Australian Property Law: Cases, Materials and Analysis [5 ed.] 0409351229, 9780409351224

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Australian Property Law Cases, Materials and Analysis Fifth Edition



For my children



Australian Property Law Cases, Materials and Analysis Fifth Edition Samantha Hepburn BA, LLB (Mon), LLM, PhD (Melb) Professor, Faculty of Business and Law, Deakin University

LexisNexis Australia 2021

LexisNexis AUSTRALIA LexisNexis 475–495 Victoria Avenue, Chatswood NSW 2067 On the internet at: www.lexisnexis.com.au ARGENTINA LexisNexis Argentina, Buenos Aires AUSTRIA LexisNexis Verlag ARD Orac GmbH & Co KG, Vienna BRAZIL LexisNexis Latin America, Sao Paulo CANADA LexisNexis Canada, Markham, Ontario CHILE LexisNexis Chile, Santiago CHINA LexisNexis China, Beijing, Shanghai CZECH REPUBLIC Nakladatelství Orac sro, Prague FRANCE LexisNexis SA, Paris GERMANY LexisNexis Germany, Frankfurt HONG KONG LexisNexis Hong Kong, Hong Kong HUNGARY HVG-Orac, Budapest INDIA LexisNexis, New Delhi ITALY Dott A Giuffrè Editore SpA, Milan JAPAN LexisNexis Japan KK, Tokyo KOREA LexisNexis, Seoul MALAYSIA LexisNexis Malaysia Sdn Bhd , Petaling Jaya, Selangor NEW ZEALAND LexisNexis, Wellington POLAND Wydawnictwo Prawnicze LexisNexis, Warsaw SINGAPORE LexisNexis, Singapore SOUTH AFRICA LexisNexis Butterworths, Durban SWITZERLAND Staempfli Verlag AG, Berne TAIWAN LexisNexis, Taiwan UNITED KINGDOM LexisNexis UK, London, Edinburgh USA LexisNexis Group, New York, New York LexisNexis, Miamisburg, Ohio

ISBN:

9780409351224 (pbk). 9780409351231 (ebk).

© 2021 Reed International Books Australia Pty Limited trading as LexisNexis. First edition 2008; Second edition 2012; Third edition 2015 (reprinted 2017); Fourth edition 2018 (reprinted 2018, 2019 (two times) and 2020). This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission. Inquiries should be addressed to the publishers. Typeset in Arial, Minion Pro. Printed in Australia. Visit LexisNexis at www.lexisnexis.com.au

Contents Prefacexxiii Casesxxv Statuteslxxvii

1 Concepts of Property

1

Characteristics of Western Property Interests 2 Private property 2 Associated property rights 4 Property as the Law of Things5 Commentary10 Property is a relationship 11 Yanner v Eaton11 Commentary18 Property is a legal construct 20 Fragmentation of property 20 Distinction Between Proprietary and Contractual Rights 21 Nature of the distinction 21 Lease or licence? 22 Cowell v Rosehill Racecourse Co Ltd22 Commentary33 Overview of the distinction between property and contract 35 Rationales for ‘private’ property 36 Classical liberalism: natural rights and the social contract 37 Utilitarianism38 Socialism perspectives 38 Modernist: legal positivism 39 Contemporary perspectives 40 Revision Questions42 Property and the environment 42 Property Rights and the Environment43 Climate Change and the Evolution of Property Rights45 Commentary47 Non-Private Resources 48 Resources outside of ownership: res communes 48 Boundaries of Ownership: Resources Incapable of Ownership 50 Rights to a spectacle 50 Victoria Park Racing and Recreation Grounds Company Ltd v Taylor50 Commentary62 Resources incapable of ownership: moral boundaries 63 v



Australian Property Law

Resources incapable of ownership: common heritage of humanity

65

Revision Questions68

Overview — Categorisation of Property Objects

2 Possession, Title and Personal Property

69

70

The Meaning of Possession: Land and Goods 71 Finders Keepers Rule 72 The Scope of Possessory Title 73 Doodeward v Spence74 Commentary74 GLS v Russell Weisz75 Commentary80 The Natural Law Duty to Recognize Private Property Ownership: Kant’s Theory of Property in His Doctrine of Right80

Revision Questions84

Enforceability of Possessory Title 85 Asher v Whitlock85 Commentary86 Perry v Clissold87 Commentary88 Possession and Crown Title: Toohey J in Mabo v Queensland (No 2) 88 Commentary92 Revision Questions93 The Finders Keepers Rule 93 Waverley Borough Council v Fletcher95 Commentary102 Bailment: Consensual Acquisition of Possession 103 Possession of Goods: The Jus Tertii Defence 105 Costello v Chief Constable of Derbyshire Constabulary107 Commentary113 Revision Questions113 The PPSA 114 Revision Questions118 Possession and Seisin 118 Seisin and Possession as the Basis of Legal Title119 Remedies for Real and Personal Property 120 Revision Questions121

3 Fixtures, Encroachment and Boundaries The Doctrine of Fixtures Degree of annexation

122

123 124 Elitestone Ltd v Morris126 Commentary129 Object of annexation 131 The intention of the affixer 131 The nature of the chattel 132 Overall circumstances 133 vi

Contents

Tenant’s rights to remove Fixtures and third parties



134 137

Metal Manufactures Limited v Federal Commissioner of Taxation139

Commentary143 Other statutory provisions 145 Revision Questions145 Fixtures and the PPSA 146

Power Rental Op Co Australia, LLC v Forge Group Power Ltd (in liq) (receivers and managers appointed)146

Commentary156 The Enduring Relevance of the Common Law Fixtures Text 156 Revision Questions157 Boundaries: Land Abutting Water 158 Tidal water boundaries 158 Non-tidal water boundaries 161 Water rights 162 The doctrine of accretion and avulsion 165 Williams v Booth165 Commentary167 Revision Questions168 Boundaries and Encroachments for Land 169 Error in title 169 Contractual errors 169 Fence boundaries 170 Encroachments on to land 171 Revision Questions174 Answer Plan174

4 Adverse Possession

176

The Meaning of Adverse Possession Outline of the Title Hierarchy The Nature of Adverse Possession Policy Rationales Underlying Adverse Possession

177 178 179 180 ‘Should the Law Recognise the Acquisition of Title by Adverse Possession?’182 Revision Questions184 Limitation Period 185 Against which Owner? 189 Factual Possession 191 Open and peaceful 192 Without consent 196 Revision Questions197 Intention to Possess: Animus Possidendi 197 JA Pye (Oxford) Ltd v Graham198 Commentary207 Whittlesea City Council v Abbatangelo209 Commentary220 vii



Australian Property Law Revision Questions222

Multiple Possessions

222

Kierford Ridge Pty Ltd v Ward224

Commentary226 Disability and Fraud 227 Adverse Possession and the Torrens System 229 Revision Questions231 Answer Plan232

5 The Doctrine of Tenure and Estates

233

English Feudal Tenure What is tenure? English feudal history

234 234 234 Feudal Tenure and Native Title: Revising an Enduring Fiction235 Revision Questions237 Australian Tenure 238 Feudal Tenure and Native Title: Revising an Enduring Fiction239 Revision Questions247 Tenure and Radical Title 247 Disinterested Truth: The Legitimation of Feudal Tenure Post Mabo249 The doctrine of estates 252 Freehold estate 253 Fee simple 253 Life estate 255 Future interests: remainder and reversion 256 Vested and contingent interests 257 Determinable or conditional? 259 Zapletal v Wright260 Commentary261 Legal contingent remainders 262 Legal remainder rules 262 Overview of Estates 265 Revision Questions268

6 Restraints on Alienation and the Rule Against Perpetuities269 Scope and Purpose of the Rule Restraining Alienation 270 Hall v Busst272 Commentary273 Nullagine Investments Pty Ltd v Western Australian Club Inc277 Commentary280 Elton v Cavill (No 2)280 Commentary281 Public policy and inalienability 283 Revision Questions284 The Rule Against Perpetuities 284 viii

Contents

Common law rule



285

Cram Foundation v Corbett-Jones287

Commentary289 Scope of the common law rule 290 Life in being 291 Certainty requirements 293 Statutory rule against perpetuities 293 Class gifts 294 Class-closing rules 295 Yeomans v Yeomans297 Commentary298 Understanding the Rule Against Perpetuities: Adopting a Five Step Approach to a Perpetuities Problem299

The Rule Against Perpetuities: An Overview

303

Revision Questions304

7 Leases

305

The Nature of a Lease: Non-Freehold Estate 306 Types of Leases 308 (i)  Fixed-term tenancy308 (ii)  Periodic tenancy308 (iii)  Tenancy at will309 (iv)  Tenancy at sufferance310 Validation Requirements 310 Statutory Formalities for the Creation of Common Law Leases 311 Exclusive Possession 312 Radaich v Smith312 Street v Mountford315 Commentary322 Swan v Uecker326 Commentary338 Revision Questions339 Certainty Requirements 339 Equitable Leases 341 Walsh v Lonsdale342 Commentary342 The doctrine of part performance 344 Tenancy by estoppel 344 Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd345 Commentary355 Revision Questions356 Common Law Rights and Duties 357 Reasonable habitability 357 Landlord’s duty of care 357 Jones v Bartlett357 Commentary364 ix



Australian Property Law

Duty to Provide Tenant with Quiet Possession/Duty Not to Derogate365 Tenant’s Duty to Use the Premises in a Tenant-Like Manner 367 Miscellaneous tenant duties 368 Express contractual duties 368 Specific statutory duties 370 Revision Questions387 Assignment and Sub-Letting 387 Qualification of the right 388 Privity of contract 390 Privity of estate 390 P&A Swift Investments v Combined English Stores Group392 Commentary394 Remedies395 Right of re-entry 395 Termination and repudiation 396 Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd400

Commentary407 The doctrine of frustration 408 Merger and surrender 409 Revision Questions410

8 Native Title

411

Pre-Mabo Position 412 Commentary413 The Mabo Decision 414 Revisiting sovereignty assumptions 414 Radical Title 416 Common Law Native Title 417 Extinguishment422 Common Law Doctrine of Extinguishment: More than a Pragmatic Compromise424

Commentary427

Revision Questions427

Statutory Recognition of Native Title 428 Commentary429 Traditional Laws and Customs 429 Members of the Yorta Yorta Aboriginal Community v Victoria429 Commentary444 Bodney v Bennell447 Commentary454 Revision Questions456 Yanner v Eaton456 Commentary463 Extinguishment Tests 465 x

Contents



Wik and the Scope of Common Law Extinguishment 466 Wik Peoples v Queensland467 Commentary479 Revision Questions480 Western Australia v Ward480 Commentary487 Fejo v Commonwealth488 Commentary492 Native Title and Coastal Waters 494 Akiba v The Commonwealth496 Commentary503 The Native Title Act: An Outline of Key Provisions 504 Recognition of native title 505 The determination of native title 505 Validation and confirmation of past Acts 506 Validation of intermediate period Acts 507 The Assessment of Compensation under the NTA 510 Economic value 512 Interest on economic value 512 Non-economic value: Cultural or spiritual value 512 Northern Territory v Griffith513 Future Act Regime 523 The registration test 525 Right to negotiate 526 ILUAs527 Revision Questions529 NTA Overview 529 Categorisation of Crown Grants Under NTA 530 Effect of Validation on Native Title 531 Future Act Regime: Nature, Effect and Requirements 532

9 Equitable Interests The Equitable Jurisdiction The Difference Between Common Law and Equitable Interests Different Forms of Equitable Title Express equitable interests Elements of a trust

533 534 535 538 538 539

Westdeutsche Landesbank Girozentrale v Islington London Borough Council539

Commentary539 DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW)540 Commentary542 Formality Requirements for the Creation of Express Trusts 543 Formality Requirements for the Creation of Equitable Interests in Land: Statute of Frauds 543 Revision Questions547 xi



Australian Property Law

Doctrine of Part Performance 547 Pipikos v Trayans548 Commentary554 Implied Equitable Interests 555 Resulting trusts 555 Failed Express Trust 555 Specific Purpose Loan 556 Revision Questions558 Contributions to Property: Purchase Money Resulting Trusts 558 Trustees of the Property of Cummins (a bankrupt) v Cummins562 Commentary566 Other Forms of Implied Equitable Interests: The Equitable Lien 566 Imposed Equitable Interests 567 Remedial constructive trust 567 Muschinski v Dodds567 Commentary576 Baumgartner v Baumgartner578 Commentary585 Giumelli v Giumelli586 Commentary589 Revision Questions591 The Institutional Constructive Trust 591 Lysaght v Edwards591 Commentary592 Tanwar Enterprises Pty Ltd v Cauchi594 Commentary597 Revision Questions599 The Personal (Mere) Equity 599 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq)601 Commentary609 Revision Questions610 Overview of Equitable Proprietary Interests 610

10 Priority Rules

612

Relevance of Priority 613 Legal Interests 613 Formalities613 Commentary614 Manton v Parabolic Pty Ltd615 Commentary616 Digital Signatures 617 Chain of Title 620 Nemo Dat Principle 620 Equitable Interests 621 Multiplicity622 Priority Rules 622 xii

Contents

Prior legal and subsequent equitable



622

Northern Counties of England Fire Insurance Co v Whipp623

Commentary625

Revision Questions626

Prior Equitable Title and Subsequent Legal Title 626 Pilcher v Rawlins627 Commentary629 The Doctrine of Notice 630 Revision Questions638 Tacking: Tabula in Naufragio 638 Wilkes v Spooner Rule 639 Competing Equitable Interests 640 Rice v Rice640 Commentary644 Estoppel645 Revision Questions647 Prior Mere Equity and Subsequent Equitable Interest 648 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq)649 Ruthol v Mills651 Commentary658 Revision Questions659

11 The Torrens System

660

An Outline of the Torrens System: Old Title Land, the Deeds Registration System and Conversion of Old Title 662 Objectives of the Torrens System 665 Characteristics of the Torrens System 667 The Register 667 Registrable interests 667 Paramount interests 670 Indefeasibility of Title: the Statutory Provisions 671 Commentary674 Immediate and deferred indefeasibility 679 Gibbs v Messer679 Commentary680 Frazer v Walker681 Commentary682 Breskvar v Wall683 Commentary688 Mercantile Credits v Shell Co of Australia Ltd691 Commentary693 Revision Questions695 Statutory Exceptions to Indefeasibility 695 Statutory fraud 695 Loke Yew v Port Swettenham Rubber Co696

xiii



Australian Property Law

Commentary697 Bahr v Nicolay (No 2)697 Commentary699 Russo v Bendigo Bank701 Commentary709 Bank of South Australia v Ferguson711 Commentary714 Cassegrain Pty Ltd v Gerard Cassegrain715 Commentary720 In Personam Exception 722 Bahr v Nicolay (No 2)723 Commentary726 Macquarie Bank v Sixty-Fourth Throne727 Commentary733 LHK Nominees Pty Ltd v Kenworthy735 Commentary737 Farah Constructions Pty Ltd v Say-Dee Pty Ltd737 Commentary741 Revision Questions744 Volunteers744 King v Smail745 Commentary749 Rasmussen v Rasmussen749 Valoutin Pty Ltd v Furst754 Commentary755 Bogdanovic v Koteff756 Commentary758 Conlan v Registrar of Titles758 Commentary760 Revision Questions761 Inconsistent Legislation 761 Pratten v Warringah Shire Council762 Commentary765 Horvath v Commonwealth Bank of Australia766 Commentary772 Hillpalm v Heavens Door773 Commentary778 City of Canada Bay Council v Bonaccorso Pty Ltd779 Commentary788 Revision Questions789 Prior Certificate of Title/Erroneous Description of Land 790 Forgery, Insufficient Power of Attorney or Disability 791 Paramount Interests: Adverse Possession, Easements and Tenancies 792 Adverse possession 792 Variations795 Easements796 xiv

Contents



Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd797 Commentary801 McGrath v Campbell802 Commentary809 Tenancies809 State Guarantee of Title 811 Bringing the land under the Act 812 Deprivation of an interest or estate from fraud 812 Diemasters v Meadowcorp812 Commentary816 Error or misdescription in the Register 818 Registration of another person 819 Registrar’s Power to Correct the Register 819 Revision Questions821

12 Electronic Conveyancing

822

What is Electronic Conveyancing? 822 Regulatory Framework 825 Key Concepts 826 Acronyms826 The documentary framework for PEXA 827 Client authorisation 828 Verification of identity 829 Digital signature 829 Security834 ECNL Fraud and the Torrens System 836 Electronic Certificate of Title 838 Summary of eCT developments in New South Wales 840 Developments for eCT in other states 840 Electronic Conveyancing and the Torrens System 841 Concerns and Risks Associated with Electronic Conveyancing 842 Benefits of Electronic Conveyancing 842 Conclusion843 Revision Questions844

13 Unregistered Interests

845

Nature of Unregistered Interest 846 Barry v Heider846 Commentary850 Unregistered Interests and Electronic Conveyancing 851 Priority Notice 852 The Caveat System 854 The Nature of a Caveatable Interest 856 Boensch v Pascoe860 Commentary862 xv



Australian Property Law

Failure to Lodge a Caveat

862

Leros Pty Ltd v Terara Pty Ltd863

Commentary868 Caveat Must Relate to an Existing Interest 869 Priority Disputes Between Unregistered Interests 870 Merit analysis: assessing the better equity 870 Heid v Reliance Finance Corporation Pty Ltd871 Commentary880 Different forms of priority disputes 882 Black v Garnock883 Commentary887 J and H Just (Holdings) v Bank of New South Wales888 Commentary891 IAC (Finance) Pty Ltd v Courtenay894 Commentary900 Revision Questions901 Jacobs v Platt Nominees902 Commentary909 The Relevance of Notice 911 Moffett v Dillon912 Commentary926 Revision Questions927

14 Easements

928

Nature of an Easement 929 Easements and natural rights 930 Profits à prendre 930 Carbon rights 932 Rentcharge935 Essential Elements of an Easement 935 Dominant and servient tenement 935 The easement must accommodate the dominant tenement 936 Dominant and servient owners must be different 939 The easement must be capable of forming the subject matter of a grant 940 Re Ellenborough Park940 Riley v Penttila948 Commentary952 Ancillary rights 955 Different Forms of Easement 956 New easement rights 956 Grants and reservations 957 Express easements and statutory powers 958 Implied easements of necessity and common intention 958 Easements of necessity 959 Adealon International Proprietary Ltd v London Borough of Merton959 Commentary968 North Sydney Printing Pty Ltd v Sabemo Investment Corp Pty Ltd968 xvi

Contents



Commentary972 Common intention easements 975 Continuous and apparent easements 975 McGrath v Campbell977 Commentary988 Easements arising from construction 989 Dabbs v Seaman989 Commentary994 Easements arising under the non-derogation principle 995 Wheeldon v Burrows995 Commentary997 Revision Questions998 Easements by Prescription 999 Hampshire Automotive Centre Pty Ltd v Centre Com (Sunshine) Pty Ltd1004 Commentary1012 Construction of Easements 1013 Westfield Management Ltd v Perpetual Trustee Ltd1013 Commentary1020 Extinguishment and Modification of Easements 1021 Abandonment1023 Treweeke v 36 Wolseley Road Pty Ltd1024 Commentary1028 Bookville Pty Ltd v O’Loghlen1030 Commentary1036 Extinguishment on the basis of a change in circumstances 1036 Unity of ownership 1038 Revision Questions1038 Answer Plan1039

15 Restrictive Covenants

1041

Contractual Nature of the Covenant 1042 The Utility of Covenants 1044 Privity of Contract and the Enforcement of Covenants 1045 Revision Questions1047 Rule against Passing the Burden of a Covenant Under Common Law1047 Austerberry v Corporation of Oldham1047 Commentary1049 Benefit and Burden of a Covenant 1050 Thamesmead Town Ltd v Allotey1050 Commentary1056 Annexation of Rentcharge 1056 Revision Questions1057 Passing the Benefit Under Common Law: The ‘Touch and Concern’ Test 1057 Congleton v Pattison1058 xvii



Australian Property Law

Commentary1059

Revision Questions1061

Passing the Burden in Equity: Enforcing a Restrictive Covenant 1061 Tulk v Moxhay1062 Commentary1063 Forestview Nominees v Perpetual Trustees WA1064 Commentary1071 Restrictive rather than positive 1071 Intention to impose the burden upon a knowing successor in title 1072 Covenant identifies benefited land 1074 Revision Questions1077 Passing the Benefit of a Covenant in Equity 1077 Midland Brick Company Pty Ltd v Welsh1079 Commentary1090 Revision Questions1091 Assignment of Covenants 1091 Assigning the Benefit of a Covenant in Equity 1092 Re Union of London and Smith’s Bank Ltd’s Conveyance1093 Commentary1098 Revision Questions1101 Building Schemes 1101 Basic requirements for building schemes 1102 Elliston v Reacher1102 Commentary1105 Mutuality1106 Small v Oliver & Saunders (Developments) Ltd1106 Commentary1111 Building schemes and the Torrens system 1112 Re Dennerstein1112 Commentary1118 Deguisa v Lynn1119 Commentary1125 Revision Questions1125 Extinguishment and Modification of Covenants 1126 Stanhill Pty Ltd v Jackson1129 Commentary1137 Revision Questions1139 Answer Plan1140

16 Mortgages

1141

What is a Mortgage? 1142 The Equity of Redemption 1143 Campbell v Holyland1145 Commentary1148 Revision Questions1151 Clogs on the equity of redemption 1151 xviii

Contents

Relevance of Unconscionability



1153

Lift Capital Partners Pty Ltd v Merrill Lynch International1154

Commentary1162

Revision Questions1164

Formality Requirements and Intention

1164

Revision Questions1167

Types of Mortgages Old title mortgage Torrens title mortgage

1167 1167 1168 Figgins Holdings v SEAA Enterprises Pty Ltd1171 Commentary1176 Mortgages and Electronic Conveyancing 1178 Revision Questions1181 Equitable mortgages 1181 Formal mortgage over equitable title 1182 Formal mortgage over legal title improperly executed 1182 Collateral security 1182 Specifically enforceable agreement to mortgage 1183 Theodore v Mistford Pty Ltd1183 Commentary1190 Mortgage by deposit of title deeds (mortgagor and third party) 1191 Re Wallis and Simmonds (Builders) Ltd1193 Commentary1198 CNG Co (Aust) Pty Ltd v Australia & New Zealand Banking Group1199 Commentary1201 Consumer Credit Legislation 1201 Revision Questions1202 Rights and Duties Under a Mortgage 1202 Right to sue for loan moneys 1202 Right to possession 1203 Right to assign a mortgage debt 1204 Revision Questions1206 Power of Sale 1206 Notice requirements 1208 Good faith requirements of the mortgagor 1209 Upton v Tasmanian Perpetual Trustees Ltd1215 Commentary1225 Revision Questions1226 Improper sale and third party purchasers 1227 Forsyth v Blundell1227 Commentary1232 Foreclosure and Receivership 1233 Revision Questions1236

17 Co-Ownership What is Co-ownership?

1237 1239 xix



Australian Property Law

Joint tenancy 1239 Unity of possession 1241 Unity of interest 1241 Unity of title 1242 Unity of time 1242 The right of survivorship 1243 The forfeiture rule 1244 Revision Questions1246 Tenancy in common 1247 Creation Requirements 1248 Creation under common law 1248 Robertson v Fraser1249 Commentary1251 Common law presumption of a joint tenancy 1251 Public Trustee v Pfeiffle1252 Commentary1259 Revision Questions1260 Statutory presumption of a joint tenancy 1261 Aoun Investments Pty Ltd v Chief Commissioner of State Revenue1263

Commentary1267

Revision Questions1268

Creation in equity 1268 Unequal contribution to purchase price 1269 Delehunt v Carmody1270 Commentary1274 Mortgagees1275 Business partners 1276 Other circumstances where beneficial entitlement intended 1276 Malayan Credit Ltd v Jack Chia-MPH Ltd1276 Commentary1281 Stack v Dowden1282 Commentary1295 Revision Questions1298 Approaches to Assessing Co-owner Presumptions 1298 Rights and duties of co-owners 1298 Right to occupy/occupation rent 1299 Wrongful exclusion 1300 Biviano v Natoli1301 Commentary1306 Revision Questions1307 Agreement to pay occupation rent 1307 Occupation rent and claim for improvements 1308 Rents received by occupying co-owner 1308 Forgeard v Shanahan1308

xx

Contents



Commentary1320 Expenditure on improvements and repairs 1321 Revision Questions1324 Right to encumber/alienate interest of a co-owner 1324 Hedley v Roberts1325 Commentary1331 Trespass and waste 1331 Severance of a Joint Tenancy 1331 What is severance? 1331 Severance by alienation 1334 Wright v Gibbons1334 Commentary1342 Revision Questions1343 Alienation at law and alienation in equity 1343 Corin v Patton1345 Commentary1362 Revision Questions1364 Severance by lease 1364 Revision Questions1366 Severance by mortgage 1366 Lyons v Lyons1367 Commentary1376 Severance by agreement 1377 Hulme v Schaecken1378 Commentary1380 Peldan v Anderson1381 Commentary1390 Revision Questions1391 Criminal Culpability and the Joint Tenancy 1391 Revision Questions1394 Partition and Sale 1394 Legislative provisions 1394 Commentary1399 Revision Questions1401 Exam Plan1402

Index

1405

xxi



Preface The fifth edition of Australian Property Law: Cases, Materials and Analysis was written during the global pandemic and Melbourne lockdown. In many ways, writing this new edition kept me sane during a very challenging period. And as we have all bunkered down in our homes, working, schooling and living under the one roof, the importance of property and its fundamental connection to our way of life has never been stronger. As a relational concept, property brings with it a range of legally enforceable entitlements that makes it one of the most powerful obligations recognised by law. As a social concept, however, property is fundamental to our identity, our community, our health and our family. Property represents our domain; it a place of refuge and safety. And during a global pandemic, it is where we have carried out many of the activities that fill our lives. Of course, property is not just about the home that we may live in but how, why and where we live. And neither is property concerned purely with our dwelling. It encompasses our natural resources, our shared living arrangements, any restrictions that impede what we can do to our domain, the process of acquiring our domain, and the rights and principles that inform that process. In short, property frames the many dimensions of our modern lives. The aim of this fifth edition, is to outline the different principles relevant to the legal articulation of property. This includes not only an appreciation of the historical principles that inform the Australian land framework, but a deeper analysis of the structural foundations of Australian property law, including Indigenous rights and interests, obligations and entitlements to interconnected natural resources, co-ownership principles, securities and encumbrances, easements, trust entitlements, leases, estates and the core tenets of the registration framework and digital conveyancing. In short, Australian Property Law comprehensively reviews the legal principles that inform ownership, possession and control of land interests in Australia. The fifth edition continues the structure of the previous editions in that it includes extracts from seminal cases, commentary and discussion on these extracts that explain the importance of the decision and its bearing on the general principles that have evolved. The book includes examples, revision questions and answer guides. All of the commentaries and case extracts have been significantly revised to include the most up-to-date references to cases and legal principles. New cases and legislative developments have occurred in a range of areas, and in Australian Property Law these include ownership of body parts, fixtures, equitable interests and the doctrine of part performance; digital conveyancing; compensation for the extinguishment of native title; honest and reasonable lodgement of caveats; and questions about whether a building scheme is obliged to be on the title. Specifically, extracts and commentary in the fifth edition include: • Detailed updates and commentary in the chapter on digital conveyancing, including an analysis of the decision in Astell v  ACT [2016] ACTSC 238, which examines the availability of statutory damages for fraud committed through an electronic conveyance, as well as the inclusion of a new discussion in Chapter 13 on priority notices. • An extract and detailed discussion of the High Court decision in Pipikos v Trayans (2018) 359 ALR 210, which examines the history and application of the doctrine of xxiii



Australian Property Law

part performance, distinguishes it from estoppel and confirms the relevant test for its application. • An extract and detailed discussion of the High Court decision in Boensch v Pascoe (2019) 375 ALR 15, which examines when a caveator is to be regarded as having acted honestly and reasonably when lodging a caveat. • An extract and detailed discussion of the High Court decision in Northern Territory v Griffith (2019) 368 ALR 77, which examines the different approaches to assessing compensation for the extinguishment of native title rights and interests from economic and spiritual and cultural perspectives. • An extract and detailed commentary on the decision of the Full Supreme Court of South Australia in Deguisa v  Lynn [2020] HCA 39, which considers whether the purchaser of Torrens title land is obliged to search other titles for evidence of the land being the subject of a building scheme. I am grateful as ever for permission to publish copyright materials within the book. Many thanks to the dedicated effort of the editorial team at Lexis Nexis Butterworths, particularly the wonderful support, focus and patience of Jocelyn Holmes and Edward Caruso. And many thanks to my family. It has been a long and difficult year. I appreciate and love you all very much. Professor Samantha Hepburn Princes Hill October 2020

xxiv

Cases References are to paragraph numbers Cases extracted at length are in bold 196 Hawthorn Road Pty Ltd v Duszniak [2020] VSC 235 .... 14.38 A

A E Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2019] VSC 688 .... 13.7 A & K Holdings Pty Ltd, Re [1964] VR 257 .... 10.3 Abbey National Building Society v Cann [1991] 1 AC 56 .... 10.18 Abbeyfield (Harpenden) Society Ltd v Woods [1968] 1 All ER 352; [1968] 1 WLR 374 .... 7.6 Abbott, Re [1893] 1 Ch 54 .... 6.16 Abela v Public Trustee [1983] 1 NSWLR 308 .... 17.64 Abigail v Lapin (1934) 51 CLR 58; [1934] AC 491 .... 10.25, 11.13, 11.32, 13.14, 13.15, 13.19, 13.21, 13.24, 13.27, 16.31, 16.46 ABN Amro Clearing Sydney Pty Ltd (formerly Fortis Clearing Sydney Pty Ltd) v Primebrokers Securities Ltd (recs & mgrs apptd) (in liq) (2012) 39 VR 208; [2012] VSCA 287 .... 16.11, 16.47 Ackroyd v Smith (1850) 10 CB 164; 138 ER 68 .... 14.8 Adam v Shewsbury [2005] EWCA Civ 1006 .... 14.24 Adamson v Hayes (1973) 130 CLR 276 .... 15.26 Addiscombe Garden Estates Ltd v Crabbe [1958] 1 QB 513; [1957] 3 All ER 563 .... 7.6 Addison v Billion [1983] 1 NSWLR 586 .... 16.4 Adealon International Proprietary Ltd v London Borough of Merton [2007] All ER 225 .... 14.20, 14.21, 14.23 Adelaide Pistol Club Inc v District Council of Munno Para and Another (1981) 45 LGERA 119 .... 5.16

Afton Band of Indians v Attorney General Nova Scotia (1978) 85 DLR (3rd) 454 .... 2.12 AGC v De Jager [1984] VR 483 .... 11.23, 11.24 AG (CQ) Pty Ltd v A & T Promotions Pty Ltd [2010] Qd ConvR 54-732 .... 13.15 Agra Bank Ltd v Barry (1874) LR 7 HL 135 .... 10.12, 11.32 Agripower Barraba Pty Ltd v Blomfield [2013] NSWSC 1598 .... 3.2 — v Blomfield [2015] NSWCA 30 .... 3.1, 3.5, 3.8, 3.14, 3.16 Ahluwalia v Robinson [2003] NSWCA 175 .... 7.23 Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 .... 9.17 Akiba v State of Queensland (No 3) (2010) 204 FCR 1; 270 ALR 564 .... 5.8, 8.15, 8.30 — v The Commonwealth (2013) 250 CLR 209; (2013) 300 ALR 1 .... 5.8, 8.9, 8.29, 8.31, 8.32, 8.47 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; 260 ALR 1; 83 ALJR 1152; [2009] HCA 41…. 3.14, 7.1, 11.6 Alcova Holdings Pty Ltd v Pandarlo Pty Ltd (1988) 15 NSWLR 53 .... 11.16 Aldridge v Wright [1929] 2 KB 117 .... 14.26 Aldrington Garages Ltd v Fielder (1978) 37 P & CR 461 .... 7.6 Alexandra, Re [1980] VR 55 .... 14.47, 15.48 Alghussein Establishment v Eton College [1988] 1 WLR 587 .... 10.28 Allan v Liverpool Overseers (1874) LR 9 QB 180 .... 7.6, 7.8 Allcock v Moorhouse [1882] 9 QBD 366 .... 7.31 Allen v Kent (1957) 136 A 2d 540 .... 9.26 — v Knight [1850] 5 Hare 272 .... 10.23 — v Rivington (1670) 2 Wms Saund 111; 85 ER 813 .... 2.11 — v Roughley (1955) 94 CLR 98 .... 2.10, 2.11, 4.19 xxv



Australian Property Law

— v Snyder [1977] 2 NSWLR 685 .... 9.26, 9.28, 17.56 Allen Taylor & Company Pty Ltd trading as Boral Timber v Norman Leslie Harrison [2010] NSWSC 1021 .... 17.49 Allens Asphalt Pty Ltd v SPM Group Pty Ltd [2010] 1 Qd R 202 .... 13.11 Allfox Building Pty Ltd v Bank of Melbourne (1992) NSW Conv R 55,625 .... 16.47 Alliance Engineering Pty Ltd v Yarraburn Nominees [2011] NSWCA 301 .... 14.40 Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868 .... 10.28, 16.4, 16.43 Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168 .... 7.14 Amcor Ltd v Barnes [2016] VSC 707 .... 16.9 Americana Leadership College v Coll [2005] NSWCA 15 .... 9.31 Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495 .... 9.21 Amodu Tijani v Secretary Southern Nigeria [1921] 2 AC 399 .... 5.8, 5.9 Anchor Brewhouse Developments Ltd v Berkley House (Docklands Development) Ltd (1987) 284 EG 625 .... 3.30 Anderson v Anderson (2016) 18 BPR 36,253; [2016] NSWSC 1204 .... 11.28, 17.68 — v Bowles (1951) 84 CLR 310 .... 7.11 Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400; [2006] NSWCA 22 .... 2.17, 2.18 Andrew v Partington (1791) 3 Bro CC 401; 29 ER 610; [1775–1802] All ER Rep 209 .... 6.11, 6.19 Andrews v South Australian Superannuation Fund Investment Trust (1985) 124 LSJS 153 .... 13.10 — v Wilcox [2008] NSWSC 280 .... 17.49 Andriopoulos v Marshall (1981) 2 BPR 9391 .... 14.39 Angus’ Will Trusts, Re [1960] 1 WLR 1296 .... 17.15 Anna Slattery et al v Neil B Adams et al (1954) 279 SW (2d) 445 .... 4.10 xxvi

Anning v Anning (1907) 4 CLR 1049 .... 15.30, 17.56, 17.57 Anson v Anson [2004] NSWSC 766 .... 9.27 Anthony v Commonwealth (1973) 47 ALJR 83 .... 3.14 Aoun Investments Pty Ltd v Chief Commissioner of State Revenue [2006] NSWSC 1394 .... 17.19, 17.20, 17.21 Application by Robinson, Re [2015] NSWSC 1387 .... 5.15 Apriaden Pty Ltd v Seacrest Pty Ltd [2005] 12 VR 319 .... 7.37, 7.41 Arab Bank of Australia v Jeitani [2016] NSWSC 617 .... 16.43 Arambasic v Veza (No 4) [2014] NSWSC 119 .... 11.45 Arcade Hotel Pty Ltd, Re [1962] VR 274 .... 15.23, 15.42 Arcadi v Whittem (1992) 59 SASR 515 .... 11.60 Arfaras v Vosnakis [2016] NSWCA 65 .... 7.16 Arkbay Investments Pty Ltd v Tripod Funds Management Pty Ltd [2014] NSWSC 1003 .... 13.7 Armory v Delamirie [1558–1774] All ER Rep 121; (1722) 1 Strange 505; 93 ER 664 .... 2.14, 2.16, 2.17 Asher v Whitlock (1865) LR 1 QB 1 .... 2.3, 2.8, 2.9, 2.10, 2.11, 2.12, 2.13, 2.17, 2.19, 4.2 Ashpitel v Bryan (1864) 5 B & S 723 .... 14.29 Ashworth Frazer Ltd v Gloucester City Council [2001] 1 WLR 218 .... 7.31 Assaf v Fuwa [1955] AC 215 .... 10.20 Assam Railways & Trading Co Ltd v Commissioners of Inland Revenue [1935] AC 445; [1934] All ER Rep 646 .... 3.14 Assets Co Ltd v Mere Roihi [1905] AC 176 .... 11.11, 11.13, 11.18, 11.21, 11.23, 11.24, 11.27, 14.29 Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588 .... 9.7 Astell v ACT [2016] ACTSC 238 .... 12.18 Atia v Nusbaum [2011] QSC 44 .... 16.11

Cases Attorney-General v Antrobus [1905] 2 Ch 188 .... 14.10, 14.11 — v Brown (1847) 1 Legge 312 .... 2.11 — v — (1847) 2 Legge 312 .... 5.6 — v Chambers (1854) 4 De GM & G 206; 43 ER 486 .... 3.19 — v — (1859) 4 De G & J 55; 45 ER 22 .... 3.22 — v Cummins (1906) 1 IR 406n .... 6.12 — v Horner [1913] 2 Ch 140 .... 14.8 — v Love (1898) AC 679 .... 14.35 — v Pyle (1738) 1 Atk 435 .... 6.12 Attorney-General for British Columbia v Attorney-General for Canada [1914] AC 153 .... 3.19 Attorney-General for NSW v Brewery Employees Union of NSW (1908) 6 CLR 469 .... 17.19 Attorney-General for Quebec v AttorneyGeneral for Canada [1921] 1 AC 401 .... 5.8, 8.8 Attorney-General of Belize v Belize Telecom Ltd [2009] 2 All ER (Comm) 1 .... 7.27 Attorney-General of Commonwealth v R T Co Pty Ltd (No 2) (1957) 97 CLR 146; [1957] HCA 29 .... 3.14 Attorney-General of Southern Nigeria v John Holt and Co (Liverpool) Ltd [1915] AC 599; [1914-15] All ER Rep 444 .... 14.12 Attwater v Attwater (1853) 52 ER 131 .... 6.3 Atwood v Maude (1868) LR 3 Ch App 369 .... 9.26, 9.28 Augusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26 .... 13.18 Augustine v State of Western Australia [2013] FCA 338 .... 8.17 Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 QdR 1 .... 7.24 Austerberry v Corporation of Oldham (1885) 29 Ch D 750 .... 15.2, 15.7, 15.8, 15.9, 15.12 Austin v Amhurst (1877) 7 Ch D 689 .... 14.36 Austin v Wright [1926] WALawRp 23; (1926) 29 WALR 55 .... 14.35



Australia and New Zealand Banking Group Ltd, Re [1993] 2 Qd R 477 .... 16.4, 16.18 Australia and New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd (1978) 139 CLR 195 .... 16.42, 16.43 — v Pola [2013] NSWSC 1801 .... 16.41 — v Widin (1990) 26 FCR 21; 102 ALR 289 .... 9.14, 16.27 Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd; Guan v Linfield Developments Pty Ltd (2017) 18 BPR 36,683 .... 10.24, 13.13, 13.15 Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; (2001) 208 CLR 199 .... 16.8 Australian Building and Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460 .... 9.17 Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (No 2) (2000) 96 FCR 491; [2000] FCA 2 .... 16.8 Australian Conservation Foundation v The Commonwealth (1980) 146 CLR 493 .... 8.6 Australian Elizabethan Theatre Trust, Re (1991) 30 FCR 491; 102 ALR 681 .... 9.19 Australian Federation of Construction Contractors, Re; Ex parte Billing (1987) 61 ALJR 39; [1986] HCA 74 .... 3.14 Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618 .... 11.67, 14.26 Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 .... 3.2, 3.14 Australian Regional Credit v Mula [2009] NSWSC 325 .... 11.16 Australian Securities and Investments Commission v Cassimatis (No 8) [2016] FCA 1023 .... 11.28 Australian Securities and Investments Commission, Re; GDK Financial Solutions Pty Ltd (2008) 246 ALR 580 .... 16.4 Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485; 112 ALR 627…. 9.30 xxvii



Australian Property Law

Australian Softwood Forests Pty Ltd v Attorney-General (NSW); Ex Rel Corporate Affairs Commission (1981) 148 CLR 121 .... 14.3 Avco Financial Services Ltd v Fishman [1993] 1 VR 90 .... 10.25, 13.20, 13.25 — v White [1977] VR 561 .... 9.7, 13.27 Aveling v Knipe (1815) 19 Ves Jun 441; 34 ER 580 .... 17.24 Avondale Printers & Stationers Ltd v Haggie (1979) 2 NZLR 124 .... 9.26 Awadallah v Hymix Australia Pty Ltd [2015] NSWSC 117 .... 17.49 B

B v B [1978] Fam 26 .... 17.36 Baden Delvaux v Société Generale [1993] 1 WLR 509 .... 11.33 Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16 .... 11.7, 11.18, 11.21, 11.22, 11.23, 11.30, 11.32, 11.34, 11.36, 11.38, 11.41, 11.52, 11.56, 11.57, 13.3, 13.10, 14.26, 15.43 Bailey v Barnes [1894] 1 Ch 25 .... 9.40, 10.18 Baillie, Re; Faithful v Sydney Industrial Blind Institution (1907) 7 SR (NSW) 265 .... 6.11 Bainbrigge v Browne [1881] 18 Ch D 188 .... 9.40 Baker v Biddle (1923) 33 CLR 188; [1923] HCA 26 .... 16.8 Balgra Office Enterprises Pty Ltd v Commissioner of State Taxation [2008] SASC 50 .... 7.1 Ballard’s Conveyance, Re [1937] Ch 473 .... 15.25 Ballas v Theopilos (No 1) (1957) 97 CLR 186 .... 17.62 Ball-Guymer v Livantes (1990) 102 FLR 327 .... 3.14 Bamford v Turnley (1863) 3 B & S 79 .... 1.27 Banjima People v State of Western Australia (No 2) [2013] FCA 868 .... 8.17, 14.23 Bank of Credit and Commerce International SA (No 8), Re [1998] AC 214 .... 9.7 Bank of New South Wales v O’Connor (1889) 14 App Cas 273 .... 16.28 xxviii

Bank of New Zealand v Development Finance Corp of New Zealand [1988] 1 NZLR 495 .... 10.20 Bank of Queensland Ltd v Dodrill [2011] QCA 130 .... 13.18 Bank of South Australia Ltd v Ferguson (1998) 192 CLR 248 .... 11.23, 11.25, 11.26 Bank of Victoria v Forbes (1887) XIII VLR 760 .... 4.9 Bankstown Trotting Recreational Club Ltd v Chisholm [2016] NSWCA 274 .... 7.24 Bannister v Bannister (1948) 2 All ER 133 .... 11.21, 11.41 Baramon Sales Pty Ltd v Goodman Fielder Mills Ltd [2001] FCA 1672 .... 15.18, 15.26, 15.43 Barba v Gas & Fuel Corporation of Victoria (1976) 136 CLR 120 .... 14.36 Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 .... 9.19, 9.20 Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415 .... 9.24 — v O’Brien [1994] 1 AC 180 .... 10.18, 11.32, 13.27 Barecall Pty Ltd v Hoban [2009] NSWSC 1104 .... 7.14 Barker v Linklater [2008] 1 Qd R 405 .... 9.27 Barlin Investments Pty Ltd v Westpac Banking Corp (2012) 16 BPR 30,671; [2012] NSWSC 699 .... 10.24, 13.20 Barnes v Addy (1874) LR 9 Ch App 244 .... 11.29, 11.33, 11.34, 11.36, 11.38 Barnhart v Greenshields [1853] EngR 1060; (1853) 9 Moo PCC 18; 14 ER 204 .... 10.18 Barns v Queensland National Bank Ltd (1906) 3 CLR 925; [1906] HCA 26 .... 9.40, 16.41, 16.42 Barrett- Lennard v River Wind Pty Ltd [2019] WASCA 199 .... 14.40 Barrowcliff, Re [1927] SASR 147 .... 17.8 Barry v Hasseldine [1952] Ch 835; [1952] 2 All ER 317; [1952] 2 TLR 92 .... 14.20, 14.22

Cases — v Heider (1914) 19 CLR 197; 21 ALR 93 .... 10.13, 10.18, 11.4, 11.13, 11.21, 11.30, 11.34, 13.2, 13.3, 13.14, 13.21, 14.29, 14.30, 16.14, 17.56 — v Hesseldine [1952] Ch 835 .... 14.20 Bartlett v Ryan [2000] NSWSC 807 .... 4.10 Bass v Gregory (1890) 25 QBD 481 .... 14.15 Batey v Potts [2004] NSWSC 606 .... 17.70 Baumgartner v Baumgartner (1987) 164 CLR 137 .... 9.27, 9.28, 9.29, 9.30, 17.42 Baxter v Four Oaks Properties Ltd [1965] Ch 816 .... 15.38 Bayport Industries Pty Ltd v Watson (2006) V ConvR 54-709; [2002] VSC 206 .... 4.1, 4.13, 4.16, 4.17, 4.20 Bazley v Wesley Monash IVF Pty Ltd [2011] 2 Qd R 207; [2010] QSC 118 .... 2.5 Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1 .... 10.18 — v Johnson (1993) 43 FCR 1; 115 ALR 411 .... 10.18 Beames v Leader [1998] QCA 368; [2000] 1 Qd R 347 .... 11.56 Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 .... 13.7, 13.8 Beconwood Securities Pty Ltd v Australia and New Zealand Banking Group Ltd (2008) 246 ALR 361 .... 16.4, 16.11 Bedford, Duke of v Trustees of British Museum (1822) 2 My & K 552; 39 ER 1055 .... 15.17 Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106 .... 13.7 Bedson v Bedson [1965] 2 QB 666; [1965] 3 All ER 307 .... 17.30 Beever v Spaceline Engineering Pty Ltd (1993) 6 BPR 13,270 .... 4.10 Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd [1984] VR 947 .... 3.2 Bell v Scott (1922) 30 CLR 387 .... 3.28 Bellevue Crescent Pty Ltd v Marland Holdings Pty Ltd (1998) 43 NSWLR 364 .... 14.30



Bellville, Re [1941] 1 Ch 414 .... 6.20 Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383 .... 5.16 Beman Pty Ltd v Boroondara City Council [2017] VSC 207 .... 15.27 Bendal Pty Ltd v Mirvac Projects Pty Ltd (1991) 23 NSWLR 464 .... 3.30 Bendall v McWhirter (1952) 2 QB 466 .... 13.10 Benger v Quartermain (1934) NZLR s 13 .... 3.2 Bennell v State of Western Australia [2006] FCA 1243 .... 8.15, 8.18 Bennett v Minister for Public Works (NSW) (1908) 7 CLR 372 .... 11.52 Ben-Pelech v Royal [2019] WASC 297 .... 4.23 Beresford v Booth [1999] SASC 166. .... 17.37 Berkley v Poulett (1977) 241 EG 911 .... 3.16 Bernard v Josephs [1982] 3 All ER 162 .... 17.30 Berrisford v Mexfield Housing Co-Operative Ltd (2012) 1 AC 955 .... 1.13 Berryman v Sonnenschein [2008] NSWSC 213 .... 14.14 Bertei v Feher [2000] WASCA 165 .... 9.21 Beswick v Beswick [1968] AC 58 .... 15.3, 15.26 Betts v Receiver of Metropolitan Police District and Carter Paterson & Co Ltd [1932] 2 KB 595 .... 2.17 Bevham Investments Pty Ltd v Belgot Pty Ltd (1982) 149 CLR 494; [1982] HCA 45 .... 16.8 Bickel v Duke of Westminster [1977] QB 517 .... 7.31 Bickersteth v Shanu [1936] AC 290 .... 5.15 Bickerton v Walker [1885] 31 Ch D 151 .... 9.40 Big Top Hereford Pty Ltd v Gavin Thomas as Trustee of the Bankrupt Estate of Douglas Keith Tyler [2006] NSWSC 1159 .... 2.14 Biggs v McEllister (1880) 14 SALR 86 .... 11.40, 11.42 xxix



Australian Property Law

Billing v Pill [1954] 1 QB 70 .... 3.2 Bird v Fort Frances [1949] 2 DLR 791 .... 2.17 Birmingham, Dudley and District Banking Co v Ross [1888] 38 Ch D 295 .... 14.33 Bishop v Elliott (1855) 11 Ex 113; 156 ER 766 .... 3.8 — v Taylor (1968) 118 CLR 518 .... 7.2 Bitumen and Oil Refineries (Aust) Ltd v Commissioner for Government Transport (1955) 92 CLR 200; [1955] HCA 1 .... 3.14 Biviano v Natoli (1998) 43 NSWLR 695 .... 17.36, 17.37, 17.38, 17.49 Black v Garnock (2007) 230 CLR 438; 237 ALR 1; [2007] HCA 31 .... 11.7, 11.14, 13.11, 13.16, 13.17, 13.18, 14.39 Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060 .... 17.29 Blacks Ltd v Rix [1962] SASR 161 .... 15.22, 15.26, 15.43 Blackwell, Re [1926] 1 Ch 223 .... 5.15 Blackwood v London Chartered Bank of Australia (1871) 10 (SCR) NSW Eq 20 .... 10.18 Bli Bli No 1 Pty Ltd v Kimlin Investments Pty Ltd [2008] QSC 289 .... 11.29, 11.37 Bligh v Martin [1968] 1 WLR 804 .... 4.1, 4.13, 4.16 Bluebottle UK Ltd v Deputy Commissioner of Taxation (2007) 232 CLR 598 .... 6.3 Blundell v Catteral (1821) 5 B & Ald 268; 106 ER 1190 .... 3.19 Blunt v Blunt [1943] AC 517 .... 7.31 Blunt’s Trusts, Re; Wigan v Clinch [1904] 2 Ch 767 .... 6.12 Bodney v Bennell (2008) 167 FCR 84 .... 8.15, 8.16, 8.8 Boensch v Pascoe (2019) 375 ALR 15 .... 13.7, 13.8, 13.11, 13.18, 13.23 Bogdanovic v Koteff (1988) 12 NSWLR 472 .... 11.41, 11.42, 11.43, 11.44, 11.45, 11.47, 11.48 Boh Ltd v Eastern Power Networks Pty Ltd [2011] EWCA Civ 19 .... 7.40 Bolt & Nut Co (Tipton) Ltd v Rowlands Nicholls & Co Ltd [1964] 2 QB 10 .... 13.27 xxx

Bolton v Bolton (1879) 11 Ch D 968; 43 JP 764; 48 LJ Ch 467 .... 14.14 — v Clutterbuck [1955] SASR 253 .... 14.19, 14.22 Bolton, Re; Ex parte Beane (1987) 162 CLR 514; [1987] HCA 12 .... 3.14 Bolton on behalf of the Southern Noongar Families v State of Western Australia [2004] FCA 760 .... 8.46 Bondi Beach Astra Retirement Village Pty Ltd v Gora (2011) 82 NSWLR 665; [2011] NSWCA 396 .... 6.3, 6.7 Booker v Palmer [1942] All ER 674 .... 7.6, 7.7, 7.8 Bookville Pty Ltd v O’Loghlen [2007] V ConvR 54-734 .... 14.45, 14.46 Boss v Hamilton Island Enterprises Ltd [2010] 2 Qd R 115 .... 7.31 Boswell v Crucible Steel Co [1925] 1 KB 119 .... 3.2 Boulter v Boulter (1898) 19 LR (NSW) Eq 135 .... 17.42, 17.44 Bowen, Re; Lloyd Phillips v Davis [1893] 2 Ch 491 .... 6.12 Bowman v Taylor (1834) 2 Ad & El 278 .... 14.29 — v Tremaine [2016] WASC 294 .... 4.13 Boyce v Beckman (1890) 11 LR (NSW) (L) 139 .... 11.1 Boyd v Mayor of Wellington [1924] NZLR 1174 .... 11.52 — v Thorn (2017) 96 NSWLR 390 .... 11.28, 11.56 — v Wellington Corpn [1924] NZLR 1174 .... 11.11, 11.13 Boyer v Warbey [1953] 1 QB 234 .... 7.35 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 .... 7.27 Brace v Duchess of Marlborough [1728] EngR 100; 34 ER 829 .... 10.20 Bradley v McBride (1886) 2 WN (NSW) 56 .... 14.29 Branwood Park Pastoral Co Pty Ltd v Willing & Sons Pty Ltd [1976] 2 NSWLR 149 .... 16.4



Cases BreakFast Investments Pty Ltd v Giannopoulos (No 5) [2011] NSWSC 1508 .... 11.37 Breskvar v Wall (1971) 126 CLR 376; [1971] HCA 70 .... 11.7, 11.13, 11.14, 11.16, 11.17, 11.21, 11.30, 11.32, 11.36, 11.41, 11.44, 11.45, 11.47, 11.52, 11.53, 11.54, 11.55, 11.56, 11.57, 13.10, 13.27, 14.26, 14.39, 14.45, 15.23, 15.43, 16.46 Breskvar v Wall in Leros Pty Ltd v Terara Pty Ltd (1991) 106 ALR 595 .... 11.14 Brickwood v Young (1905) 2 CLR 387 .... 17.40, 17.42, 17.44 Bride v Shire of Katanning [2013] WASCA 154 .... 4.15, 16.18, 16.36 — v The Registrar of Titles [2015] WASC 11 .... 13.7 Bridges v Bridges [2010] NSWSC 1287 .... 4.11 — v Hawkesworth (1851) 21 LJQB 75 .... 2.14 Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457 .... 16.8 Brigers v Orr (1932) 32 SR (NSW) 634 .... 16.46 Bright v Walker (1834) 1 Cr M & R 211 .... 14.35 Bristow v Cormican (1878) 3 App Cas 641 .... 2.11 British Actors’ Film Company v Glover [1918] 1 KB 299 .... 1.12 British American Cattle Co v Caribe Farm Industries Ltd [1998] UKPC 28; [1998] 1 WLR 1529 .... 11.56 British American Tobacco Ltd v Cowell (2002) 7 VR 524 .... 2.14 British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577 .... 14.26 British Waterways Board v Toor [2006] EWHC 1256 .... 4.15 Broadcast Australia v Minister Assisting Minister for Natural Resources (Lands) (2004) 204 ALR 46 .... 6.3 Brocklesby v Armitage & Guest [2002] 1 WLR 598 .... 4.22

Brogden v Metropolitan Railway Co .... 7.17 Bromley v Tryon [1952] AC 265 .... 14.5 Brown v Heffer (1967) 116 CLR 344 .... 9.35 Browne v Flower [1911] 1 Ch 219 .... 7.24, 14.25, 14.29 Brunker v Perpetual Trustee Co (Ltd) (1937) 57 CLR 555 .... 17.56 Brunner v Greenslade [1971] Ch 993 .... 15.19, 15.39, 15.43 Bruton v London Quadrant Housing [2000] 1 AC 406 .... 7.7, 7.10, 7.16 Bryant v Foot (1867) LR 2 QB 161 .... 14.35 Brydall v The Owners of Strata Plan 66794 (2009) 14 BPR 26,831 .... 14.14 Buckinghamshire County Council v Moran [1990] Ch 623 .... 4.4, 4.20 Buckley v Barber (1851) 6 Exch 164 at 179; 155 ER 498 .... 17.26 — v Gross (1863) 3 B & S 556 .... 2.17, 2.18 Buckton’s Settlement Trusts, Re [1964] Ch 497 .... 6.16 Buffrey v Buffrey [2006] NSWSC 1349 .... 9.17 Bull v Bull [1955] 1 All ER 253; [1955] 1 QB 234 .... 17.33, 17.36, 17.47 Bulstrode v Lambert (1953) 2 All ER 728 .... 14.43 Burgess v Rawnsley [1975] Ch 429 .... 17.15, 17.56, 17.64, 17.65 Burke Estate v Nova Scotia (Attorney General) (1991) 107 NSR (2d) 91 .... 4.10 — v Dawes (1938) 59 CLR 1 .... 7.11, 10.20 — v State Bank of New South Wales (1995) 37 NSWLR 53 .... 11.32 — v Yurilla SA Pty Ltd (1991) 56 SASR 382 .... 15.11, 15.22, 15.23, 15.43 Burkinshaw v Nicolls (1878) 3 AC 1004 .... 14.29 Burns Philp Trustee Co Ltd v Viney [1981] 2 NSWLR 216 .... 9.2, 9.39, 10.27, 10.28 — v Burns [1984] Ch 317 .... 9.26 — v McCormick 135 NE 273 (NY 1922) .... 9.15 Burrows v Lang [1901] 2 Ch 502 .... 14.11 xxxi



Australian Property Law

Burrup Fertilizers Pty Ltd (Receivers and Managers Appointed) v Oswal (No 2) [2011] FCA 731 .... 11.37 Bursill Enterprises Pty Ltd v Berger Bros Trading Co Pty Ltd (1971) 124 CLR 73; [1971] ALR 551 .... 14.39, 15.23, 15.43, 15.44 Burton v Winters [1993] 3 All ER 847 .... 3.30 Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 .... 3.19 Butler v Attorney-General (Vic) (1961) 106 CLR 268; [1961] HCA 32 .... 11.52, 11.56 — v Dickson [2018] VCC 610 .... 4.9 — v Fairclough (1917) 23 CLR 78 .... 10.28, 11.21, 11.23, 11.34, 13.3, 13.19, 13.20, 13.21, 13.24 — v Hobson (1938) 4 Bing (NC) 290; 132 ER 800; [1838] EngR 401 .... 2.17 Buttle v Saunders [1950] 2 All ER 193 .... 17.73 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 .... 7.27 Byrnes v Kendle (2011) 243 CLR 253 .... 13.3 C

C Convenience Stores Pty Ltd v Wayville Plaza Pty Ltd [2012] SASC 14 .... 15.18 Cable v Bryant [1908] 1 Ch 259 .... 14.15, 14.25, 14.29 Caboche v Ramsay (1993) 119 ALR 215 .... 5.18, 6.3 Cackett v Keswick [1902] 2 Ch 456 .... 16.8 Cadell v Palmer (1833) 1 Cl & Fin 372; 6 ER 956 .... 6.11 Cadia Holdings Pty Ltd v NSW (2010) 269 ALR 204 .... 3.26 Calder v Attorney-General (British Columbia) .... 8.8 Caldwell v Rural Bank of New South Wales (1951) 53 SR (NSW) 415 .... 11.56 Callow v Rupchev [2009] NSWCA 148 .... 17.43 Calverley v Green (1984) 155 CLR 242; 56 ALR 483; [1984] HCA 81…. 9.17, 9.21, 9.22, 9.23, 9.26, 9.28, 17.23, 17.24 xxxii

Cam v Linke Nominees [2010] FCA 1148 .... 11.14 Cameron Ltd v Rolls Royce Pty Ltd [2007] EWHC 546 .... 1.13 Campbell v Holyland (1878) 7 Ch D 166 .... 16.3, 16.4 — v Payne and Fitzgerald (1953) 53 SR (NSW) 537 .... 7.37 Campbell and Cowdy, Re [1928] 1 DLR 1034 .... 15.42 Canadian Pacific Ltd v Paul [1988] 2 SCR 654 .... 8.8 Cannon v Villars (1878) 8 Ch D 415 .... 14.39 Canon Kabushiki Kaisha v Green Cartridge Co (Hong Kong) Ltd [1997] AC 728 .... 14.26 Cantliff v Jenkins [1978] 1 All ER 836 .... 17.36 Cao v Baccello Pty Ltd as trustee for the Mondello Family Trust ]2020]WASCA 82 .... 7.2, 7.14 Capell v Winter [1907] 2 Ch 376 .... 13.14, 10.25 Capital and Counties Bank Ltd v Rhodes [1903] 1 Ch 631 .... 7.40 Capital Finance Australia Pty Ltd v Bayblu Holdings Pty Ltd & JNW Investments Pty Ltd [2011] NSWSC 24 .... 13.7 Carey v Doyne (1856) 5 Ir Ch Rep 104 .... 16.35 Carindaels-Hooper v Tierney (1995) NSW ConvR 55-767 .... 17.43, 17.44 Carly v Farrelly (1975) 1 NZLR 356 .... 9.26 Carreras Rothmans Ltd v Freeman Mathews Treasure Ltd [1985] Ch 207 .... 9.7 Carter v Carter (1857) 3 K & J 617; 69 ER 1256 .... 10.13, 10.18 Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 368 ALR 390 .... 9.37 Carvita Holdings Pty Ltd v Mitsubishi Bank of Australia Ltd (1993) 6 BPR 13,327 .... 11.18 Casborne v Scarfe (1737) 1 Atk 603; 26 ER 37 .... 9.40, 16.4

Cases Case of Tanistry (1608) Dav Ir 28; 80 ER 516 .... 5.9 Cash Resources Aust Pty Ltd v BT Securities Ltd [1990] VR 576 .... 10.25, 13.27 Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425 .... 11.7, 11.14, 11.27, 11.37, 17.2, 17.53 Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2013) 247 CLR 149 .... 11.14, 11.37, 11.57, 11.64, 11.65, 11.66, 15.43 Casuarina Rec Club Pty Ltd v The Owners Strata Plan 77971 [2011] NSWCA 159 .... 14.13 Catanzariti v Whitehouse (1981) 55 FLR 426 .... 17.46 Caunce v Caunce [1969] 1 WLR 286 .... 10.18 Cavacourt Pty Ltd v Durian (Holdings) Pty Ltd [1998] NSWSC 787 .... 14.47 Cave v Cave (1880) 15 Ch D 639 .... 9.40, 10.28, 10.29, 13.27 — v Robinson Jarvis & Rolf [2002] 1 WLR 581 .... 4.22 CBA v Nabi [2010] NSWSC 1425 .... 16.39 CBS Songs Ltd v Amstrad Consumer Electronics plc [1988] 1 AC 1013 .... 16.43 Ceda Nominees Pty Ltd v Registrar of Title [1982] ANZ ConvR 524 .... 13.7 Central Control Board (Liquor Traffic) v Cannon Brewery Company Ltd (1919) AC 744 .... 8.7 Central Newbury Car Auctions Ltd v Unity Finance Ltd (1957) 1 QB 371 .... 13.14 Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378; [2012] HCA 56 .... 3.14 Cetojevic v Cetojevic [2007] NSWCA 33 .... 9.2 CG (Deceased) on behalf of the Badimia People v State of Western Australia [2015] FCA 204 .... 14.23 Chalhoub v Chalhoub [2005] NSWSC 572 .... 17.73 Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd [2003] NSWSC 1072 .... 11.76



Chambers v Goldwin 9 Ves 254 .... 16.4 — v Randall [1923] 1 Ch 149 .... 15.31 — v Warkhouse [1797] 3 Lev 336 .... 2.3 Chambeyron Pty Ltd, Re [2017] VSC 241 .... 17.57 Chan v Chan [2020] VSCA 40 .... 7.2, 9.31 — v Cresdon Pty Ltd (1989) 168 CLR 242; 89 ALR 522; 64 ALJR 111 .... 7.14, 7.19, 7.37, 17.56 Chandler v Thompson (1811) 3 Camp 80 .... 1.27 Chandra v Perpetual Trustees Victoria Ltd [2007] NSWSC 694 .... 11.16 Chang v Registrar of Titles (1976) 137 CLR 177; 8 ALR 285 .... 9.36 Chardon, Re [1928] Ch 464 .... 6.12 Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 .... 9.17, 9.21, 9.22, 17.56 Charmelyn Enterprises Pty Ltd v Klonis (1981) 2 BPR 9,527 .... 16.8 Chasfild Pty Ltd v Taranto [1991] 1 VR 225 .... 11.14, 11.41 Chateau Constructions (Aust) Ltd v Zepinic (No 5) [2010] NSWSC 265 .... 16.39 Cheah Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472 .... 13.27 Chelsea Investments Pty Ltd v Commissioner of Taxation (1966) 115 CLR 1 .... 7.5 Chen v Sunshine Light Pty Ltd [2017] WASC 14 .... 16.27 Chester v Buckingham Travel Ltd [1981] 1 WLR 9 .... 7.27 — v Willan (1670) 2 Wms Saund 96 (85 ER 768) .... 17.52 Chhokar v Chhokar [1984] FLR 313 .... 17.38 Chia v Rennie (1997) 8 BPR 15,601 .... 16.47 Chick v Dockray [2011] TASFC 1 .... 14.35 Chieco v Evans (1990) 5 BPR 11,297 .... 17.36 Chin v Miller (1981) 37 ALR 171 .... 13.24 China Field Ltd v Appeal Tribunal (Buildings) (No 2) [2009] HKCFA 95 .... 14.36 Chomley v Firebrace (1879) 5 VLR (Eq) 57 .... 11.40 xxxiii



Australian Property Law

Churchill v Evans (1809) 1 Taunt 529; 127 ER 939 .... 3.29 Churston Golf Club v Haddock [2018] 4 WLR 53 .... 15.8 Ciaglia v Ciaglia (2010) 269 ALR 175; [2010] NSWSC 341 .... 11.37, 16.11 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2 .... 3.14 Circuit Finance Australia Ltd (in liq) v Panella [2011] NSWSC 311 .... 10.24, 13.15 Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd (2006) NSW ConvR 56,143 .... 13.12 Cirino v Registrar-General (1993) 6 BPR 13,260 .... 11.76 Citicorp Investment Bank (Singapore) Ltd v Wee Ah Kee [1997] 2 SLR 759 .... 16.8 City Developments Pty Ltd v Registrar General (2000) 135 NTR 1 .... 14.13 City of Canada Bay v Bonaccorso Pty Ltd (2007) 71 NSWLR 424 .... 11.53, 11.56, 11.57, 11.58 City of London Corporation v Appleyard [1963] 1 WLR 982 .... 3.14 CL Forrest Trust, Re [1953] VLR 246 .... 16.4 Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52 .... 2.16 Clarence City Council v Howlin [2016] TASSC 61 .... 11.4, 14.25 Clark v Burnie City Council [2008] TASCC 28 .... 15.46 — v Raymor (Brisbane) Pty Ltd [1982] Qd R 479 .... 13.20 Clarke v Babbitt [1927] 2 DLR 7 .... 4.10 — v Japan Machines (Australia) Pty Ltd (No. 2) (1984) 1 Qd R 421 .... 16.47 — v Ramuz [1891] 2 QB 456 .... 9.35 Classic Heights Pty Ltd v Black Hole Enterprises Pty Ltd (1994) V ConvR 54-506 .... 13.7 Cleaver v Mutual Reserve Fund Life Association [1892] 1 QB 147 .... 17.8, 17.70 xxxiv

Clem Smith Nominees Pty Ltd v Farrelly & Farrelly (1978) 20 SASR 227 .... 15.18, 15.23, 15.26, 15.32, 15.43 Clement v Jones (1909) 8 CLR 133 .... 4.9, 4.10 Clements v Ellis (1934) 51 CLR 217; [1934] HCA 18 .... 11.13, 11.27, 11.40, 11.52, 11.56 Clifford v Dove [2003] NSWSC 938 .... 15.8 Clifford’s Settlement Trust, Re; Heaton v Westwater [1981] Ch 63 .... 6.19 Climie v Wood (1868) LR 3 Ex 257 .... 2.14 Clissold v Perry (1904) 1 CLR 363 .... 2.10, 8.7 Clive Anthony Nicholson, Re [2004] QSC 480 .... 17.8 Clos Farming Estates Pty Ltd v Easton (2001) 10 BPR 18,845 .... 14.3, 14.8, 14.13 Cloutte v Storey [1911] 1 Ch 18 .... 9.40 CNG Co (Aust) Pty Ltd v Australia & New Zealand Banking Group (1992) 6 BPR 13,101 .... 16.31, 16.32 Cobb v Lane [1952] 1 All ER 1199 .... 7.6 Cobbe v Yeoman’s Row Management Ltd (2008); 1 WLR 1752 .... 7.16, 7.17 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; [1982] HCA 24…. 7.27, 14.26, 14.38, 14.39 Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107; [1558–1774] All ER Rep 1 .... 2.16, 3.10 Coles KMA Ltd v Sword Nominees Pty Ltd (1986) 44 SASR 120 .... 13.10 Colledge v H C Curlett Construction Co Ltd (1932) NZLR 1060 .... 3.2 Collins v Simonsen [2019] EWHC 2214 .... 17.57 Combet v The Commonwealth (2005) 224 CLR 494; [2005] HCA 61 .... 3.14 Combis (Trustee of the Property of Peter Jenson (Bankrupt) v Jenson (No 2) (2009) 181 FCR 178 .... 9.23 Commercial and General Acceptance Ltd v Nixon (1981) 152 CLR 491 .... 16.42 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 .... 9.26

Cases Commissioner of Stamp Duties (NSW) v Yeend (1929) 43 CLR 235 .... 1.12 Commissioner of Stamp Duties (Qld) v Hopkins (1945) 71 CLR 351 .... 10.9, 17.19 Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 .... 9.4 Commissioner of Stamps (Western Australia) v L Whiteman Ltd (1940) 64 CLR 407; [1940] HCA 30 .... 3.14 Commissioner of State Revenue v Lend Lease Funds Management Ltd [2011] VSCA 182 .... 9.7 — v Placer Dome Inc (2018) 93 ALJR 65 .... 1.7 — v Rojoda Pty Ltd [2020] HCA 7 .... 9.37 — v TEC Desert Pty Ltd [2009] WASCA 128 .... 3.8, 3.9, 3.11 — v Uniqema Pty Ltd (2004) 9 VR 523 .... 3.3 Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 215 ALR 1 .... 9.5 — v Luxxotica Retail Australia Pty Ltd (2011) 191 FCR 561 .... 13.22 — v Metal Manufactures Ltd (2001) 108 FCR 150 .... 3.11 — v R & D Holdings Pty Ltd (2007) 240 ALR 653 .... 16.11 Commonwealth v Hazeldell Ltd (1918) 25 CLR 552 .... 8.7 — v Registrar of Titles for Victoria (1918) 24 CLR 348; 24 ALR 106 .... 14.12, 14.15 — v Verwayen (1990) 170 CLR 394; 95 ALR 321 .... 7.16, 9.30, 16.8 — v Yarmirr (2000) 101 FCR 171 .... 3.19, 5.8 — v — (2001) 208 CLR 1 .... 5.8, 5.9, 8.14, 8.30, 8.31 Commonwealth Bank of Australia v Baranyay [1993] 1 VR 589 .... 13.7 — v Kyriackou (2003) V Conv R 54-674 .... 13.7 Commonwealth Development Bank of Australia v Bradley [1999] NSWSC 544 .... 16.40



Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1946) 46 SR (NSW) 47 .... 7.2, 7.11 Commonwealth of Australia v Akiba on behalf of the Torres Strait Islanders of the Regional Seas Claim Group (2012) 289 ALR 400 .... 8.20 — v Davis Samuel Pty Ltd (No 7) [2013] ACTSC 146 .... 10.18 Commonwealth Trading Bank of Australia v Austral Lighting Pty Ltd [1984] 2 Qd R 507 .... 13.17 Composite Buyers Ltd v Soong (1995) 38 NSWLR 286 .... 13.7 Congleton v Pattison (1808) 10 East 130; 103 ER 725 .... 7.34, 15.13, 15.14 Congoo on behalf of the Bar-Barrum People v The State of Queensland [2014] FCAFC 9 .... 8.29 Conlan v Registrar of Titles [2001] 24 WAR 299 .... 11.43, 11.45, 11.46, 11.47 Conroys Smallgoods Pty Ltd v Tomlinson [2018] WASC 21 .... 13.7 Consolidated Trust Co Ltd v Naylor (1936) 55 CLR 423 .... 16.37 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226 .... 7.27 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 .... 11.32, 11.34 Cook, Re [1948] Ch 212 .... 9.4 Cook v Alto Prestige Pty Ltd [2010] NSWSC 92 .... 9.19 Cook’s Mortgage, Re; Lawledge v Tyndall .... 17.44 Cooke v Ingram (1893) 68 LT 671 .... 14.29 Coolbrew Pty Ltd v Westpac Banking Corporation [2014] NSWSC 1108 .... 9.19 Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd [2013] VSCA 106 .... 7.7, 7.16, 7.35 Cooney v Burns (1922) 30 CLR 216; 28 ALR 181 .... 9.15 Cooper v Chitty (1756) 1 Burr 20 .... 1.13 — v Stuart (1889) 14 App Cas 286 .... 5.5, 5.6 xxxv



Australian Property Law

Cooper’s Conveyance Trusts, Re; Crewsdon v Bagot [1956] 1 WLR 1096 .... 6.12 Cope v Keene (1968) 118 CLR 1 .... 17.56 Copeland v Greenhalf [1952] Ch 488; [1952] 1 All ER 809 .... 14.8, 14.11 Coras v Webb and Hoare [1942] St R Qd 66 .... 11.52 Corin v Patton (1990) 169 CLR 540; 92 ALR 1 .... 9.22, 15.30, 17.2, 17.55, 17.56, 17.57, 17.59, 17.64, 17.65 Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391 .... 9.40 Corozo Pty Ltd v Total Australia Ltd [1988] 2 Qd R 366 .... 11.34 Corporation of London v Riggs (1880) 13 Ch D 798; 44 JP 345; 49 LJ Ch 297 .... 14.20 Cosmichome Ltd v Southampton City Council [2013] WLR 2436 .... 15.23 Costello v Chief Constable of Derbyshire Constabulary [2001] 1 WLR 1437 .... 2.17, 2.18, 2.19 Costin v Costin (1997) NSW ConvR 55-811 .... 17.57 Cottee Dairy Products Pty Ltd v Minad Pty Ltd (1997) 8 BPR 15,611 .... 3.8, 3.11 Couche v Adams [2002] NSWSC 27 .... 14.44, 15.48 Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460 .... 9.26 Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 .... 9.13 Courtenay v Austin (1961) 78 WN (NSW) 1082 .... 13.27 Cowcher v Cowcher (1972) 1 WLR 425; [1972] 1 All ER 943 .... 9.26 Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 .... 1.12, 1.13, 1.14 Cowlishaw v Ponsford (1928) 28 SR (NSW) 331 .... 14.30 Cowper v Fletcher (1865) 6 B & S 464; 122 ER 1267 .... 17.59 Cox v Bishop (1857) 8 De G & J 276; 44 ER 604 .... 15.2 — v Coulson [1916] 2 KB 177 .... 1.12 xxxvi

CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98 .... 9.3 Crabb Foundation v Corbett-Jones [2006] NSWSC 495 .... 5.15, 5.18 Crago v Julian [1992] 1 All ER 744 .... 7.4 Cram Foundation v Corbett-Jones [2006] NSWSC 495 (Unreported, 26 May 2006) .... 6.12, 6.13, 6.24 Cray v Willis (1729) 2 P Wms 529; 24 ER 847 .... 17.56 Credit Connect v Carney Credit Connect v Smit [2010] NSWSC 910 .... 11.22 Creelman v Hudson Bay Co (1920) AC 194 .... 14.29 Cresswell, Re [2018] QSC 142 .... 1.29 Crest Nicholson Residential (South) Ltd v McAllister [2004] 2 All ER 991 .... 15.25 Creswell v Hughes (1862) 1 H & C 421, 158 ER 950 .... 17.42 Cricklewood Property and Investment Trust Ltd v Leighton’s Investment Trust Ltd (1945) AC 221 .... 7.37, 7.39 Crippen, Re Jane Tucker (1920) 21 SR (NSW) 175 .... 17.70 Crisp v Mullings (1976) EGD 730 .... 9.21 Crompston v French (1995) V ConvR 54-529 .... 13.7 Crook v Hill [(1871) LR 6 Ch App 311 .... 14.26 Cross v National Australia Bank Ltd (1993) Q ConvR 54-33 .... 13.7 Crossley v Crossley [2005] EWCA Civ 1581; [2006] 1 FCR 655 .... 17.30 Crossley & Sons Ltd v Lightowler (1867) 2 Ch App 478 .... 14.43 Crow v Campbell (1884) 10 VLR (E) 186 .... 11.40, 11.42 Crowley v Crowley (1984) 51 Nfld & PEIR 140 .... 4.10 Crown v Cosmopolitan Hotel (Vic) Ltd .... 7.19 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 .... 7.7, 7.14, 7.18

Cases Cruickshank & Co Ltd v Ewington (1905) 24 NZLR 957 .... 13.27 Cruse v Mount [1933] Ch 278 .... 7.21 Cuckmere Brick Co Ltd v Mutual Finance Ltd [1971] Ch 949 .... 16.41, 16.42 Cumberland Consolidated Holdings Ltd v Ireland [1946] KB 264 .... 9.35 Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd (2011) 243 CLR 492 .... 11.55 Currey v Federal Building Society (1929) 42 CLR 421 .... 13.21 Currumbin Investments Pty Ltd v Body Corp Mitchell Park Parkwood CTS [2012] Qd LR 511 .... 14.40 Cussen and of Beechworth Land Estates Pty Ltd v Douglas Estate Holdings Pty Ltd (2019) 140 ACSR 1 .... 16.28 Cuthbertson v Swan (1877) 11 SA LR 102 .... 13.2 Cuzeno Pty Ltd v The Owners Strata Plan 65870 [2013] NSWSC 1385 .... 14.33 D

Da Costa, Re; Clarke v Church of England Collegiate School of St Peter [1912] 1 Ch 337 .... 6.12 Dabbs v Seaman (1925) 36 CLR 538 .... 14.25, 14.29, 14.30, 14.34 Dagenham (Thames) Dock Company, Re; Ex parte Hulse (1873) LR 8 Ch App 1022 .... 9.36 Dai v Liu [2018] VSC 189 .... 13.25 Dale v Hamilton (1846) 5 Hare 369; 67 ER 955 .... 9.15 Dalton v Angus (1881) 6 App Cas 740 .... 4.10, 14.11, 14.35 Damberg v Damberg (2001) 52 NSWLR 492; [2001] NSWCA 87 .... 9.21, 17.13 Daniel v Camplin (1845) 7 Man & G 167; (135 ER 73) .... 17.52 Darmanin v Cowan [2010] NSWSC 1118 .... 3.3 Davies, Re (1989) 1 Qd R 48 .... 13.10 Davies v Sear (1869) LR 7 Eq 427 .... 14.22, 14.32



Davis v Johnson [1979] AC 264 .... 17.36 — v Taylor (1948) 48 SR (NSW) 514 .... 16.46 Dayah v The Partners of Bushloe Street Surgery [2020] EWHC 1375 .... 7.39 De Falbe, Re; Ward v Taylor [1901] 1 Ch 523 .... 3.14 De Mattos v Gibson (1858) 4 De G & J 276; 45 ER 108 .... 15.22 De Rose v State of South Australia (No 2) [2005] FCAFC 110 .... 8.15 Debonair Nominees Pty Ltd v J & K Berry Nominees Pty Ltd (2000) 77 SASR 261 .... 7.30 Deen v Andrews [1986] 1 EGLR 262 .... 3.2 Deguisa v Lynn [2019] SASCFC 107 .... 15.14, 15.22, 15.23, 15.32 — v — [2020] HCA 39 .... 15.23, 15.34, 15.41, 15.43, 15.44, 15.45 Delehunt v Carmody (1986) 161 CLR 464 .... 17.15, 17.18, 17.24, 17.29 Delgamuukw v British Columbia .... 8.23, 8.26 Delohery v Permanent Trustee Co of NSW (1904) 1 CLR 283 .... 14.35 Dempster v Cleghorn (1813) 2 Dow 40 .... 14.11 Den Norske Bank v Acemex Management Co (2003) 2 All ER (Comm) 318 .... 16.41 Denn v Gaskin (1777) 2 Cowp 657 .... 17.15 Denn d Tarzwell v Barnard (1777) 2 Cowp 595; 98 ER 1259 .... 2.11 Dennerstein, Re [1963] VR 688 .... 15.32, 15.41, 15.42, 15.43 Dennis v McDonald [1982] Fam 63 .... 17.36, 17.38, 17.42 Denny, Mott and Dickson Ltd v James B Fraser and Co Ltd [1944] AC 265 .... 9.26 Depas Pty Ltd v Dimitriou (2007) V ConvR 54-728 .... 13.12 Deputy Commissioner of Taxation v Huang [2019] FCA 1728 .... 17.31, 17.32 — v Vasiliades (2014) 323 ALR 59 .... 17.31 Destri Enterprises Pty Ltd v Donald James Maxwell [2012] NSWC 295 .... 14.44 Detroit Baseball Club v Deppert 61 Mich 63 (1886) .... 1.27 xxxvii



Australian Property Law

Devefi Pty Ltd v MaHeffy Perl Nagy Pty Ltd (1993) 113 ALR 225 .... 6.3 Devine v Holloway (1861) 14 Mood CC 290…. 14.35 DHJPM Pty Ltd v Blackthorn Resources (2011) 285 ALR 311 83 NSWLR 728 .... 7.16 Dickinson v Burrell (1866) LR 1 Eq 337 .... 9.40, 10.28 Diemasters v MeadowCorp [2001] 52 NSWLR 572 .... 11.74, 11.75, 11.79, 13.4 Dillwyn v Llewellyn (1862) 4 De GF & J 517; 45 ER 1285 .... 3.30, 7.16, 7.17, 9.30 Diplock, Re [1948] Ch 465 .... 9.26 Director of Public Prosecutions for the State of Victoria v Le (2007) 232 CLR 562 .... 17.50 Dixon v Muckleston (1872) LR 8 Ch App 155 .... 13.14, 13.21, 13.24 DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510 .... 9.2, 9.5, 9.6, 9.13, 10.9, 10.10 — v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431; 40 ALR 1 .... 9.17, 17.56 Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234 .... 10.18 Dobbie v Davidson (1991) 23 NSWLR 625 .... 11.64, 11.65, 11.76, 14.26, 14.35 Dockrill v Cavanagh (1944) 45 SR (NSW) 78 .... 7.2 Doe v Barnard (1849) 13 QB 945 .... 2.9 — v Bird (1809) 11 East 49; 103 ER 922 .... 17.36 Doe d Hall v Penfold (1838) 8 C & P 536; 173 ER 607; [1838] EngR 489 .... 2.10 Doe d Hughes v Dyeball (1829) 3 C & P 610; Mood & M 346; 173 ER 1184 .... 2.8, 2.11 Doe d Lewis v Rees (1834) 6 C & D 610 .... 4.20 Doe d Smith and Payne v Webber (1834) 1 AD and E 119; 110 ER 1152 .... 2.11 Doe d Stansbury v Arkwright (1833) 5 Car and P 575; 172 ER 1105 .... 2.11 xxxviii

Doe d Wilkins v Marquis of Cleveland (1829) 9 B and C 864; 109 ER 321 .... 2.11 Doherty v Allman (1878) 3 App Cas 709 .... 1.12, 1.13, 15.19 Dolphin’s Conveyance, Re [1970] Ch 654 .... 15.38, 15.39 Donald v Suckling (1866) LR 1 QB 585 .... 2.16 Donaldson v Donaldson (1854) Kay 711; 69 ER 303 .... 17.56 Donnelly v Adams (1905) 1 IR 154 .... 14.29 Donoghue v Stevenson [1932] AC 562 .... 1.13, 1.27, 7.22 Doodeward v Spence (1908) 6 CLR 406 .... 1.29, 2.3, 2.4, 2.5, 2.6 Double Bay Newspapers Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 .... 13.20 Doueihi v Construction Technologies Australia Pty Ltd [2016] NSWCA 105 .... 7.16 Douglas v Baynes (1908) AC 477 .... 14.26 Douglas Properties Ltd v Olde World Antiques etc Ltd (1980) 28 AR 108 .... 13.27 Downie v Lockwood [1965] VR 257 .... 7.27, 11.5, 11.69 Dr Foster’s Case [(1614) 11 Co Rep 56b .... 11.52 Drake v Mitchell (1803) 3 East 251; 102 ER 594 .... 13.27 — v Whipp [1996] 2 FCR 296 .... 17.30 Draper’s Conveyance, Re [1969] 1 Ch 486 .... 15.56 Drever v Drever [1936] ALR 446 .... 17.13 Drummond’s Settlement, Re [1988] 1 WLR 239 .... 6.18, 6.19 Duffield v Duffield [1827] EngR 56; 6 ER 525 .... 5.15 Duke of Norfolk’s Case (1681) 3 Ch Cas 1; 22 ER 931 .... 6.11, 6.22 Duncan v Louch (1845) 6 QB 904; 115 ER 341 .... 14.11, 14.12 Dura Australia Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326 .... 2.20

Cases Durian (Holdings) Pty Ltd v Cavacourt Pty Ltd (2000) 10 BPR 18,099 .... 14.47 Dutton v Taylor (1701) 2 Lut 1487; 125 ER 819 .... 14.20, 14.22, 14.32 Dwyer v Kaljo (1992) 27 NSW LR 728 .... 17.42 Dyce v Lady Hay (1852) 1 Macq 305 .... 14.11, 14.12, 14.15 Dyer v Dyer (1788) 2 Cox Eq Cas 92; 30 ER 42 .... 9.17 Dyson v Foster [1909] AC 98 .... 7.34 E

Eade v Vogiazopoulos (1993) V Conv R 154,458 .... 11.41 Eagle Trust Plc v SBC Securities Ltd [1992] 4 All ER 488; [1993] 1 WLR 484 .... 10.18 Eagling v Gardner [1970] 2 All ER 838 .... 15.38 Earl de la Warr v Miles (1881) 17 Ch D 535 .... 14.35 Eastern Nitrogen Ltd v Commissioner of Taxation (1999) 99 ATC 5163; [1999] FCA 1536 .... 3.10 Eastern Nitrogen Ltd v Commissioner of Taxation (2001) 108 FCR 27 .... 3.11 Eaton v The Swansea Waterworks Co (1851) 17 QB 267; 117 ER 1282 .... 4.10 Eckford v Stanbroke Pastoral Co Pty Ltd [2012] QSC 48 .... 4.23 Edwards v Amos (1945) 62 WN (NSW) 204 .... 2.17 — v State Trustees Ltd [2016] VSCA 28 .... 17.8 Edwards, Re, Estate of Edwards (2011) 81 NSWLR 198; [2011] NSWSC 478 .... 2.5 Edwards, Re; State Trustees Ltd v Edward [2014] VSC 392 .... 17.8 Edwards, Re; State Trustees Ltd v Edward [2016] VSCA 28 .... 17.70 Edwinton Commercial Corp v Tsavliris Russ (Worldwide Salvage and Towage) Ltd (The Sea Angel) [2007] 2 Lloyd’s Rep 517 .... 7.39 Effeney v Millar Investments Pty Ltd [2011] NSWSC 708 .... 14.40, 14.42, 14.44, 14.47



Egerton v Brownlow (1853) 4 HLC 1 .... 5.17 Egmont v Smith (1877) 6 Ch D 469 .... 9.35 Elderly Citizens Homes of SA Inc v Balnaves [1998] 72 SASR 210 .... 13.20 Elders Trustee & Executor Company Ltd v EG Reeves Pty Ltd (1988) 84 ALR 734 .... 16.4 Elfar v Registrar-General of New South Wales [2010] NSWSC 539 .... 11.73 Elitestone Ltd v Morris [1997] 1 WLR 687 .... 3.2, 3.3, 3.5, 3.17 El-Kazzi v Kassoum [2009] NSWSC 99 .... 11.22, 11.26, 13.20 Ellenborough Park, Re [1956] Ch 131 .... 14.1, 14.6, 14.8, 14.11, 14.12, 14.13 Elliot v Morley (Earl) (1907) 51 Sol J 625 .... 3.19 Ellis v Marshall [2006] NSWSC 448 .... 16.28, 16.32 Ellison v Ellison (1802) 6 Ves Jun 656; 31 ER 1243 .... 17.56 — v Marshall (No 2) [2016] WASC 333 .... 14.47 — v Vukicevic (1986) 7 NSWLR 104 .... 14.3 Elliston v Reacher [1908] 2 Ch 374; [1908–10] All ER Rep 612 .... 15.19, 15.35, 15.36, 15.38, 15.39, 15.42, 15.43 — v Reacher [1908] 2 Ch 665 .... 15.9, 15.34 Elton v Cavill (No 2) (1994) 34 NSWLR 289 .... 6.6, 6.7 Elvis v Archbishop of York (1619) Hob 315; 80 ER 458 .... 2.11 Elwes v Brigg Gas Company (1886) 33 Ch D 562 (UK) .... 2.14 Emanuel (Rundle Mall) Pty Ltd v Commissioner of Stamps (1986) 41 SASR 122 .... 3.11 Embrey v Owen (1851) 6 EX 353; 155 ER 579 .... 1.25 Emerald Quarry Industry Pty Ltd v Commissioner of Highways (1976) 14 SASR 486 .... 14.3 Emerald Securities Pty Ltd v Tee Zed Enterprises Ltd (1981) 28 SASR 214 .... 16.47 xxxix



Australian Property Law

Emhill Pty Ltd v Bonsoc Pty Ltd [2004] V ConvR 54–685 .... 7.37, 7.40 — v Bonsoc Pty Ltd (No 2) [2007] VSCA 108 .... 7.27 Emile Elias & Co Ltd v Pine Groves Ltd [1993] 1 WLR 305 .... 15.38 Empire Securities Pty Ltd v Miocevich [2008] WASCA 52 .... 3.8, 3.9 Engelwood Properties Ltd v Patel [2005] 1 WLR 1961 .... 9.35 English, Scottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302 .... 16.15 Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841 .... 3.1, 3.3, 3.5, 3.8 Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue (2011) 43 WAR 186 .... 3.11 Epic Feast Pty Ltd v Mawson KLM Holdings Pty Ltd (1998) 71 SASR 161; [1998] SASC 7106 .... 16.7, 16.8, 16.27 Epworth Group Holdings Pty Ltd v Permanent Custodians Ltd [2011] SASFC 32 .... 11.14 ER Ives Investment Ltd v High [1967] 2 QB 379 .... 15.8, 15.9 Errington v Errington & Woods [1952] 1 All ER 149; [1952] 1 KB 290 .... 1.13, 7.6 ES & A Bank v Phillips (1937) 57 CLR 302; [1937] ALR 104 .... 17.62 Esanda v Gibbons [1999] NSWSC 1094 .... 2.17 Espin v Pemberton (1859) 3 De G & J 54; 44 ER 1380 .... 11.32 Espley v Wilkes [1872] 7 Exch 298 .... 14.29 Esposito v The Commonwealth of Australia [2015] FCAFC 160 .... 1.7 Essex County Roman Catholic Separate School Board and Antaya, Re (1977) 80 DLR (3d) 405 .... 6.12 Estate Late Chow Cho-Poon, Re; Application for judicial advice [2013] NSWSC 844 .... 6.19 Ettershank v Zeal (1882) 8 VLR 333 .... 10.13 xl

Eustace v Scawen (1624) Cro Jac 696 (79 ER 604) .... 17.52 Evandale Estates Pty Ltd v Keck [1963] VR 647 .... 11.52 Evans v Bicknell (1801) 6 Ves 174; 31 ER 998 .... 10.12 Evanturel v Evanturel (1874) LR6 PC 1 .... 6.8 Eves v Eves [1975] EWCA Civ 3; [1975] 3 All ER 768; [1975] 1 WLR 1338 .... 9.26, 9.28 Ewen v Gerofsky 382 NYS 2d 651 (1976) .... 9.26 Expo International Pty Ltd (recs and mgrs appointed) (in liq) v Chant [1979] 2 NSWLR 820 .... 16.48 F

F & F Holdings Pty Ltd v Ridge Lane Pty Ltd [1998] VSCA 72 .... 11.23 Facchini v Bryson [1952] 1 TLR 1386 .... 7.6 Fachetti v Fachetti [2004] NSWSC 898 .... 17.64 Fairbairn v Varvaressos (2010) 78 NSWLR 577 .... 5.14, 5.15, 5.19 Fairclough v Swan Brewery Co Ltd [1912] UKPC 1; [1912] AC 565 .... 16.6, 16.8 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; 81 ALJR 1107; [2007] HCA 22 .... 11.14, 11.18, 11.24, 11.33, 11.35, 11.36, 11.37, 11.38, 11.47, 11.48, 14.39, 16.8 Farquharson and Co v King (1902) AC 325 .... 14.29 Farrar v Farrars Ltd (1888) 40 Ch D 395 .... 9.40 Farrington v Smith (1894) 20 VLR 90 .... 17.62 Federal Commissioner of Taxation v Metal Manufactures (2001) 108 FCR 150 .... 3.11 Federated Homes Ltd v Mill Lodge Properties Ltd [1980] 1 All ER 371; [1980] 1 WLR 594 .... 15.19, 15.25, 15.26, 15.27 Fejo v Northern Territory (1998) 195 CLR 96; 156 ALR 721; 72 ALJR 1442 .... 1.6, 8.8, 8.14, 8.19, 8.26, 8.27, 8.28, 8.29, 8.31, 8.47 Ferella v Official Trustee in Bankruptcy [2015] NSWCA 411 .... 17.73

Cases Ferguson v Miller [1978] 1 NZLR 819 .... 17.36 Fewings, Ex parte; In Re Sneyd (1883) 25 Ch D 338 .... 16.4 Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 .... 9.26 Field v Sullivan [1923] VLR 70 .... 2.17 Figgins Holdings v SEAA Enterprises Pty Ltd (1999) 196 CLR 254 .... 16.17, 16.18, 16.20 Finch v Finch [1808] EngR 125; (1808) 15 Ves Jun 43 .... 9.21 Fines v Spencer (1794) 3 Dy 306 b .... 2.3 Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87 .... 11.4, 13.3 Fink v Robertson (1907) 4 CLR 864 .... 16.15, 16.48 Finlay v R & I Bank of Western Australia Ltd (1993) 6 BPR 13,232; NSW ConvR 55-686 .... 13.20, 13.27 Finlayson v Campbell [1997] NSWSC 1050 .... 14.7 Finucane v The Registrar of Titles [1902] St R Qd 78 .... 11.74 First City Capital Ltd v Ampex Canada Inc (1989) 75 CBR 109 .... 13.27 Fisher v Wiggs (1700) 12 Mod Rep 296; 1 P Wms 14; 1 Salk 391 .... 17.15 Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732 .... 11.37 Fitt v Luxury Developments Pty Ltd [2000] VSC 258 .... 15.27, 15.43 Flack v Chairperson, National Crime Authority [1997] FCA 1331 .... 2.14 Fletcher v Fletcher (1844) 4 Hare 67; 67 ER 564 .... 17.56 Flourentzou v Spink [2019] NSWCA 315 .... 9.21 Ford v Grey (1703) 1 Salk 285; 91 ER 253; 6 Mod 44; 87 ER 807 .... 17.42 Forestview Nominees v Perpetual Trustees WA (1998) 193 CLR 154 .... 15.2, 15.19, 15.20, 15.21, 15.22, 15.24, 15.25, 15.26



Forgeard v Shanahan (1994) 35 NSWLR 206 .... 17.34, 17.35, 17.36, 17.41, 17.42, 17.43, 17.44 Formby v Barker [1903] 2 Ch 539 .... 15.31 Forrest v Nix [2012] NSWSC 493 .... 17.73 Forrest, Re; Trustees Executors and Agency Co Ltd v Anson [1953] VLR 246; [1953] ALR 532 .... 17.62 Forrest Trust, Re (1953) VLR 246 .... 9.40 Forster v Finance Corporation of Australia Ltd (1980) VR 63 .... 13.10 Forsyth v Blundell (1973) 129 CLR 477 .... 13.27, 16.41, 16.42, 16.46, 16.47 Fortescue Metals Group v Warrie on behalf of the Yindjibarndi People [2019] FCAFC 177 .... 8.6 Foster v Mackinnon (1869) LR 4 CP 704 .... 13.2 — v Warblington Urban District Council [1906] 1 KB 648 .... 14.36 Foudoulis v O’Donnell [2020] VSC 248 .... 15.48 Foundas v Arambatzis [2020] NSWCA 47 .... 9.21 Fourniotis v Vallianatos [2018] VSC 369 .... 4.10 Foxter v Blackstone I Myl & K 307 .... 10.23 Francis, Re (1988) 82 ALR 335 .... 17.53 Frank Warr and Co Ltd v London County Council [1904] 1 KB 713 .... 1.12 Franklin v Ind (1883) 17 SA LR 133…. 13.2 Fraser v Di Paolo (2008) V ConvR 54-751 .... 15.48 Frasers Lorne Pty Ltd v Joyce Goldsworthy Burke [2008] NSWSC 743 .... 14.47 Frater v Finlay (1968) 91 WN (NSW) 730 .... 14.8 Frazer v Walker [1967] 1 AC 569 .... 11.7, 11.11, 11.12, 11.13, 11.14, 11.27, 11.29, 11.30, 11.32, 11.34, 11.36, 11.37, 11.42, 11.44, 11.45, 11.50, 11.56, 11.67, 11.78, 13.10, 14.26, 14.43 Freed v Taffel [1984] 2 NSWLR 322 .... 17.50, 17.56 xli



Australian Property Law

Freeman v Freeman (1691) 2 Vern 234 (23 ER 751) .... 6.2 Freemasons Hospital v Attorney General (Vic) [2010] VSC 373 .... 5.15, 5.18, 6.13 French v Hope (1887) 56 LT 57 .... 9.40 — v Queensland Premier Mines [2006] VSCA 287 .... 16.37 Frewen v Relfe (1787) 2 Bro CC 220; 29 ER 123 .... 17.50, 17.62 Friends Provident Life Office, Re [1999] 1 All ER (Comm) 28 .... 7.7 Frieze v Unger [1960] VR 230 .... 17.46, 17.47, 17.59 Frogley v Earl of Lovelace (1859) Johns 333 .... 1.12 Frost, Re (1889) 43 Ch D 246 .... 6.15 Fry v Metzelaar [1945] VR 65 .... 7.2 FTFS Holdings Pty Ltd v Business Acquisitions Australia Pty Ltd [2006] NSWSC 846 .... 13.7 Fuji Xerox Australia Pty Ltd v Thoi [2018] VSC 483 .... 16.37 Funds in Court, Re; Application of Mango Credit Pty Ltd [2016] NSWSC 199 .... 16.9 Furness Railway Co v Cumberland Cooperative Building Society (1884) 52 LT 144 .... 14.29 Fysh v Page (1956) 96 CLR 233 .... 9.40 G

G and C Kreglinger v New Patagonia Meat and Cold Storage Company Ltd [1913] UKHL 1; [1914] AC 25 .... 16.6, 16.7, 16.8, 16.9 Gadsden v Commissioner of Probate Duties (1978) VR 653 .... 9.26 Gage, Re [1898] 1 Ch 498 .... 6.12 Gaite’s Will Trusts, Re [1949] 1 All ER 459 .... 6.15 Galafassi v Kelly (2014) 87 NSWLR 119 .... 7.37 Gallagher v Rainbow (1994) 179 CLR 624; 121 ALR 129 .... 14.39, 14.47 Ganga Dhar v Shankar Lal (1958) 45 AIR 770 .... 16.8 xlii

Garafano v Reliance Finance Corporation Ltd (1992) NSW Conv R 55-640 .... 11.32 Garcia v National Australia Bank Ltd (1998) 72 ALJR 1243 .... 13.27 Gardner v Hodgson’s Kingston Brewery [1903] AC 229 .... 14.35 Garland v Brown (1864) 10 LT 292 .... 6.11, 6.16 Garnett v Bradley (1878) 3 App Cas 944 .... 11.52 Garnett, Re; Robinson v Gandy (1886) 33 Ch D 300 .... 9.40 Garrard v Frankel (1862) 30 Beav 445 .... 9.40 — v Tuck (1849) 8 CB 231; 137 ER 498 .... 9.6 Gaskett v Gosling [1896] 1 QB 669 .... 16.48 Gaw v Coras Iompair Eireann [1953] IR 232 .... 7.34 Gee v Smart (1857) 8 E & B 313 .... 1.12 Gel Custodians v Gibson [2016] WASC 318 .... 13.7 General Finance Agency & Guarantee Co v Perpetual Executors & Trustees (1902) 27 VLR 739 .... 13.14, 13.27 George v McDonald (1992) 5 BPR 11,659 .... 17.73 — v Webb [2011] NSWSC 1608 .... 9.19 George Wimpey & Co Ltd v Sohn [1967] Ch 487; [1966] 1 All ER 232 .... 4.1, 4.14, 4.16, 14.12 Georgeski v Owners Corporation SP49833 (2004) 62 NSWLR 534 .... 3.19 Gerard Cassegrain & Co Pty Ltd v Cassegrain [2013] NSWCA 453 .... 11.47, 17.68 Gerhardy v Brown (1985) 159 CLR 70 .... 8.4 Ghey & Galton’s Application, Re [1957] 2 QB 650 .... 14.47 Gibbs v Messer [1891] AC 248; [1891-4] All ER Rep Ext 2047 .... 11.7, 11.9, 11.10, 11.11, 11.14, 11.16, 11.30, 11.40, 11.41, 15.43 Gibbs and Houlder Brothers and Co Ltd’s Lease, Re [1925] Ch 198 .... 7.31 Gifford v Lord Yarborough (1828) 5 Bing 163; 130 ER 1023 .... 3.22



Cases Gigi Entertainment Pty Ltd v Schmidt [2013] NSWCA 287 .... 7.38 Giles decd, Re [1972] 1 Ch 544 .... 17.70 Gimblett v Purton (1871) LR 12 Eq 427 .... 6.18 Gissing v Gissing [1971] AC 886; [1970] 2 All ER 780 .... 17.30, 17.56 Giumelli v Giumelli (1999) 196 CLR 101; 73 ALJR 547 .... 7.16, 7.17, 9.2, 9.30, 9.31, 9.32 Glasshouse Investments Pty Ltd v MPJ Holdings Pty Ltd [2005] NSWSC 546 .... 7.27 Glover v Pfeuffer (1914) 163 SW 984 .... 4.10 GLS v Russell Weisz (2018) 52 WAR 413 .... 2.5, 2.6 Goddard v Lewis (1909) 101 LT 528 .... 17.62 Godfrey Constructions Pty Ltd v Kanangra Park Pty Ltd (1972) 128 CLR 529 .... 13.10 Godmanchester Town Council, R (on the application of) v Secretary of State for the Environment, Food and Rural Affairs [2007] UKHL 28 .... 14.35 Goldberg v Edwards [1950] 1 Ch 247 .... 14.25 Goldcorp Exchange Ltd (in receivership), Re [1995] 1 AC 74 .... 9.29 Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd (2015) 319 ALR 151; 105 ACSR 605 .... 9.37, 9.41, 10.18, 16.47 Golding v Hands [1969] WAR 121 .... 17.56 — v Tanner (1991) 56 SASR 482 .... 11.66, 14.35 Goldstein v Shyzi Pty Ltd [2017] NSWSC 398 .... 16.24 Goldsworthy Mining Ltd v Federal Commissioner of Taxation (1973) 128 CLR 199 .... 7.7, 7.8, 8.23 Gomez v State Bank of New South Wales Ltd [2002] FCA 442 .... 16.42, 16.48 Goodman v Gallant [1986] 1 All ER 311; [1986] Fam 106 .... 17.30 Goodright v Wells (1781) 2 Dougl 771; 99 ER 491 .... 9.6

Goodtitle v Tombs (1770) 3 Wils KB 118; 95 ER 965 .... 17.35, 17.36, 17.42 Goodtitle d Parker v Baldwin (1809) 11 East 488; 103 ER 1092 .... 2.11 Goodwin v Phillips (1908) 7 CLR 1 .... 11.52 — v Western Australian Sports Centre Trust [2014] WASC 138 .... 4.7, 4.19 Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9 .... 7.24 Gotobed v Pridmore (1970) 115 SJ 78 .... 14.44 Gould v Kemp (1834) 2 My and K 304 .... 17.15, 17.62 Goyal v Chandra [2006] NSWSC 239 .... 6.7 Grafstein v Holme and Freeman (1958) 12 DLR (2d) 727 .... 2.14 Graham v Peat (1801) 1 East 244 .... 2.3 Grahame Allen & Sons Pty Ltd v Water Resources Commission [2000] 1 Qd R 523 .... 4.22 Grainge v Wilberforce (1889) 5 TLR 436 .... 17.56 Grant v Edmundson [1931] 1 Ch 1 .... 7.34, 15.19 — v Edwards [1986] 2 All ER 426; [1986] Ch 638 .... 17.30 Great Investments Ltd v Warner [2016] FCAFC 85 .... 10.18 Great West Permanent Loan Co v Friesen [1925] AC 208 .... 11.13, 13.21 Greco v Swinburne Ltd [1991] 1 VR 304 .... 7.11 Green Growth No 2 Ltd v Queen Elizabeth the Second National Trust [2016] NZCA 308 .... 10.29 Gregory v Alger (1888) 19 VLR 565 .... 11.23 Greig v Watson (1881) 7 VLR (Eq) 79 .... 9.40, 16.4 Gresley v Mousley (1859) 4 De G & J 78; 45 ER 31 .... 9.40, 10.28 Grey v Inland Revenue Commissioners [1960] AC 1 .... 9.11 Grgic v Australia & New Zealand Banking Group Ltd (1994) 33 NSWLR 202 .... 11.32, 11.34, 11.67, 14.26 xliii



Australian Property Law

Griffies v Griffies (1863) 8 LT 758 .... 17.42 Griffiths v Northern Territory [2007] 165 FCR 391 .... 8.6 Grill v Hockey (1991) 5 BPR 11,421 .... 14.44, 14.46 Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22 .... 11.37 Grimes v Stacke (1610) Cro Jac 262 .... 2.3 Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 .... 7.17, 9.15, 13.24 Guerin v R (1984) 13 DLR (4th) 321 .... 8.6 Gumana v Northern Territory of Australia [2007] FCAFC 23 .... 3.19, 3.25 Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 .... 7.35, 7.37, 7.38 Gunns Ltd v Balani Pty Ltd [2011] FCA 431 .... 11.22, 13.3 Gurfinkel v Bentley Pty Ltd (1966) 116 CLR 98 .... 16.11 Gusheroski v Lewis (1946) 167 P (2d) 390 .... 4.10 Guth v Robinson (1977) 1 BPR 9209 .... 14.44 Guthrie v ANZ Banking Group Ltd (1991) 23 NSWLR 672 .... 17.61 H

H & R Securities Ltd v Sayer [2009] NSWSC 427 .... 3.28 H, AE (No 2), Re [2012] SASC 177 .... 2.5 Hack v Minister for Lands (1905) 3 CLR 10 .... 11.52 Hagan v Waterhouse (1991) 34 NSWLR 308 .... 9.11 Hale v Dobbie and the Registrar of Titles (Unreported, 22 April 1984) BC 9401259 .... 14.45 Hall v Beckenham Corporation [1949] 1 KB 716 .... 2.14 — v Busst (1960) 104 CLR 206 .... 6.2, 6.3, 6.4, 6.6, 6.9 — v Knight & Baxter [1914] P 1 .... 17.70 Hallen v Spaeth (1923) AC 684 .... 7.37 xliv

Hallifax Property Corporation Pty Ltd v GIFC Ltd (1987) 4 BPR 9708 .... 16.47 Halloran v Firth (1926) 26 SR (NSW) 183 .... 7.37 — v Minister Administering National Parks and Wildlife Act 1974 (2006) 224 ALR 79; 80 ALJR 519; [2006] HCA 3 .... 11.7, 11.14, 13.3, 14.39 Halsall v Brizell [1957] Ch 169 .... 15.8, 15.9, 15.12 Hamilton v Joyce [1984] 3 NSWLR 279 .... 14.36 — v Kaljo (1987) 17 NSWLR 381 .... 4.22 Hamlet of Baker Lake v Minister of Indian Affairs .... 8.23 Hamlyn v Wood [1891] 2 QB 488 .... 14.26 Hampshire Automotive Centre Pty Ltd v Centre Com (Sunshine) Pty Ltd [2019] VSCA 77 .... 14.33, 14.36, 14.42 — v Wickens (1878) 7 Ch D 555 .... 7.27 Hancock Prospecting Pty Ltd v Wright Prospecting Pty Ltd [2012] WASCA 216 .... 17.57 Hannah v Peel [1945] KB 509 .... 2.2, 2.14 Hansford v Jago [1921] 1 Ch 322; [1921] 90 LJ Ch 129; [1920] All ER Rep 580 .... 14.20 Hanson Construction Materials Pty Ltd v Roberts [2016] NSWCA 240 .... 13.18 — v Vimwise Civil Engineering Pty Ltd (2006) NSW ConvR 56,137 .... 13.12 Hanson v Grassy Gully Gold Mining Co (1900) 21 NSWLR 271 .... 3.21 Haque v Commissioner for ACT Revenue (2006) 62 ATR 1116 .... 16.18 Harbour Port Consulting v NSW Maritime [2011] NSWSC 813 .... 9.31 Harmwood v Oglander (1803) 8 Ves Jun 106; 32 ER 293 .... 9.6 Harnett v Green (No 2) (1883) 4 LR (NSW) 292 .... 4.10 Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2016] NSWCA 123 .... 7.37 Harper v Minister for Sea Fisheries (1989) 168 CLR 314 .... 3.19, 8.31

Cases Harris v Flower (1904) 74 LJ Ch 127 .... 14.39, 14.40 — v Smith [2008] NSWSC 454 .... 11.37 Harrison v Foreman (1800) 5 Ves 207 .... 17.15 — v Melhem (2008) 72 NSWLR 380; [2008] NSWCA 67 .... 3.14 Harvard Nominees Pty Ltd v Tiller (No 2) [2020] FCA 604 .... 7.33 Harvey v Edwards, Dunlop & Co Ltd (1927) 39 CLR 302 .... 16.27 Haslam v Money for Living (Aust) Pty Ltd (2008) 172 FCR 301; 250 ALR 419 .... 7.11, 7.16 Hatala v Graglee Pastoral Company Pty Ltd [2017] NSWSC 155 .... 16.28 Hatton v Finch (1841) 4 Beav 186 .... 17.15 Hawkesley v May [1956] 1 QB 304 .... 17.56 Hawkesbury Valley Developments Pty Ltd v Custom Credit Corporation Ltd (1995) NSW ConvR 55-731 .... 16.43 Hays v De Atley (1923) 212 P 296 .... 4.10 Hayward v Giordani (1983) NZLR 140 .... 9.26 Haywood v Brunswick Permanent Benefit Building Society (1881) 8 QBD 403 .... 15.21 HE Dibble Ltd v Moore [1970] 2 QB 181 .... 3.2 Heath v Allen (1875) 1 VR 176 .... 3.28 — v Pugh (1881) 6 QBD 345 .... 16.48 Heathe v Heathe (1740) 2 Atk 121 .... 17.15 Hedley v Roberts [1977] VR 282 .... 17.46, 17.47, 17.48 Heid v Connell Investments Pty Ltd (1987) 9 NSWLR 628 .... 11.74 Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326; 49 ALR 229 .... 10.24, 10.25, 13.13, 13.14, 13.15, 13.20, 13.23, 13.24, 13.26, 13.27, 16.31 Helimount Pty Ltd (in liq) v Web Wealth Pty Ltd [2007] FCA 1936 .... 16.28, 16.32 Heller v Niagara Racing Association (1925) 2 DLR 286 .... 1.12



Henderson v Eason (1851) 17 QB 701; 117 ER 1451 .... 17.42 — v Squire [1868] LR 4 QB 170 .... 7.26 Henderson’s Conveyance, Re [1940] Ch 835 .... 15.47 Henningson v Nolan [2004] SASC 105 .... 7.30 Henry Berry & Co Pty Ltd v Rushton [1937] SR (Qld) 109 .... 2.17 Henry Roach (Petroleum) Pty Ltd v Credit House (Vic) Pty Ltd [1976] VR 309 .... 16.41, 16.42 Hepworth v Hepworth (1963) 110 CLR 309; [1963] HCA 49 .... 9.26, 9.28 Heslop v Burns [1974] 3 All ER 406; [1974] 1 WLR 1241 .... 7.6 Hewett, Re [1894] 1 Ch 362 .... 17.62 Hewett v Court (1983) 149 CLR 639 .... 9.24, 10.18 Heywood v Mallalieu (1883) 25 Ch D 357 .... 14.12 — v Skinner & Ors [1981] 1 NSWLR 590 .... 17.42 HG & R Nominees Pty Ltd v Fava [1997] 2 VR 368 .... 11.32, 11.46 Higgins v Australian Capital Territory [2020] ACTSC 19 .... 7.24, 15.39 Higgs v Nassauvian Ltd [1975] AC 464 .... 4.9 Highway Properties Ltd v Kelly, Douglas & Co Ltd (1971) 17 DLR (3d) 710 .... 7.37 Hill v Hall (1876) LR 1 Ex D 411 .... 11.56 — v Hill [2005] NSWSC 863 .... 9.29 — v — [2013] NSWSC 524 .... 17.8 — v Tupper (1863) 2 H & C 121; [1861– 1873] All ER Rep 696 .... 14.8 Hillman v Dissanayake (2008) V ConvR 54751 .... 15.48 Hillpalm Pty Ltd v Heavens Door Pty Ltd (2004) 220 CLR 472; 211 ALR 588; [2004] HCA 59 .... 11.54, 11.55, 11.57, 11.58, 13.17 Hilltop Planners Pty Ltd v Great Lakes Council [2003] NSWLEC 214 .... 5.16 Hine v Hine [1962] 3 All ER 345; [1962] 1 WLR 1124 .... 17.30 xlv



Australian Property Law

Hinkley v Star City Pty Ltd [2011] NSWSC 1389 .... 1.13 Hircock v Windsor Homes (Development No 3) Pty Ltd [1979] 1 NSWLR 501 .... 17.18, 17.19, 17.21 Hirst v Tolson (1850) 2 Mac and G 134 .... 9.26 HL (Qld) Pty Ltd v Jobera Pty Ltd [2009] SASC 165 .... 11.22 Hobson v Gorringe [1897] 1 Ch 182 .... 3.2 Hogan v Baseden (1997) 8 BPR 15,723 .... 17.73 Hoh v Ying Mui Pty Ltd [2019] VSCA 203 .... 11.24 Holland v Hodgson (1872) LR 7 CP 328 .... 3.1, 3.2, 3.14 Holohan v Friends Provident and Century Life Office (1966) IR 1 .... 16.41, 16.46 Homebush Abattoir Corporation v Bermira Pty Ltd (1991) NSW ConvR 55-579 .... 7.21 Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha [1962] 2 QB 26 .... 7.38 Hoon v Westpoint Management [2011] WASC 239 .... 9.37 Hooper v Lane (1859) 6 HL Cas 443; 10 ER 1368 .... 10.28 Hopkinson v Rolt (1861) 11 ER 829 .... 10.20 Hopper v Corporation of Liverpool (1944) 88 Sol Jo 213 .... 6.12 Horn v Chipperfield [2019] EWHC 537 .... 17.31 Horsey Estate Ltd v Steiger [1899] 2 QB 79 .... 7.35 Horsfall v Braye (1908) 7 CLR 629; [1908] HCA 85 .... 14.26 Horton v Westminster Commissioners [1852] 7 Ex 780 .... 14.29 Horvath v Commonwealth Bank of Australia [1999] 1 VR 643; [1999] 1 VR 643 .... 11.51, 11.52, 11.53, 11.56, 11.57, 11.58 Hosking v Haas (No 2) (2010) NSW ConvR 56-253 .... 15.22, 15.32, 15.37, 15.41, 15.43 Hough v Taylor (1927) 29 WALR 97 .... 4.10 xlvi

Houldsworth v City of Glasgow Bank (1880) 5 AppCas 317 .... 10.28 Howell v Bradford 570 So 2d 643 (1990) .... 17.36 — v District Land Registrar (1908) 27 NZLR 1074 .... 11.50 HSBC Rail (UK) Ltd v Network Rail Infrastructure Ltd [2006] 1 All ER (Comm) 345 .... 2.16 Hubbs v Black (1918) 46 DLR 583; 44 O LR 545 .... 1.12 Hudson v Arap 1 NSW Pty Ltd (2015) 90 NSWLR 477 .... 16.11 Hulme v Schaecken [1999] NSWSC 1291 .... 17.64, 17.65, 17.66 Hume v Perpetual Trustees Executors and Agency Co of Tasmania Ltd (1939) 62 CLR 242 .... 5.15 Hunt v Luck [1902] 1 Ch 428 .... 10.18 Hunter v Canary Wharf Ltd [1997] AC 655 .... 14.36 — v Walters (1871) 7 Ch App 75 .... 9.39 Huntingford v Hobbs [1993] 1 FCR 45 .... 17.30 Hurst v Picture Theatres Ltd [1915] 1 KB 1 .... 1.12, 1.13 Hussey v Palmer [1972] 3 All ER 744; [1972] 1 WLR 1286 .... 9.26, 9.28 Hutton v Hamboro (1860) 2 F & F 218 .... 14.43 — v Watling [1948] Ch 26 .... 6.13 Hycenko v Hrycenko & Hrycenko [2016] VSC 247 .... 17.16, 17.64 Hyde v Graham (1862) 1 H & C 583; 158 ER 1020 .... 1.12 Hyman v Van Den Bergh [1908] 1 Ch 167 .... 14.9 Hypec Electronics v Registrar-General [2008] NSWSC 18 .... 11.47 I

IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 .... 11.42, 11.46, 13.14, 13.16, 13.20, 13.21, 13.22, 13.23, 13.27

Cases ICM Agriculture v Commonwealth (2009) 240 CLR 140 .... 3.21 Idewu Inasa v Oshodi (1934) AC 99 ….8.6 IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440 .... 10.18, 13.25 Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41 .... 9.29 Impact Funds Management v Roy Morgan Research Ltd [2016] VSC 221 .... 7.38 ING Bank Australia Ltd v O’Shea [2010] NSWCA 71 .... 9.37, 14.23 Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 .... 16.47 Ingram v Ingram (1941) VLR 95 .... 9.21 International Drilling Fluids v Louisville Investments (Uxbridge) Ltd [1986] Ch 513 .... 7.31 International News Service v Associated Press 248 US 215; 63 L Ed 211 (1918) .... 1.27 International Tea Stores Company v Hobbs [1903] 2 Ch 165 .... 14.11, 14.29 Investec Bank Australia Ltd v Glodale Pty Ltd (2009) 24 VR 617 .... 16.48 Irving v National Provincial Bank [1962] 2 QB 73 .... 2.17 Isaac v Hotel de Paris Ltd [1960] 1 All ER 348; [1960] 1 WLR 239 .... 7.6 Isenberg v East India House Estate Co Ltd (1863) 3 De GJ & S 263; 46 ER 637 .... 2.23 Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 .... 3.14 Isin v Ozen [2017] NSWCA 316 .... 5.13 ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue (2003) 53 ATR 527; [2003] NSWSC 697; .... 11.56 Ives v Brown [1919] 2 Ch 314 .... 15.31 J

J & D Rigging Pty Ltd v Agripower Australia Ltd [2013] QCA 406 .... 3.3, 3.14 J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 .... 10.24, 11.13, 13.10, 13.14, 13.16, 13.17, 13.19, 13.20, 13.23, 13.24, 13.27



J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 61 FLR 108 .... 9.26 J and T Lonsdale v P Gilbert [2006] NSWLEC 30 .... 3.30 J C Williamson Ltd v Lukey and Mulholland (1931) 45 CLR 282; [1931] VLR 221; [1931] ALR 157 .... 9.15 J Lyons & Sons v Wilkins [1899] 1 Ch 255 .... 1.27 J N Hipwell & Son v Szurek [2018] EWCA Civ 674 .... 7.27 J Wright Enterprises Pty Ltd (in liq) v Port Pallidu Pty Ltd [2010] QSC 213 .... 11.24 JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419 .... 4.7, 4.9, 4.10, 4.11, 4.13, 4.14, 4.15, 4.16, 4.18 — v United Kingdom [2007] ECHR 559 .... 4.4, 4.6, 4.15 Jabbour v Sherwood [2003] FCA 529 .... 9.29 Jackson, Ex parte; Re Australasian Catholic Assurance Co Ltd (1941) 41 SR (NSW) 285 .... 16.15 Jacobs v Platt Nominees [1990] VR 146 .... 13.16, 13.20, 13.24, 13.25, 13.27, 13.29 — v Seward (1872) LR 5 HL 464 .... 17.33, 17.35, 17.36, 17.42, 17.47 Jager v Jager 136 NJ Eq 379; 42 A 2d 201 (1945) .... 17.36 Jaggard v Sawyer [1995] 1 WLR 269 .... 2.23 Jain v Amit Laundry Pty Ltd [2019] NSWCA 20 .... 9.21 Jam Factory v Sunny Paradise [1989] VR 584 .... 7.37 Jamaica Mutual Life Assurance Society v Hillsborough Ltd [1989] 1 WLR 1101 .... 15.38 James v Registrar-General (1967) 69 SR (NSW) 361 .... 11.78, 14.4 — v Seltsam Pty Ltd [2017] VSC 506 .... 1.29 — v Stevenson (1893) AC 162 .... 14.29 — v UK [1986] ECHR 8793/79 .... 4.4, 4.15 James Baird Co v Gimbel Bros Inc (1933) 64 F 2d 344 .... 11.22 James Boyd Lockrey v Fussell (2019) 19 BPR 39,853 .... 17.47 xlvii



Australian Property Law

James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53; [1998] HCA 78 .... 3.14 Jango v Northern Territory of Australia (2007) 240 ALR 432; [2007] FCAFC 101 .... 8.29, 11.14 Jared v Clements [1903] 1 Ch 428 .... 10.18 Javid v Aqil [1991] 1 WLR 1007 .... 7.2 JB Northbridge Pty Ltd v Winners Circle Group Pty Ltd [2014] NSWSC 950 .... 7.31 JC Williamson Ltd v Lukey and Mulholland [1931] ALR 157 .... 1.2 JDM Investments Pty Ltd v Todburn Pty Ltd [2000] NSWSC 349 .... 7.31 Jea Holdings Australia Pty Ltd v RegistrarGeneral [2013] NSWSC 587 .... 14.8 Jeffereys v Small (1683) 1 Vern 217; 23 ER 424 .... 17.24 Jeffrey v Anderson [1914] QSR 66 .... 9.11 Jeffries v The Great Western Railway Co [1856] EngR 81; [1856] 119 ER 680 .... 2.17 Jenkins v Wynen [1992] 1 Qd R 40 .... 9.21 Jennings v Rice [2003] 1 P & CR 8 .... 7.16 — v Ward (1705) 2 Vern 520; 23 ER 935 .... 16.8 Jervey v Jervey [2014] FamCA 561 .... 17.37 Jewish National Fund of Australia Ltd v Bar-Mordecai [2020] NSWSC 384 .... 17.57 JLCS Pty Ltd v Loft City Steakhouse Pty Ltd [2008] FCA 867 .... 14.25 Jobson v Nankervis (1943) 44 SR (NSW) 277; 61 WN (NSW) 76 .... 14.30 John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 .... 11.22 John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc [2003] SASC 286 .... 6.7 — v Hahndorf Golf Club Inc [2004] SASC 128 .... 6.3 John Street Marina Pty Ltd v Minister for Transport [2005] WASC 171 .... 13.7 Johnson v McIntosh (70) (1823) 8 wheat 21 US .... 8.4, 8.6 — v Wyatt (1863) 2 De GJ & S 18 .... 1.27 Jones, Re [1893] 2 Ch 461 .... 17.42 xlviii

Jones v Bartlett (2000) 75 ALJR 1 .... 7.22, 7.23 — v Brown (1856) 25 LJ (Ex) 345 .... 17.42 — v Earl of Tankerville [1909] 2 Ch 440 .... 1.12 — v Jones [1997] 1 WLR 438 .... 17.33, 17.36 — v Kernott [2011] 3 WLR 1121 .... 9.21, 17.31 — v Maynard [1951] 1 All ER 802; [1951] Ch 572 .... 17.30 — v Morgan [2001] EWCA Civ 995 .... 16.8 — v Sherwood Hills Pty Ltd (1975) 52 ALJ 223 .... 15.46 — v State of Queensland [2000] QSC 267 .... 2.12 Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW) 568 .... 13.20, 13.22 Jonsue Investments Pty Ltd v Balweb Pty Ltd [2013] NSWSC 325 .... 10.27 Josephson v Mason (1912) 12 SR (NSW) 249 .... 13.2 Jovanovic v Commonwealth Bank of Australia (2004) 87 SASR 570; [2004] SASC 61 .... 16.42 Julong Pty Ltd v Fenn (2003) Q ConvR 54-586 .... 16.37 K

Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 .... 10.18 Karpany v Dietman (2013) 303 ALR 216 .... 8.32 Kay v London Borough of Lambeth [2006] 2 WLR 570 .... 7.7 Kay’s Leasing Corporation Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VicRp 62; [1962] VR 429 .... 3.9, 3.14 Keberwar Pty Ltd v Harkin (1987) 9 NSWLR 738 .... 14.25 Keefe v Amor [1965] 1 QB 334 .... 14.43 Keewatin Power Co Ltd v Lake of the Woods Milling Co Ltd [1930] AC 640 .... 14.45 Keitley, Re [1992] 1 VR 583 .... 17.70

Cases Kelly, Re; Cleary v Dillon [1932] IR 255 .... 6.22 Kelly v John Fairfax & Sons Ltd (1982) 1 NSWLR 466 .... 13.14, 13.27 Kelsen v Imperial Tobacco Co (Great Britain & Ireland) [1957] 2 QB 334 .... 3.30 Kemp v Public Curator of Queensland [1969] Qd R 145 .... 17.8 Kemppi v Adani Mining Pty Ltd [No 4], [2018] FCA 1245 .... 8.46 Kennedy v de Trafford (1896) 1 Ch 762 .... 16.41 — v — [1897] AC 180 .... 9.40, 16.41, 16.42 Kenworthy v Ward (1853) 11 Hare 196; 68 ER 1245 .... 17.6, 17.56 Keppell v Bailey (1834) 2 My & K 517 .... 1.12, 15.7 Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222 .... 13.12 Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164; 71 ALR 417 .... 9.35, 9.36 Kernott v Jones [2010] 3 All ER 423 .... 17.31 Kerrison v Smith [1897] 2 QB 445 .... 1.12 Kettlewell v Watson (1882) 21 Ch D 685 .... 10.21 Khattar v Wiese (2005) 12 BPR 23,235 .... 14.23 Khoury v Khouri (2006) 66 NSWLR 241; [2006] NSWCA 184 .... 9.11, 9.14 Kiama Development Co Pty Ltd v Wilcox [1999] NSWSC 277 .... 7.39 Kidson (Inspector of Taxes) v Macdonald [1974] 1 All ER 849 .... 17.19 Kierford Ridge Pty Ltd v Ward [2005] VSC 215 .... 4.20 Kinara Trustee Ltd v Infinity Enterprises NZ Ltd [2019] NZHC 1526 .... 14.27 King v AGC (Advances) Ltd [1983] 1 VR 682 .... 10.25, 13.20, 13.24, 13.27 — v King (1931) 2 Ch 294 .... 13.14 King Investment Solutions Pty Ltd v Hussain (2005) 64 NSWLR 441; (2006) ANZ ConvR 48 .... 16.39, 16.48, 16.49



King v Smail [1958] VR 273 .... 11.39, 11.40, 11.41, 11.42, 11.43, 11.44, 11.45, 11.47, 11.48 Kingsnorth Finance Ltd v Tizard [1986] 2 All ER 54 .... 10.18 Kingswood Estate v Anderson [1963] 2 QB 169 .... 9.14 Kirby v Cowderoy [1912] AC 599 .... 4.9 Kitching v Phillips [2009] WASC 396 .... 14.33 — v — [2011] WASCA 19 .... 14.25, 14.38 Knight’s Case (1588) 5 Co Rep 54b .... 7.37 Kogarah v Golden Paradise [2005] NSWCA 230 .... 11.55, 11.57, 11.58 Kondis v State Transport Authority .... 7.22 Koompahtoo Local Aboriginal Land Council v KLALC Property Investment Pty Ltd [2008] NSWCA 6 .... 11.57 — v Sanpine Pty Ltd (2007) 82 ALJR 345 .... 7.38 Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62 .... 9.3 Kravchenko v The Rock Building Society (2009) 26 VR 400 .... 16.43 Kreglinger v New Patagonia Meat and Cold Storage Company Ltd [1914] AC 25 .... 16.4, 16.9 Kumar v Dunning [1987] 3 WLR 1167 .... 7.34 Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419 .... 13.10 Kutner v Phillips [1891] 2 QB 267 .... 11.52 KY Enterprises Pty Ltd v Darby [2013] VSC 484 .... 4.9, 4.10, 4.16, 4.21 L

Lace v Chantler [1944] 1 All ER 305 .... 7.11 Lacey v Attorney-General (Qld) .... 8.31 Lake v Craddock (1732) 3 P Wms 158; 24 ER 1011 .... 17.24, 17.27 — v Gibson (1729) 1 Eq Rep 290; 21 ER 1052 .... 17.24 — Macquarie City Council v Luka (1999) 9 BPR 17,481 .... 14.30 xlix



Australian Property Law

Lambert Property Group Pty Ltd v Body Corporate for Castlebar Cove [2015] QSC 179 .... 14.23 Lambeth London Borough Council v Bigden (2001) 33 HLR 43 .... 4.19 — v Blackburn (2001) 82 P & CR 494 .... 4.9, 4.14 Laming v Jennings [2017] VCC 1223 .... 4.11 — v — [2018] VSCA 335 .... 14.13, 14.35, 14.36 Land Tax Act, In re the; Ex parte Finlay (1884) 10 VLR (E) 68 .... 11.42 Lane v Pannel (1615) 1 Roll Rep 238 .... 17.62 Langdale Pty Ltd v Sollas [1959] VR 634; [1959] ALR 1150 .... 15.42 Lange v Ruwoldt (1872) 7 SALR 1 .... 13.2 Lansen v Olney (1999) 169 ALR 49 .... 5.6, 11.60 Lanyon Pty Ltd v Canberra Washed Sands Pty Ltd (1966) 115 CLR 342 .... 3.20 Lapin v Abigail (1930) 44 CLR 166 .... 10.24, 10.28, 11.13, 13.14, 13.17, 13.19, 13.21, 13.24, 13.27 Laris v Lin (No 2) (2016) 18 BPR 35,917 .... 14.44, 14.47 Lashmar, Re; Moody v Penfold [1891] 1 Ch 258 .... 17.56 Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265; [1965] HCA 17 .... 9.39, 9.40, 9.41, 10.28, 10.29, 11.21, 11.23, 13.7, 13.14, 13.27, 16.43, 16.46, 16.47 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 .... 7.37 Law Mortgagees Queensland Pty Ltd v Thirteenth Corp Pty Ltd [1999] VSC 360 .... 13.7 Lawledge v Tyndall [1896] 1 Ch 923 .... 17.42 Lawrence v South County Freeholds Ltd [1939] Ch 656 .... 15.39, 15.43 Lawson v Minister for Environment and Water [2020] NSWSC 186 .... 8.29 — v South Australian Minister for Water and the River Murray [No 2] [2014] NSWLEC 189 .... 2.12 l

Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 .... 10.28 Leake v Loveday (1942) 4 Man & G 972; 133 ER 399; [1842] EngR 1063 .... 2.17 Leaver, Re [1997] 1 Qd R 55 .... 17.16 Leda Commercial Properties Pty Ltd v DHK Retailers Pty Ltd (1992) 111 FLR 81 .... 7.37 Lee v Ross (No 2) (2003) 11 BPR 20,991 .... 13.7 Legal Services Board v Gillespie-Jones [2012] VSCA 68 .... 9.19 — v — (2013) 249 CLR 493 .... 9.3 Legal Services Commissioner v Brereton [2011] VSCA 241 .... 9.19 Legione v Hateley (1983) 152 CLR 406; 46 ALR 1; 57 ALJR 292 .... 7.17, 9.26, 9.36, 13.24 Legum Furniture Corporation v Levine (1977) 232 S E 2d 782 .... 9.26 Lehmann v Haskard [1997] NSWSC 22 .... 6.19 Lehrer and the Real Property Act, Re (1960) 61 SR (NSW) 365 .... 11.56 Leigh v Dickeson (1884) 15 QBD 60 .... 17.39, 17.42, 17.44 — v Jack (1879) 5 Ex D 264 .... 4.14, 4.15, 4.16 — v Taylor [1902] AC 157 .... 3.2, 3.6 Leightons Investment Trust Ltd v Cricklewood Property and Investment Trust Ltd (1943) KB 493; AC 221 .... 7.37 Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407; [1992] HCA 22 .... 11.14, 11.52, 11.56, 13.6, 13.10, 13.11, 13.23 LHK Nominees Pty Ltd v Kenworthy [2002] 26 WAR 517; [2002] WASCA 291 .... 11.34, 11.35, 11.37, 11.38 Li Sau Sing v CTMA Holdings Ltd [2015] HKDC 1148 .... 4.11 Lickbarrow v Mason (1787) 2 TR 63; 100 ER 35 .... 13.14 Lictor Anstaldt v MIR Steel UK Ltd [2014] EWHC 3316 .... 3.5, 3.7

Cases Life Interest and Reversionary Securities Corporation v Hand-in-Hand Fire and Life Insurance Society (1898) 2 Ch 230 .... 16.46 Lift Capital Partners Pty Ltd v Merrill Lynch International (2009) 253 ALR 482 .... 16.6, 16.8, 16.10 Lighting by Design (Australia) Pty Ltd v Cannington Nominees Pty Ltd [2008] 35 WAR 520 .... 7.15, 9.14 Linden Gardens Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85 .... 6.3 Link Lending Ltd v Susan Bustard [2010] EWCA Civ 424 .... 10.18 Little v Dardier (1891) 12 NSWLR (Eq) 319 .... 14.29 Littledale v Liverpool College [1900] 1 Ch 19 .... 4.14 Liv v Hanson Property Developments [2016] NSWSC 1870 .... 16.32 Liverpool City Council v Irwin [1977] AC 239 .... 7.27 Living and Leisure Australia Ltd (ACN 107 863 445) v Commissioner of State Revenue [2018] VSCA 237 .... 7.7 Lloyds Bank plc v Rosset [1988] 3 WLR 1301 .... 10.18 — v — [1991] 1 AC 107; [1990] 1 All ER 1111 .... 17.30 Lo Pilato (Trustee) v Kamy Saeedi Lawyers Pty Ltd, in the matter of Adzic (Bankrupt) (2017) 346 ALR 459 .... 17.68 Logue v Shoalhaven Shire Council (1979) 1 NSWLR 537 .... 11.21, 11.30, 11.56, 14.26 Loiero (aka Lero) v Adel Sportswear Pty Ltd [2010] NSWSC 113 .... 3.2 Loke Yew v Port Swettenham Rubber Co [1913] AC 491 .... 11.19, 11.20, 11.21, 11.30 Lolakis v Konitsas [2002] NSWCA 889 .... 14.47 London Borough of Bromley v Morritt [1999] EWCA Civ 1631 .... 4.7 London Celluloid Company, Re (1888) 39 Ch D 190 .... 10.28 London County Council v Allen [1914] 3 KB 642 .... 15.23, 15.31



London & Northern Estates Co v Schlesinger (1916) 1 KB 20 .... 7.37 London & South Western Railway Company v Gomm (1882) 20 Ch D 562 .... 15.19, 15.21 Lonergan v Lewis [2011] NSWSC 1133 .... 14.23 Long v Michie [2003] NSWSC 233 .... 14.44, 14.46 Lontav Pty Ltd v Pineross Custodial Services [2011] VSC 278 .... 7.37 Loose v Lynn Shellfish Ltd [2017] AC 599 .... 3.24 Loosefit Pty Ltd v Marshbaum [2011] NSWCA 372 .... 7.23 Lord Abergavenny’s Case (1607) 6 Co Rep 786; 77 ER 373 .... 17.47 Lord Chesterfield’s Settled Estates [1911] 1 Ch 237 .... 3.6 Lord Northbourne v Johnston & Son [1922] 2 Ch 309 .... 15.31 Louis and the Conveyancing Act, Re [1971] 1 NSWLR 164 .... 15.32, 15.41, 15.43 Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61 .... 16.8 Love v Commonwealth of Australia; Thoms v Commonwealth of Australia [2020] HCA 3 .... 5.8 Low v Bouverie (1891) 3 Ch 82 .... 7.17, 14.29 Lowe v Adams [1901] 2 Ch 598 .... 1.12 — v Kladis [2018] NSWCA 130 .... 14.40 LPJ Investments Pty Ltd v Howard Chia Investments Pty Ltd (No 2) (1989) 24 NSWLR 490 .... 3.30 LTDC Pty Ltd v Cashflow Finance Australia Pty Ltd [2019] NSWSC 150 .... 10.25, 13.15, 13.20 Lukass Investments Pty Ltd v Makaroff (1964) 82 WN (Pt 1) (NSW) 226 .... 16.46 Luke v Luke (1936) 36 SR (NSW) 310; 53 WN (NSW) 101 .... 17.34, 17.35, 17.36, 17.42 Lumley v Wagner (1852) 1 De GM & G 604; 42 ER 687 .... 1.12, 15.19, 15.23 li



Australian Property Law

Lynn Shellfish Ltd v Loose [2016] 2 WLR 1126 .... 3.24 Lynne Anne Luxton, The Estate of [2006] SASC 371 .... 17.8 Lyon v Tweddell (1881) 17 Ch D 529 .... 9.26, 9.28 Lyons v Lyons [1967] VR 169 .... 17.15, 17.47, 17.50, 17.56, 17.61, 17.62, 17.63 Lyons & Sons v Wilkins [1899] 1 Ch 255 .... 1.27 Lysaght v Edwards (1876) 2 Ch D 499 .... 9.34, 9.35, 9.36, 9.37 Lyttleton Times Co Ltd v Warners Ltd [1907) AC 476 .... 14.29, 14.33 Lyus v Prowsa Developments Ltd; Binions v Evans (1972) Ch 359 .... 11.30 M

Mabo v Queensland (No 1) (1988) 166 CLR 186 .... 8.3, 8.7, 8.9, 8.21, 8.27, 8.31 — v — (No 2) (1992) 175 CLR 1; [1992] HCA 23 .... 2.11, 2.12, 2.13, 5.6, 5.8, 5.9, 6.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.10, 8.11, 8.12, 8.14, 8.16, 8.21, 8.22, 8.23, 8.27, 8.28, 8.29, 8.30, 8.31, 8.36, 8.37 MacGreal v Taylor 167 US 688 (1897) .... 11.52 Mackreth v Marlar (1786) 1 Cox 259; 29 ER 1156 .... 9.36 — v Symmons (1808) 15 Ves Jun 329; 33 ER 778 .... 10.23, 13.27 Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 3 All ER 747; [1995] 1 WLR 978 .... 10.13, 10.18 Macquarie Bank v Sixty-Fourth Throne [1998] 3 VR 133 .... 11.23, 11.24, 11.32, 11.33, 11.34, 11.35, 11.36, 11.37, 11.48 MacTiernan, Re; Ex parte Coogee Coastal Action Coalition Inc (2005) 30 WAR 138 .... 3.19 Madden v Official Trustee in Bankruptcy (2014) 221 FCR 344 .... 17.25 Maddison v Alderson (1883) 8 App Cas 467 .... 9.14, 9.15 Mahendran v Chase Enterprises Pty Ltd (2013) 17 BPR 32,733 .... 13.7 lii

Maio v City of Sterling (No 2) [2015] WASC 189 .... 14.8 Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC 549; [1986] 1 All ER 711; [1986] 1 WLR 590 .... 9.22, 17.22, 17.24, 17.28, 17.29, 17.30, 17.31, 17.32 Malden v Menill (1737) 2 Atk 8 .... 9.40 Malika Holdings Pty Ltd v Stretton (2001) 204 CLR 290 .... 15.47 Mallet v Mallet (1984) 156 CLR 605 .... 17.42 Malter v Procopets [2000] VSCA 11 .... 4.13 Manado on Behalf of the Bindanbur Native Title Group v State of Western Australia [2018] FCAFC 238 .... 3.19 Mancetter Developments Ltd v Garmanson [1986] QB 1212 .... 3.8 Manchester Bonded Warehouse Co Ltd v Carr (1880) 5 CPD 507 .... 5.13 Manchester Brewery Co v Coombs [1901] 2 Ch 608 .... 7.33 Manchester Ship Canal Co v Manchester Racecourse Co [1901] 2 Ch 37 .... 15.19 Manjang v Drammeh (1990) 61 P & CR 194 .... 14.20 Mann v Paterson Constructions Pty Ltd (2019) 373 ALR 1 .... 7.38 — v Stephens (1846) 15 Sim 377; 10 Jur 650; 60 ER 665; 40 Digest (Repl) 344 .... 15.17 Mansfield v Mansfield (1890) 16 VLR 569 .... 17.62 Mantec Thoroughbreds Pty Ltd v Batur [2009] VSC 351 .... 14.23 Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 .... 10.3, 10.4, 10.5 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; [1973] HCA 23 .... 11.67, 14.26 Marchant v Charters [1977] 3 All ER 918; [1977] 1 WLR 1181 .... 7.6 Marcroft Wagons Ltd v Smith [1951] 2 All ER 271; [1951] 2 KB 496 .... 7.6 Marian Walker v Brian Bridgewood [2006] NSWSC 149 .... 14.44 Marina Blue Pty Ltd v Gear (No 2) [2018] NSWSC 1442 .... 4.23

Cases Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd [2001] NSWSC 448 .... 10.18 Marquess of Northhampton v Pollock (1890) 45 Ch D 190 .... 16.2 Marquess of Zetland v Driver [1939] Ch 1 .... 15.19, 15.25 Marquis Cholmondeley v Lord Clinton (1820) 2 Jac & W 1; 37 ER 527 .... 4.4, 4.6 Marriner v Australian Super Developments Pty Ltd [2012] VSCA 171 .... 9.19 Marriott, Re [1968] VR 260 .... 14.44 Marsden v Edward Heyes Ltd [1927] 2 KB 7 .... 7.25 Marsh v Lee [1726] EngR 573; [1726] 86 ER 473 .... 10.20 Marshall v Allsop [1946] ALR 378 .... 16.8 — v Director-General, Department of Transport (2001) 205 CLR 603; [2001] HCA 37 .... 3.14 — v Green (1875) 1 CPD 35 .... 14.3 Marten v Flight Refuelling Ltd [1962] Ch 115 .... 15.23, 15.26, 15.38 Martorella v Innovision Developments Pty Ltd [2011] VSC 282 .... 13.11, 13.12 Martyn, Re (1965) 65 SR (NSW) 387 .... 15.43 Mascall v Murray 149 P 517 (1915) .... 4.10 Mason v Clarke [1955] AC 778 .... 14.3 Massey v Boulden [2003] 1 WLR 1792 .... 14.47 Masters Home Improvement Aust Pty Ltd v Aventus Cranbourne Thompson Road Pty Ltd [2019] VSC 428 .... 7.31 Matcove Pty Ltd, In the matter of [2020] NSWSC 625 .... 16.9 Matsen v Matsen [2008] NSWSC 135 .... 6.7 Matthey v Curling (1922) 2 AC 180 .... 7.37 Matton v Lipscombe (1895) 16 LR (NSW) 142 .... 16.48 Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293 .... 10.20 Maundrell v M [1834] 10 Ves 271 .... 10.23 Maurice Toltz Pty Ltd v Macey’s Emporium Pty Ltd [1970] NSWR 474 .... 14.12



Maviglia Investments Pty Ltd (as trustee for the Maviglia Family Trust) v BKSL Investments Pty Ltd (in liq) [2017] NSWSC 401 .... 16.47 May v Ceedive (2006) 13 BPR 24,147; [2006] NSWCA 369 .... 3.3, 3.5, 3.7 Maybury v Plowman (1913) 16 CLR 468 .... 11.52 Mayer v Coe (1968) 88 WN (Pt 1) (NSW) 549; [1968] 2 NSWR 747 .... 11.13, 11.32, 11.34, 11.36, 11.44, 11.67, 14.26, 14.39 Mayhew v Suttle (1854) 4 E & B 347; 119 ER 137 .... 7.6 Mazuchelli v Mazuchelli [2006] WASC 124 .... 15.20 MBF Investments v Nolan [2011] VSCA 114 .... 16.41, 16.43 McAuley v Bristol City Council [1992] QB 134 .... 7.27 McBride v Sandland (1918) 25 CLR 69 .... 9.14, 9.15 McCance v London and North-West Railway Co 3 H. & C. 343 .... 14.29 McConaghy v Denmark (1880) 4 SCR 609 .... 4.10 McCormick v McCormick [1921] NZLR 384 .... 17.42 McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 .... 7.37 McGlade v Native Title Register [2017] FCAFC 10 .... 8.46 McGrath v Campbell (2006) 68 NSWLR 229; [2006] NSW ConvR 56-159 .... 11.66, 11.67, 11.68, 11.79, 14.26, 14.27, 14.35 McHugh v Union Bank of Canada (1913) AC 299 .... 16.41 McKean’s Caveat, Re [1988] 1 Qd R 525 .... 13.7 McKeand v Thomas [2006] 12 BPR 98,201 .... 14.27 McKinnon v Smith, [1925] 4 DLR 262 .... 11.40 McLeod v McRae (1918) 43 DLR 350 .... 4.10 McMahon v Ambrose [1987] VR 817 .... 9.14 — v Burchell (1846) 5 Hare 322; 67 ER 936 .... 17.36, 17.42 liii



Australian Property Law

— v National Foods Milk Ltd (2009) 25 VR 251 .... 7.27 — v Public Curator (Qld) [1952] QSR 197 .... 17.42 McManus v Cooke (1887) 35 Ch D 681 .... 9.11 McNab v Earle [1981] 2 NSWLR 673 .... 17.56, 17.65 — v Graham (2017) 53 VR 31 .... 9.31 McNamara and the Conveyancing Act, Re (1961) 78 WN (NSW) 1068 .... 17.73 Meadow Springs Fairway Resort Ltd (In liq) v Balanced Securities Ltd (No 2) (2008) 245 ALR 726 .... 13.28 Medforth v Blake [2000] Ch 86 .... 16.41, 16.42, 16.48 Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc [2010] 1 All ER .... 7.27 Meftah v TSB Bank plc [2001] 2 All ER (Comm 741) .... 16.41 Mekpine Pty Ltd v Moreton Bay Regional Council [2014] QCA 317 .... 11.14, 17.68 Melling v Leak (1855) 16 CB 652; 139 ER 915 .... 9.6 Mellor v Walmesley (1905) 2 Ch 164 .... 14.29 Melluish (Inspector of Taxes) v BMI (No 3) Ltd [1995] Ch 90 .... 3.9 — v — (No 3) Ltd [1996] AC 454 .... 3.2, 3.11 Members of the Yorta Yorta Aboriginal Community v Victoria (2002) 214 CLR 422; 77 ALJR 356; [2002] HCA 58 .... 1.8, 8.12, 8.13, 8.14, 8.15, 8.16, 8.17, 8.18 Menzies v MacDonald (1856) 2 Macq 463 .... 17.47 Mercantile Credits v Shell Co of Australia Ltd (1976) 136 CLR 326 .... 11.15, 11.16, 11.17, 13.10, 13.11, 14.40 Mercantile Credits Ltd v Australian & New Zealand Banking Group Ltd (1988) 48 SASR 407 .... 10.20 Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 .... 11.29, 11.32, 11.46, 11.67, 14.26 liv

Meriton Apartments Pty Ltd v Baulderstone Pty Ltd (unreported, SC (NSW), No 4940 of 1991) .... 3.30 — v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671 .... 13.20, 13.22 Metal Manufactures Ltd v Federal Commissioner of Taxation [1999] FCA 1712 .... 3.9, 3.10, 3.11, 3.13 Metropolitan Housing Trust Ltd v RMC FH Co Ltd [2018] Ch 195 .... 14.36 Meux v Jacobs (1875) LR 7 HL 481 .... 3.11 Michael Senno v Natasha Bailey [2011] NSWSC 679 .... 17.37 Micklethwait v Newlay Bridge Co (1886) 33 Ch D 133 .... 3.20 Midland Bank plc v Cooke [1995] 4 All ER 562 .... 17.30 Midland Bank Trust Co Ltd v Green [1981] AC 513 .... 13.27 Midland Brick Co Pty Ltd v Welsh (2006) 32 WAR 287 .... 13.7, 15.14, 15.18, 15.20, 15.23, 15.25, 15.26, 15.27, 15.28 Midland Railway Company Agreement, Re v British Railways Board [1971] Ch 725 .... 7.11 Mijac Investments Pty Ltd v Graham (No 2) (2009) 72 ACSR 684 .... 16.43 Milbex Pty Ltd, Re (2007) V ConvR 54-726 .... 15.48 Milenkovic v Belleli [2015] VSC 349 .... 13.25, 13.28 Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141; [1972–3] ALR 65 .... 5.6, 8.1, 8.2, 8.14 Miller v Emcer Products Ltd [1956] Ch 304; [1956] 1 All ER 237 .... 14.12 — v Minister of Mines [1963] AC 484; [1963] 1 All ER 109; [1986] UKHL 1 .... 11.50, 11.56 Miller & Aldworth Ltd v Sharp [1899] 1 Ch 622 .... 9.14 Mills v Colchester Corporation (1867) LR 2 CP 476 .... 14.35 — v Silver [1991] 2 WLR 324 .... 14.35 — v Stockman (1967) 116 CLR 61 .... 11.21, 13.10

Cases Milmo v Carreras [1946] KB 306 .... 7.7 Milroy v Lord (1862) 4 De GF & J 264; 45 ER 1185 .... 17.56 Mimi v Millennium Developments Pty Ltd [2003] VSC 260 .... 13.20, 13.25 Minasian v Aetna Life Ins Co 3 NE (2d) 17 (1936) .... 17.8 Mine Subsidence Board v Frank and Louisa Kozak (2017) 51 WAR 304 .... 7.9 Minister for Natural Resources v New South Wales Aboriginal Land Council (1987) 9 NSWLR 154 .... 2.12 Mischel Holdings Pty Ltd (in liq) v Mischel [2013] VSCA 375 .... 13.3, 17.13, 17.18, 17.25 Missouri v Holland 252 US 416 (1920) .... 1.6, 8.19 Mitchell v Pattern Holdings Pty Ltd (2002) NSWCA 212 .... 10.28 Mitchelson v Mitchelson (unreported, King J, 13 November 1979) .... 13.24 Modular Design Group Pty Ltd, Re (1994) 35 NSWLR 96 .... 16.7, 16.8 Moffett v Dillon [1999] 2 VR 480 .... 13.13, 13.27, 13.28, 13.29 Mogul Steamship Co v McGregory, Gow & Co (1889) 23 QBD 598 .... 1.27 Mohammadzadeh v Joseph [2006] EWHC 1040 .... 15.25 Mole v Ross (1950) 1 BPR 9101 .... 17.18 Monash City Council v Melville [2000] VSC 55 .... 4.16 Moncrieff v Jamieson (2007) 1 WLR 2620 .... 14.3, 14.8, 14.14 Montagu’s Settlement Trusts, Re [1987] 2 WLR 1192 .... 10.18 Moody v Steggles (1879) 12 Ch D 261 .... 14.8 Mooloolaba Slipways Pty Ltd v Cashlaw Pty Ltd [2011] QSC 236 .... 7.2 Moongking Gee v Tahos (1963) 63 SR (NSW) 935 .... 11.1 Moore, Re (1888) 39 Ch D 116 .... 5.17 Moore v Dimond (1929) 43 CLR 105 .... 7.2



Moorebank Recyclers Pty Ltd v Liverpool City Council (No 2) (2012) 16 BPR 31,257 .... 14.23 — v Tanlane Pty Ltd [2012] NSWCA 445 .... 14.23 Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express (Australia) Pty Ltd [2008] 14 BPR 26,339 .... 6.3 Moran case (1988) 86 LQR 472 .... 4.14 Morley v Bird (1798) 3 Ves 628 .... 17.15 Morris Finance Ltd v Free [2017] NSWSC 1417 .... 9.7 Morrison Jones & Taylor Ltd, Re [1914] 1 Ch 50 .... 3.9 Morton v Woods [1867] LR 4 QB 293 .... 7.16 Moses v Macferlan (1760) 2 Burr 1005 .... 9.26 Motel Marine Pty Ltd v IAC (Finance) Pty Ltd (1964) 110 CLR 9 .... 9.40 Mounsey v Ismay (1865) 3 H & C 486 .... 14.11 MRA Engineering Ltd v Trimster Co Ltd (1987) 56 P & CR 1 .... 14.19 Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464 .... 4.9, 4.19, 4.21 Muller v Trafford [1901] 1 Ch 504 .... 11.16 Multi-Span Constructions No 1 Pty Ltd v 14 Portland Street Pty Ltd [2001] NSWSC 696 .... 13.12 Mulvaney v Jackson [2002] EWCA Civ 1078 .... 14.13 Munro v Southern Dairies Ltd [1955] VLR 332 .... 3.30 Murdoch and Barry, Re (1975) 64 DLR (3d) 222 .... 17.56 Murnane v Findlay [1926] VLR 80 .... 4.9, 4.16 Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 .... 2.14 — v Wright [1992] NSW Conv R 55-652 .... 13.7 Murray v Hall (1849) 7 CB 441 .... 17.52 Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78 .... 9.2, 9.17, 9.26, 9.27, 9.28, 9.38, 16.8, 17.42 lv



Australian Property Law

Muthu Goundan v Anantha Goundan AIR [1916] Madras 1001 .... 4.10 Myers v Clark [2018] NSWSC 1029 .... 17.44 MYT Engineering Pty Ltd v Mulcon Pty Ltd (1999) 195 CLR 636 .... 10.3 N

N H Dunn Pty Ltd v LM Ericsson Pty Ltd (1979) 2 BPR 9241; [1980] ANZ ConvR 300 .... 3.5, 3.14 N Jobson and the Real Property Act 1900, Re (1951) 68 WN (NSW) 23 .... 11.78 Nabeth Taleb v National Australia Bank [2011] NSWSC 1562 .... 10.25 Naden, Ex parte; Wood, Re (1874) LR 9 Ch App 670 .... 5.17 Nai Pty Ltd v Hassoun Nominees Pty Ltd (1985) ANZ ConvR 349 .... 7.37 Nairn’s Application, Re [1961] VR 26 .... 16.28, 17.62 Nangus Pty Ltd & Anor v Charles Donovan Pty Ltd (in liquidation) & Anor [1989] VR 184 .... 7.37 Napier v Public Trustee WA (1980) 32 ALR 153 .... 9.17 National Australia Bank Ltd v Blacker (2000) 179 ALR 97 .... 3.1, 3.2, 3.14 — v Clowes [2013] NSWCA 179 .... 16.27 — v KDS Construction Services Pty Ltd (1987) 163 CLR 668 .... 13.27 National Bank of Australasia v United Hand-in-Hand and Band of Hope Co (1879) 4 App Cas 391 .... 17.62 National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675 .... 7.7, 7.37, 7.39 National Dairies WA Ltd v Commissioner of State Revenue [1999] WASCA 152 .... 3.10 National Executors and Trustees Co of Tasmania v Edwards [1957] Tas SR 182 .... 14.5 National Outdoor Advertising Pty Ltd v Wavon Pty Ltd .... 7.8 National Provincial Bank Ltd v Ainsworth [1965] AC 1175; [1965] 2 All ER 472 .... 5.19, 9.39, 13.27, 14.10 lvi

— v Hastings Car Mart Ltd [1964] Ch 9 .... 9.40 National Trust for Places of Historic Interest or Natural Beauty v White [1987] 1 WLR 907 .... 14.39 National Trustees Co v Hassett [1907] VLR 404 .... 11.59 Native Bond Pty Ltd (Controller Appointed) v Cant [2016] VSC 206 .... 16.37 Natuna Pty Ltd v Cook [2007] NSWSC 121 .... 13.7 Natwest Markets Australia Pty Ltd v Tenth Vandy Pty Ltd [2008] 21 VR 68 .... 7.37 Nay v Iskov [2012] NSWSC 598 .... 17.8, 17.70 Naylor v Canterbury Park Racecourse Co Ltd (1935) 35 SR (NSW) 281 .... 1.12 Neighbourhood Association DP No 285220 v Moffat (2008) NSW Conv R 56,208 .... 14.38 Neilson v Letch (No 2) [2006] NSWCA 25 .... 17.25 Nelson v Nelson (1995) 184 CLR 538 .... 9.21 — v Walker (1910) 10 CLR 560; [1910] HCA 27 .... 14.8, 14.25, 14.26, 14.33 Neoform Developments & Interiors Pty Ltd v Town & Country Marketing Pty Ltd (2002) 49 ATR 625 .... 13.7 Netherby Properties Pty Ltd v Tower Trust Ltd (1999) 76 SASR 9; [1999] SASC 247 .... 15.22, 15.23, 15.43 Neubacher v Good (2003) 11 BPR 20,877 .... 17.70 Neville v Dale (1990) V Conv R 54-382 .... 14.35 New Galaxy Investments Pty Ltd v Thomson [2017] NSWCA 153 .... 13.7, 13.8 New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50 .... 8.5 New Zealand Government Property Corporation v HM & S Ltd [1982] QB 1145 .... 3.8 New Zealand Shipping Co Ltd v the Societe des Ateliers et Chantiers de France [1917] 2 KB 717 .... 10.28

Cases — v — [1919] AC 1 .... 10.28 Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 .... 13.24 Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273 .... 10.18 Newgrosh v Newgrosh (1950) 100 LJ 525 .... 17.30 Newington v Windeyer (1985) 3 NSWLR 555 .... 4.23 Newton Abbot Co-operative Society Ltd v Williamson & Treadgold Ltd [1952] Ch 286 .... 15.23, 15.26 Ngatoa v Ford (1990) 19 NSWLR 72; NSW ConvR 1155-552 .... 17.42, 17.73 Nguyen v Scheiff [2002] NSWSC 151 .... 17.37 Nicholas v Andrew [1920] 20 SR (NSW) 178 .... 4.20 Nicholson v Morgan (No 3) [2013] WASC 110 .... 11.37 Nickerson v Barraclough [1981] Ch 426; [1981] 2 All ER 369; [1981] 2 WLR 773 .... 14.19, 14.20, 14.28 Nielson-Jones v Fedden [1975] Ch 222 .... 17.56 NL Mercantile Group Pty Ltd, In the matter of [2018] NSWSC 1337 .... 10.18 Noakes & Co Ltd v Rice [1902] AC 24 .... 16.2 Nocton v Lord Ashburton [1914] AC 932 .... 4.22, 11.18 Nolan v Nolan (2003) 10 VR 626 .... 2.10 Nominal Defendant v GLG Australia Pty Ltd (2006) 228 CLR 529; [2006] HCA 11 .... 3.14 Noon v Bondi Beach Astra Retirement Village Pty Ltd [2010] NSWCA 202 .... 6.3 Nordern v Blueport Enterprises Ltd [1996] 3 NZLR 450 .... 7.24 Norman v FCT (1963) 109 CLR 9 .... 17.56 North Fort Worth Townsite Co v Taylor (1924) 262 SW 505 .... 4.10 North Shore Gas Co Ltd v Commissioner of Stamp Duty (1940) 63 CLR 2 .... 3.8



North Sydney Printing Pty Ltd v Sabemo Investment Corp Pty Ltd [1971] 2 NSWLR 150 .... 14.19, 14.20, 14.22, 14.23 North-Eastern Railway Co v Elliot [1860] 1 J & H 145 .... 14.33 Northern Counties of England Fire Insurance Co v Whipp (1884) 26 Ch D 482 .... 10.12, 10.13, 10.14 Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313; 146 ALR 572 .... 7.22, 7.23 Northern Star Agriculture v Morgan & Banks Developments Pty Ltd [2007] NSWSC 2 .... 13.12 Northern Territory v Alyawarr (2005) 145 FCR 442; [2005] FCAFC 135 .... 8.15, 8.16 — v Arnhem Land Aboriginal Land Trust (2008) 236 CLR 24 .... 3.19, 3.25 — v Arnhem Land Aboriginal Trust (2008) 236 CLR 24 .... 1.30 — v Collins (2008) 235 CLR 619; [2008] HCA 49 .... 3.14 — v Griffiths (2019) 364 ALR 208; [2019] HCA 7 .... 1.7, 5.12, 8.38, 8.40, 8.41, 8.42, 11.14 Northern Territory of Australia v Arnhem Land Aboriginal Trust (The Blue Mud Bay case) (2008) 236 CLR 24 .... 3.19, 8.30 Northstate Carpet Mills Pty Ltd v B R Industries Pty Ltd [2006] NSWSC 1057 .... 13.7 Notaras v Hugh [2003] NSWSC 440 .... 16.40 Nottingham Patent Brick and Tile Co v Butler (1885) 15 QBD 261 .... 15.42 — v — (1886) 16 QBD 778 .... 15.42 Nottingham Permanent Benefit Building Society v Thurstan [1903] AC 6 .... 11.52 Noyes v Pollock (1886) 32 Ch D 53 .... 16.18 NRMA Insurance Ltd v B & B Shipping & Marine Salvage Co Pty Ltd (1947) 47 SR (NSW) 273; 64 WN 58 .... 2.10 NSW Trustee & Guardian as Executor of Will of Walsh (decd) v Gregory (2012) 18 BPR 35,153 .... 17.73 lvii



Australian Property Law

Nugawela v Commonwealth Bank of Australia [2018] WASCA 70 .... 13.11 Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635 .... 6.4, 6.5, 17.10, 17.19, 17.73 O

Oakes v Turquand & Anor (1867) LR 2 HL 325 .... 10.28 Oakley v Boston [1976] QB 270 .... 14.35 Ocean Estates v Pinder [1969] 2 AC 19 .... 4.1, 4.13, 4.14, 4.16 Odey v Barber [2006] EWHC 3109 .... 14.42 Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 .... 9.13 Offulue v Bossert [2008] 3 WLR 1253 .... 4.15 Ogilvie v Ryan [1976] 2 NSWLR 504 .... 9.14 Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11 .... 7.33 Olsson v Dyson (1969) 120 CLR 365 .... 17.56 Olympic Holdings Pty Ltd v Windslow Corporation Pty Ltd (in liq) [2008] WASCA 80 .... 10.20 Omar Property Pty Ltd & Ors v Amcor Flexibles (Port Melbourne) Pty Ltd (No 4) [2020] VSC 216 .... 7.31 Ong v Luong [1991] ANZ Conv R 596 .... 11.69 O’Neill v Roberton-Statum [2015] NSWSC 149 .... 9.29 Onus v Alcoa of Australia Ltd (1981) 149 CLR 27 .... 8.6 Onward Building Society v Smithson (1893) 1 Ch 1 .... 14.29 Orakpo v Manson Investments Ltd [1978] AC 9 .... 9.28, 11.52 O’Regan v Commissioner of Stamp Duties [1921] St R Qd 283 .... 17.56 Osborne v Bradley [1903] 2 Ch 446 .... 15.35 Osborne Park Co-operative Society Ltd v Wilden Pty Ltd (1989) 2 WAR 77 .... 13.10 Osmanoski v Rose [1974] VR 523 .... 13.20, 13.24 lviii

O’Sullivan v Commissioner of Stamp Duties (Qld) [1984] 1 Qd R 212 .... 9.7 Overland v Lenehan (1901) 11 QLJ 59 .... 14.39 Oversea-Chinese Banking Corp Ltd (OCBC) v Malaysian Kuwaiti Investment Co (MKIC) [2003] VSC 495 .... 10.18, 10.20, 11.25 Owners of ‘Shin Kobe Maru’ v Empire Shipping Co Inc (1994) 181 CLR 404 .... 15.47 Owners of East Fremantle Shopping Centre West Strata Plan 8618 v Action Supermarkets Pty Ltd (2008) 37 WAR 498; [2008] WASCA 180 .... 14.8, 14.14 Owners Strata Plan No 61233 v Arcidiacono [2019] NSWSC 1307 .... 14.23, 14.30 Oxford Meat Co Pty Ltd v McDonald (1963) 63 SR (NSW) 423 .... 2.11 Oxley v Hiscock [2004] EWCA Civ 546; [2004] 3 All ER 703; [2005] Fam 211 .... 17.30 Ozibar Pty Ltd v Laroar Holdings Pty Ltd (No 2) [2016] QSC 82 .... 7.33 P

P Samuel & Co Ltd v Dumas [1924] AC 431 .... 10.28 P&A Swift Investments v Combined English Stores Group [1989] AC 632 .... 7.34, 7.35, 7.37 Packer v Wellsted (1658) 2 Sid 39; 82 ER 1244 .... 14.20, 14.22 Paine & Co Ltd v St Neots Gas & Coke Co [1939] 3 All ER 812 .... 14.3 Palmer v Bowman [2000] 1 All ER 22 .... 14.35 — v Rich [1897] 1 Ch 134 .... 17.15, 17.24 Palumberi v Palumberi [1986] ANZ ConvR 593; (1986) NSW ConvR 55-287 .... 3.3, 3.7 Pannizutti & Anor v Trask (1987) 10 NSWLR 531 .... 17.42 Panton v The Owners of Survey Strata Plan 46838 [2013] WASC 35 .... 15.48 Paoro Torotoro v Sutton (1875) 1 NZ Jur (NS) 57 .... 13.2

Cases Papas v Co [2018] NSWSC 1404 .... 11.24 Paragreen v Lim Group Holdings Pty Ltd [2020] VSCA 84 .... 11.7, 14.38 Parker v British Airways Board [1982] QB 1004; [1982] 2 WLR 503 .... 2.14, 2.17 — v Registrar-General [1977] 1 NSWLR 22 .... 11.73 — v South Australian Housing Trust .... 7.22 — v Trigg [1874] WN (UK) 27 .... 17.42 — v Webb (1822) 3 Salk 4 .... 7.34 Parkinson v Hanbury (1860) 1 Dr & Sm 143 .... 9.40, 16.46 Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWCA 422 .... 7.14 Parramore v Duggan (1995) 183 CLR 633 .... 14.17, 14.25 Parsons v McBain (2001) 109 FCR 120 .... 9.29 Partriche v Powlet (1740) 2 Atk 54; 26 ER 430 .... 17.50, 17.56, 17.62, 17.65 Partridge v McIntosh and Sons Ltd (1933) 49 CLR 453; [1933] ALR 417 .... 17.62 Pascoe v Swan (1859) 27 Beav 508; 54 ER 201 .... 17.34, 17.35, 17.36, 17.42 Patmore v Upton (2004) 13 Tas R 95; [2004] TASSC 77 .... 13.7 Patzak v Lytton [1984] WAR 353 .... 17.56 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; [1987] HCA 5 .... 9.28 Pavlou, Re [1993] 1 WLR 1046 .... 17.38 Payne v Dwyer [2013] WASC 271 .... 4.7, 4.13 Peaceable d Uncle v Watson (1811) 4 Taunt 16; 128 ER 232 .... 2.11 Peacock v Custins [2002] 1 WLR 1815; [2001] 2 All ER 827 .... 14.39 Pearce v Brain [1929] 2 KB 310 .... 11.52 — v City of Hobart [1981] Tas R 334 .... 14.39 Peat v Chapman (1750) 1 Ves Sen 542 .... 17.15 Pegasus Gold Australia Ltd v Mesto Minerals (Australia) Ltd [2003] NTCA 203 .... 3.5 Pekel v Humich (1999) 21 WAR 24 .... 14.35



Peldan v Anderson (2006) 227 CLR 217; 229 ALR 432 .... 11.7, 11.14, 17.53, 17.64, 17.66, 17.67, 17.68, 17.69 Pemberton v Barnes (1871) LR 6 Ch App 685 .... 17.42 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; [1912] HCA 9 .... 9.40, 16.41, 16.42, 16.47 Penn v Gatenex Co Ltd [1958] 2 QB 210 .... 7.21 Pennington v Waine [2002] 1 WLR 2075 .... 17.57, 17.58 Penny & South-East Railway Co, Re (1857) 7 E & Bl 660 .... 1.27 People of California v Nogarr (1958) 330 P (2nd) 858; 67 Am LR (2nd) 992 .... 17.62 People v Nogarr 330 P 2d 858; 67 ALR 2d 992 (1958) .... 17.61 Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10 .... 10.18, 11.26, 11.37 Permanent Trustee Co Ltd v Freedom From Hunger Campaign (1991) 25 NSWLR 140 .... 17.70 Permanent Trustee Nominees (Canberra) Ltd, Re [1989] 1 Qd R 3147 .... 17.42, 17.73 Perpetual Trustee Co v Williams (1913) 13 SR (NSW) 209 .... 6.12, 6.13 Perpetual Trustee Co Ltd v Scheiler (1948) 49 SR (NSW) 169 .... 5.19 — v Smith (2010) 186 FCR 566; 273 ALR 469; [2010] FCAFC 91 .... 7.11, 10.18, 10.24, 11.69, 13.20 Perpetual Trustees Victoria Ltd v English (2010) 14 BPR 27,339; [2010] NSWCA 32 .... 14.40, 16.37 Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 .... 3.9 Perry v Clissold (1906) 4 CLR 374; [1907] AC 73 .... 2.3, 2.9, 2.10, 2.11, 2.12, 2.13, 2.17, 2.19, 4.3, 8.8 Perry v Rolfe [1948] VLR 297 .... 9.40, 16.2, 16.4 lix



Australian Property Law

Person-to-Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745 .... 13.16, 13.20, 13.23 Pertsoulis, In the Marriage of (1980) 6 Fam LR 39 .... 17.56 Petkov v Lucerne Nominees Pty Ltd (1992) 7 WAR 163 .... 4.7, 4.10, 4.13 Pettey v Parsons (1914) 2 Ch 653 .... 14.43 Pettitt v Pettitt [1970] AC 777; [1969] 2 All ER 385 .... 9.22, 9.26, 17.30 Pettkus v Becker (1980) 117 DLR (3d) 257 .... 9.26, 9.28 Pfeiffle v Pfeiffle (1989) 13 Fam LR 692 .... 17.63 Phillips v Marrickville Municipal Council [2002] NSWSC 396 .... 4.11 — v McLachlan [1884] 5 LR (NSW) 168 .... 14.29 — v Phillips (1862) 4 De G F & J 208; 45 ER 1164; [1861] EngR 1044 .... 9.40, 10.28, 10.29, 13.21, 13.27 — v Southage Pty Ltd [2014] VSCA 17 .... 4.1 Philos Pty Ltd v National Bank of Australasia (1976) 5 BPR 11810 .... 10.20 Phipps v Pears [1964] 2 All ER 35 .... 14.12 Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 .... 11.14 Piatek v Piatek (2010) 245 FLR 137 .... 9.27 Pico Holdings Inc v Wave Vistas Pty Ltd (2005) 79 ALJR 825 .... 16.27 Picton-Warlow v Allendale Holdings Pty Ltd [1988] WAR 107 .... 7.33 Pilcher v Rawlins (1872) LR 7 Ch App 259…. 10.16, 10.17, 13.27 Pinewood Estate, Farnborough, Re [1958] Ch 280 .... 15.32 Pinnington v Galland (1853) 22 LJ Ex 348; 9 Exch 1; 1 CLR 819; 22 LTOS 41 .... 14.20, 14.32 Pipikos v Trayans (2018) 359 ALR 210 .... 9.15, 9.16 Pirie v Registrar-General (1962) 109 CLR 619 .... 15.18, 15.19, 15.21, 15.26 lx

Piromalli v Di Masi [1980] WAR 173 .... 14.35 Piroshenko v Grojsman [2010] VSC 240 .... 13.11 Plaister Perpetual Trustee Co, Re v Crawshaw (1934) 34 SR (NSW) 547 .... 17.70 Planet Kids Ltd v Auckland Council [2013] NZSC 147 .... 7.39 Planning Commission (WA) v Temwood Holdings Pty Ltd (2004) 221 CLR 30 .... 2.10 Platzer v Commonwealth Bank of Australia [1997] 1 Qd R 266 .... 13.27, 13.28 Plimmer v Mayor, Councillors and Citizens of the City of Wellington (1884) 9 App Cas 699 .... 9.30 Plumpton v Plumpton (1885) 11 VLR 733 .... 13.2 Police Association of South Australia, In the Matter of An Application By [2008] SASC 299 .... 11.22 Pollard’s Estate, Re (1863) 3 De GJ and Sm 541; 46 ER 746 .... 17.62 Pomal Kanji Govindji v Vrajlal Karsandas Purohit (1989) 76 AIR 436 .... 16.8 Pomfret v Ricroft (1669) 2 Keb 505; 1 Sid 429; 1 Wms Saund 323 .... 14.20 Poole’s Case [1738] EngR 617; 90 ER 934 .... 3.8, 6.2 Post Investments Pty Ltd v Wilson (1990) 26 NSWLR 598 .... 14.48, 15.46 Potter v North (1669) 1 Vent 387 .... 14.11 Pottinger v Raffone (Jamaica) [2007] UKPC 22 .... 4.15 Poulton v Moore [1915] 1 KB 400 .... 14.29 Powell v In de Braekt [2005] WASC 8 .... 9.29 — v Langdon (1944) 45 SR (NSW) 136 .... 14.39 — v McFarlane (1979) 38 P & Cr 452 .... 4.14, 4.16, 4.20 Power Rental Op Co Australia, LLC v Forge Group Power Ltd (in liq) (receivers and managers appointed) [2017] NSWCA 8 .... 3.14, 3.15 Power v Grace [1932] 2 DLR 793 .... 17.62

Cases Pozetu Pty Ltd v Alexander James Pty Ltd [2016] NSWCA 208 .... 7.14 Pratten v Warringah Shire Council [1969] 2 NSWLR 161 .... 11.49, 11.50, 11.51, 11.56, 11.57, 11.58 Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (2007) 64 ACSR 31 .... 11.22 Price v Perpetual Trustee (1955) 72 WN (NSW) 290 .... 7.31 PricewaterhouseCoopers Legal v Perpetual Trustees Victoria Ltd [2007] NSWCA 271 .... 3.1, 3.3 Primepoint Asset Pty Ltd v Fabray Pty Ltd [2010] WASC 366 .... 11.2 Proctor v Hodgson (1855) 10 Exch 824; 156 ER 674 .... 14.22 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; 57 ALR 609 .... 7.37, 7.38, 7.41, 17.36 Project Blue Moon Pty Ltd v Fairway Trading Pty Ltd [2000] FCA 127 .... 7.24 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 .... 15.47 Project Research Pty Ltd v Permanent Trustee of Australia Ltd (1990) 5 BPR 97,341 .... 16.4 Property & Bloodstock Ltd v Emerton (1968) 1 Ch 94 .... 16.46 Property Builders Pty Ltd v Adelaide Bank Ltd (2011) 15 BPR 29,411 .... 16.37 Proprietors Strata Plan No 9968 v Proprietors Strata Plan No 11,173 [1979] 2 NSWLR 605 .... 14.44, 14.46 Prowse v Johnstone [2012] VSC 4 .... 15.48 — v — [2015] VSC 621 .... 15.43 Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386 .... 7.11 PSAL Pty Ltd v Raja [2016] WASC 295 .... 9.37 PT Ltd v Maradona Pty Ltd (1992) 27 NSWLR 241 .... 9.12 — v — (1992) 25 NSWLR 643 .... 11.16, 14.40 Public Trustee v Commissioner of Stamp Duties [1925] NZLR 237 .... 17.56



— v Evans (1985) 2 NSWLR 188 .... 17.8 17.70 — v Fraser (1987) 9 NSWLR 433 .... 17.70 — v Paradiso (1995) 64 SASR 387 .... 11.60 — v Pfeiffle [1991] 1 VR 19 .... 17.15, 17.16, 17.17 Public Trustee of Queensland v Public Trustee of Queensland [2014] QSC 47 .... 17.8 — v Smith [2008] QSC 339 .... 6.19 Public Trustee (WA) v Mack [2017] WASC 325 .... 17.8 Pugh v Savage [1970] 2 QB 373 .... 14.36 Pukuweka Sawmills Ltd v Winger (1917) NZLR 81 .... 3.2 Purchase v Lichfield Brewery Company (1915) 1 KB 184 .... 7.33, 7.35 Purple Tangerine Pty Ltd v Australian Financial Loan Pty Ltd [2013] VSC 411 .... 7.24 Pwllbach Colliery Co Ltd v Woodman [1915] AC 624; [1915] All ER Rep 124 .... 14.12, 14.22, 14.24, 14.26 Pye, Ex parte (1811) 18 Ves Jun 140; 27434 ER 271 .... 17.56 Pyer v Carter (1857) 1 H & N 916; 156 ER 1472 .... 14.32, 14.33 Pyramid Building Society (In liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 .... 11.23, 11.32, 11.34, 11.42, 11.52 Pyrmont Point Pty Ltd v Westacott [2016] NSWCA 33 .... 11.16 Q

QGC Pty Ltd v Bygrave (No 3) [2011] FCA .... 8.46 Quach v Marrickville Municipal Council (1990) 22 NSWLR 55 .... 11.51 Queensland v Congoo (2015) 256 CLR 239 .... 8.29 Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81; 82 ALJR 115 .... 11.7, 11.64, 16.37 Quest Rose Hill Pty Ltd v The Owners Corporation of Strata Plan 64025 (2012) 16 BPR 31,387 .... 7.7, 7.14 lxi



Australian Property Law

R

R v D’Eyncourt (1888) 21 QBD 109 .... 2.17 — v Eastern Archipelago Co (1853) 22 LJQB 196 .... 8.8 — v Evans [1957] NZLR 1128 .... 17.62 — v Holland (1647) Style 20; 82 ER 498 .... 9.6 — v Morton (1873) LR 2 CCR 22 .... 10.3 — v Otley (1830) 1 B & Ad 161 .... 3.2 — v Oxfordshire County Council; Ex parte Sunningwell Parish Council [2000] 1 AC 335 .... 14.35 — v Ramsay and Foote (1883) 48 LT 733 .... 1.27 — v Secretary of State for the Environment; Ex parte Davies (1990) 61 P & CR 487 .... 4.14 — v Sparrow (1990) 70 DLR 385 .... 8.8 — v Steel (1834) 1 Legge 65 .... 5.9 — v Steele [1834] NSWSC 111 .... 4.7 — v Teller Home Furnishers Pty Ltd (In Liq) Electronic Industries v Horsburgh [1967] VR 313 .... 7.30 — v The Registrar of Titles; Ex parte Waddington [1917] VLR 603 .... 14.8 — v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327; 44 ALR 63 .... 1.6, 8.19 — v Tower Hamlets London Borough Council [1999] QB 109 .... 7.14 R & I Bank of Western Australia Ltd v Lavery (unreported, Supreme Court of Western Australia, 25 October 1993, BC9301503) .... 13.7 R (Beresford) v Sunderland City Council [2004] 1 AC 889 .... 14.35 R K Roseblade and V M Roseblade and the Conveyancing Act, Re [1964–5] NSWR 2044 .... 14.47 Radaich v Smith (1959) 101 CLR 209 .... 7.5, 7.6, 7.7, 7.8, 8.23 Rafael v Allison [1988] 1 WWR 570 .... 13.27 Rainbowforce Pty Ltd v Skyton Holdings Ltd (2010) 171 LGERA 288 .... 14.23 Rains v Buxton (1880) 14 Ch D 537 .... 4.7 lxii

Raleigh v Glover (1866) 3 WW & A’B (Eq) 163 .... 11.40 Rambaldi v Commissioner of Taxation (2017) 107 ATR 1 .... 9.19 Ramnarace v Lutchman [2001] 1 WLR 1651 .... 4.11 Ramsden v Dyson (1886) LR1HL 129 .... 7.16 Rance v Kensett (1916) 16 SR (NSW) 285 .... 1.12 Randell, Re; Randell v Dixon (1888) 38 Ch D 213 .... 6.12 Rasmanis v Jurewitsch (1968) 88 WN (Pt 1) (NSW) 59 .... 17.8 — v — (1969) 70 SR (NSW) 407 .... 17.70 Rasmussen v Rasmussen [1995] 1 VR 613 .... 11.41, 11.42, 11.43, 11.47, 11.48 Ratcliffe v Watters (1969) 89 WN (Pt 1) (NSW) 497; [1969] 2 NSWR 146 .... 11.13, 11.32, 11.44 Rathwell v Rathwell (1978) 83 DLR (3d) 289 .... 9.28 Raulfs v Fishy Bite Pty Ltd; Fishy Bite Pty Ltd v Raulfs [2012] NSWCA 135 .... 9.19 Rawlinson v Ames [1925] Ch 96 .... 9.14 Rayner v Preston (1881) 18 Ch D 1 .... 9.35 RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123 .... 10.18 Red Pepper Property Group Pty Ltd v S 3 Sth Melb Pty Ltd [2019] VSC 4 .... 7.37 Reed v Sheen (1982) 39 ALR 257 .... 13.24 Rees v Rees [1931] SASR 78 .... 17.34, 17.36, 17.42 Refina Pty Ltd v Binnie [2009] NSWSC 914 .... 4.10, 4.23 — v — [2010] NSWCA 192 .... 4.23 Refund of Dues under Timber Regulations, Re [1935] AC 184 .... 14.3 Reg v Symonds (1847) NZPCC .... 8.6 Regent v Millett (1976) 133 CLR 679; 10 ALR 496 .... 9.14, 9.15 Regis Property Co Ltd v Dudley [1959] AC 370 .... 7.26 Registrar-General of New South Wales v Jea Holdings (Aust) Pty Ltd (2015) 88 NSWLR 321; [2015] NSWCA 74 .... 14.3, 14.13

Cases Registrar-General, Ex parte; Re Council of Municipality of Randwick (1951) 51 SR (NSW) 220 .... 11.50 Regreen Asset Holdings Pty Ltd v Castricum Brothers Australia Pty Ltd [2015] VSCA 286 .... 3.8, 7.27 Reid v Bickerstaff [1909] 2 Ch 305 .... 15.37, 15.38 — v Smith (1905) 3 CLR 656; [1905] HCA 54 .... 3.1, 3.2, 3.14 Reid & Co v Minister for Public Works (1902) 2 SR (NSW) (L) 405 .... 16.15 Renals v Cowlishaw (1878) 9 Ch D 125 .... 15.26, 15.30, 15.31, 15.32 — v — (1879) 11 Ch D 866 .... 15.38 Renshaw v Queensland Mining Corporation (No 2) [2016] FCA 1482 .... 13.11 Rentoul v Rentoul [1944] VLR 205 .... 17.15 Renwarl Pty Ltd v Birky [1998] ANZ Conv R 515 .... 13.7 Repatriation Commission v Tsourounakis (2007) 239 ALR 491 .... 9.31 Residential Housing Corporation v Esber (2011) 80 NSWLR 69 .... 13.3 Reuthlinger v MacDonald [1976] 1 NSWLR 88 .... 6.7 Reynolds v Ashby and Son (1904) AC 466 .... 3.2 Rhone v Stephens [1994] 2 AC 310; [1994] 2 All ER 65 .... 15.8, 15.9, 15.10, 15.12, 15.19, 15.21 Rice v George (1873) 20 Grant 221 .... 17.42 — v Noakes [1900] 2 Ch 445 .... 16.2 — v Rice (1853) 2 Drew 73; 61 ER 646 .... 9.40, 10.22, 10.23, 10.24, 10.25, 11.13, 13.14, 13.19, 13.27 Richards v Delbridge (1874) LR 18 Eq 11 .... 17.56 — v Rose (1853) 9 Exch 218 .... 14.32 Richardson v Aileen Pty Ltd; Application by DJ Hughes [2007] VSC 104 .... 13.28 Riches v Hogben [1985] 2 Qd R 292 .... 9.30 Ridley, Re; Buckton v Hay and Sweet (1917) 33 LQR 236 .... 6.2



Riley and Real Property Act, Re (1964) 82 WN (Pt 1) (NSW) 373 .... 4.10 Riley v Penttila [1974] VR 547 .... 4.13, 4.20, 14.12, 14.13, 14.39, 14.45, 14.46 Rimmer v Rimmer [1952] 2 All ER 863, [1953] 1 QB 63 .... 17.30 — v Webster [1902] 2 Ch 163 .... 10.25, 13.14 Ripka Pty Ltd v Maggiore Bakeries Pty Ltd [1984] VR 629 .... 7.37 Risk v Northern Territory (2002) 210 CLR 392 .... 3.19 — v — [2006] FCA 404 .... 8.16 — v — (2007) 240 ALR 75; [2007] FCAFC 46 .... 8.16 Rixon v Horseshoe Pastoral Co Pty Ltd [2017] NSWSC 1293 .... 14.23 Road Australia Pty Ltd v Commissioner of Stamp Duties [2001] 1 Qd R 327 .... 5.10 Roads Corporation v Pearse [2012] VSC 527 .... 4.7 Roake v Chadha [1984] 1 WLR 40 .... 15.25 Roberts v Crown Estate Commissioners [2008] EWCA Civ 98 .... 4.7 — v Jones (1940) 30 NE 2d 392 .... 6.4 — v Karr (1809) 1 Taunt 495 .... 14.29 — v Swangrove Estates Pty Ltd [2008] Ch 439 .... 4.7 Robertson v Butler [1915] VLR 31 .... 4.9 — v Fraser (1871) 6 Ch App 696 .... 17.12, 17.13, 17.15 Robinson, Re [1972] VR 278 .... 15.47, 15.48 Robinson v Preston (1858) 4 K & J 505; 70 ER 211 .... 9.21, 17.24 — v The Registrar-General [1983] NSW Conv R 55-128 .... 11.74 Roblin v Public Trustee for the Australian Capital Territory [2015] ACTSC 100 .... 1.29, 2.4 Roche v Douglas (2000) 22 WAR 331; [2000] WASC 146 .... 2.4, 2.5 Rock Bottom Fashion Market Pty Ltd (In liq) v H R & C E Griffiths Pty Ltd (unreported, Queensland Court of Appeal, 6 March 1998) .... 17.36 lxiii



Australian Property Law

Rodwell GR Evans & Co Pty Ltd [1978] 1 NSWLR 448 .... 14.35 Roe d Haldane v Harvey (1769) 4 Burr 2484; 98 ER 302 .... 2.11 Roe d Reade v Reade (1799) 8 TR 118; 101 ER 1298 .... 9.6 Rogers v Hosegood [1900] 2 Ch 388 .... 7.34, 7.37, 15.25, 15.26, 15.19, 15.31 — v Rajendro Dutt (1860) 13 Moore PCC 209 .... 1.27 — v Resi-Statewide Corporation Ltd (1991) 101 ALR 377 .... 11.60 Rogers’ Question, Re [1948] 1 All ER 328 .... 17.30 Roman Catholic Bishop of the Diocese of Christchurch v RFD Investments Ltd (in liquidation) [2015] NZHC 2647 .... 7.39 Romanos v Pentegold Investments Pty Ltd (2003) 217 CLR 367 .... 9.27, 10.18 Ronan v Australia and New Zealand Banking Corporation (2000) 2 VR 531 .... 16.30 Rose v Hvric (1963) 108 CLR 353 .... 11.52 Rose, Re; Rose v Inland Revenue Commissioners [1952] Ch 499 .... 17.56, 17.57 Rosedale Farm (NSW) Pty Ltd, Re [2010] NSWSC 1321 .... 14.46, 14.47 Rosenberg v Cook (1881) 8 QBD 162 .... 2.11 Rosher, Re (1884) 26 Ch D 801 .... 6.3 Ross v Bank of Commerce (Saint Kitts Nevis) Trust and Savings Association Ltd [2012] UKPC 3 .... 16.29 Ross v Ross [2010] NSWCA 301 .... 17.43 Ross Bilton v Georgia Ligdas [2016] NSWSC 1262 .... 14.35, 14.44 Ross T Smyth & Co Ltd v T D Bailey Son & Co [1940] 3 All ER 60 .... 7.37 Rosset’s case [1990] 1 All ER 1111; [1991] 1 AC 107 .... 17.30 Rowbotham v Wilson (1857) 8 E and B 123; (1860) 8 HLC 348 .... 17.47 Rowe v National Australia Bank Ltd [2019] WASCA 140 .... 16.47 Rowland v Divall [1923] 2 KB 500 .... 2.17 Roy v Lagona [2010] VSC 250 .... 4.19, 4.21 lxiv

Royal Bank of Scotland v Etridge [2001] 4 All ER 449 .... 10.18 Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] 2 AC 378 .... 11.2311.34 Royalene Pty Ltd v Registrar of Titles [2008] QSC 64 .... 11.24 Roycroft v Uglum [1922] 1 WWR 78 .... 13.27 Rrumburriya Borroloola Claim Group v Northern Territory of Australia [2016] FCA 776 .... 8.17 Rubibi Community v State of Western Australia (No 7) [2006] FCA 459 .... 8.6 Rudd v Bowles (1912) 2 Ch 60 .... 14.29 Rudge v Richens (1873) LR 8 CP 358 .... 16.35 Rural View Developments Pty Ltd v Fastfort Pty Ltd [2009] QSC 244 .... 15.10, 15.21 Russell v Russell (1783) 1 Bro CC 269; 28 ER 1121 .... 16.28 — v Wilson (1923) 33 CLR 538; [1923] HCA 60 .... 2.3, 2.10, 2.17 Russo v Bendigo Bank [1999] 3 VR 376 .... 11.23, 11.24 Ruthol v Mills (2003) 11 BPR 20,793 .... 10.28 Ryan v Dries (2002) 10 BPR 19,497 .... 17.37, 17.38, 17.41, 17.43, 17.44 — v O’Sullivan [1956] VLR 99 .... 16.39 — v Ryan [2012] NSWSC 636 .... 17.29 — v Sutherland [2011] NSWSC 1397 .... 15.21 Rye v Rye [1962] AC 496 .... 7.40 Rylands v Fletcher (1868) LR 3 HL 330 .... 1.27 S

S & D International Pty Ltd (No 4), Re (2010) 79 ASCR 595 .... 9.39, 13.25, 13.27, 13.28 S and Y Investments (No 2) Pty Ltd (in liq) v Commercial Union Assurance Co of Australia Ltd (1986) 44 NTR 14 .... 10.28 Saade v Registrar-General (1993) 179 CLR 58 .... 11.73, 11.75

Cases Sabri, Re; Ex parte Brien v Australia & New Zealand Banking Group Ltd (1996) 21 Fam LR 213 .... 9.29 Sacks v Klein [2011] VSC 451 .... 13.3, 17.25 Saeed v Minister of Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23 .... 3.14 Saffron v Societe Miniere Cafrika (1958) 100 CLR 231 .... 13.27 Sahab Holdings Pty Ltd v Registrar-General [2011] NSWCA 395 .... 11.57, 11.59 Said v Butt [1920] 3 KB 497 .... 1.12 Sakoua v Williams (2005) 64 NSWLR 588 .... 7.23 Saldanha v City of Belmont [2018] WASCA 7 .... 11.14, 15.48 Saleeba v Wilke (2007) ANZ ConvR 664 .... 17.7, 17.16, 17.64 Salt & Tyler v Marquess of Northampton [1892] AC 1 .... 16.2 Saltri III v MD Mezzanine SA [2013] 1 AER Comm 661 .... 16.41 Sam Management Services (Aust) Pty Ltd v Bank of Western Australia Ltd [2009] NSWCA 320 .... 7.27 — v — [2009] NSWSC 676 .... 16.9 Sammon, Re (1979) 94 DLR (3d) 594 .... 17.56 Sampi v Western Australia (2010) 266 ALR 537 .... 8.15 Samuel Allen & Sons Ltd, Re [1907] 1 Ch 575 .... 3.9 Samuel v Jarrah Timber and Wood Paving Corporation Ltd [1904] UKHL 2; [1904] AC 323 .... 16.2, 16.6, 16.8 Sander v Twigg (1887) 13 VLR 765 .... 13.2 Sandgate Corporation Pty Ltd v Ionnou Nominees Pty Ltd (2000) 22 WAR 172 .... 16.4 Sandhurst Trustees v Australia Country Cinema Pty Ltd [2006] Q ConvR 54-658 .... 15.25 Santley v Wilde [1899] 2 Ch 474 .... 16.13 Sanwa Australia Leasing Ltd v National Westminster Finance Australia (1988) 4 BPR 9514 .... 3.9



Saraswati v R (1991) 172 CLR 1; [1991] HCA 21 .... 11.52, 11.56 Sarat Chunder Dey v Gopal Chunder Laha (1892) LR 19 I.A 203 .... 14.29 Sargent v ASL Developments Ltd (1974) 131 CLR 634 .... 10.18 Scapinello v Scapinello (1988) SASR 316 .... 17.42 Scarcella v Linknarf Management Services Pty Ltd (in liquidation) [2004] NSWSC 360 .... 7.37 Schmidt v 28 Myola Street (2006) 14 VR 447 .... 13.7 Schultz v Corwill Properties Pty Ltd (1969) 90 WN (NSW) (Pt 1) 529; [1969] 2 NSWR 576 .... 10.18, 11.23, 11.24, 11.27 — v Turner [2008] 2 BFRA 514 .... 16.28 Schwann v Cotton [1916] 2 Ch 459 .... 14.25 Scoones v Galvin and the Public Trustee [1934] NZLR 1004 .... 17.56 Seaforth Land Sales Pty Ltd’s Land (No 2), Re [1977] Qd R 317 .... 14.23 Seaman v Vawdrey (1810) 16 Ves 390 .... 14.43 Secretary, Department of Social Security v James (1990) 95 ALR 615 .... 9.11 Secure Funding Ltd v Donneley [2010] QSC 91 .... 13.18 Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979)144 CLR 596 .... 7.27, 7.31 Seddon v Smith (1877) 36 LT 168 .... 4.1, 4.13, 4.16 — v Tutop (1796) 6 TR 607; 101 ER 729 .... 13.27 Sefton v Tophams Ltd [1967] 1 AC 60 .... 15.26 Segal v Barel [2013] NSWCA 92 .... 17.44, 17.73 Selwyn v Garfit (1888) 38 Ch D 273 .... 9.40, 16.46 Sertari Pty Ltd v Nirimba Developments Pty Ltd [2007] NSWCA 324 .... 14.40 Seton v Slade (1802) 7 Ves Jun 265; 32 ER 108 .... 9.36, 16.6 Settree Estates, Re; Robinson v Settree [2018] NSWSC 1413 .... 17.8

lxv



Australian Property Law

Sewell v Agricultural Bank of Western Australia (1930) 44 CLR 104 .... 9.40 Sexton v Horton (1926) 38 CLR 240; [1926] ALR 373 .... 1.12, 5.12 Seymour v Seymour (1996) 40 NSWLR 358 .... 4.22 Shah v Shah [2011] WTLR 519 .... 17.57 Sharer, Re; Abbot v Sharer (1912) 57 Sol Jo 60 .... 17.62 Sharp’s Settlement Trusts, Re [1973] Ch 331 .... 5.18 Shaw Excavations Pty Ltd v Portfolio Investments Pty Ltd [2000] TASSC 185 .... 16.42 Shaw v Foster (1872) LR 5 HL 321 .... 9.35 — v Garbutt (1996) 7 BPR 14,816 .... 2.10, 4.10, 4.12 Shell-Mex & BP Ltd v Manchester Garages Ltd [1971] 1 All ER 841; [1971] 1 WLR 612 .... 7.6 Shelmerdine v Ringen Pty Ltd [1993] 1 VR 315 .... 4.21, 14.36, 14.45 Shephard v Cartwright [1955] AC 431 .... 9.17, 9.21 Shepherd Homes Ltd v Sandham (No 2) [1971] 2 All ER 1267 .... 15.21 Sherren v Pearson (1887) 14 SCR 581 .... 4.10 Shevill v Builders Licensing Board (1982) 149 CLR 620 .... 7.37, 7.38, 7.41 Shiloh Spinners Ltd v Harding [1973] AC 691; [1973] 1 All ER 90 .... 9.36, 13.27 Shorten v David Hurst Constructions Pty Ltd (2008) 72 NSWLR 211; [2008] NSWCA 134 .... 3.14 Shrivdev Singh v Sucha Singh [2000] AIR (1st Supp) 1935 .... 16.8 Shropshire Union Railways & Canal Co v R (1875) LR 7 HL 496 .... 11.13, 13.19, 13.24, 13.27 Siddons v Short, Harley & Co (1877) 2 CPD 572 .... 14.25 Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19 .... 7.16, 7.17, 9.31 Siemenski v Brooks Nominees [1990] Tas SR 236 .... 6.12 lxvi

Signature of St Albans (Property) Guernsey Ltd v Wragg [2018] Ch 264 .... 15.10 Silven Properties v Royal Bank of Scotland [2004] 1 BCLC 359 .... 16.41 Silver Brothers Ltd, In re [1986] UKHL 3; [1932] AC 514 .... 11.56 Simm v Anglo-American Telegraph Co (1879) 5 QBD 188 .... 14.29 Simmons v Simmons [2019] NSWSC 1050 .... 17.53 Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870 .... 13.7, 16.47 Singer v Berghouse [No 2] (High Court of Australia, unreported, 14 September 1994; [1944] HCJB 42) .... 17.42 Singh v Kaur Bal [No 2] [2014] WASCA 88 .... 17.53 Sino Iron Pty Ltd v Palmer (No 3) [2015] QSC 94 .... 9.19 Sistrom v Urh (1992) 40 FCR 550 .... 11.34 Sivritas v Sivritas (2008) 23 VR 349 .... 9.17 Small v Oliver & Saunders (Developments) Ltd [2006] EWHC 1293 .... 15.25, 15.38, 15.40 Smallman v Agborow (1617) Cro Jac 417; 79 ER 356 .... 17.59 Smith, Re [1967] VR 341 .... 6.12 Smith v Australian Woollen Mills Ltd [1934] ALR 129 .... 1.12 — v Gould [2014] VSCA 138 .... 2.14 — v Jones [1954] 1 WLR 1089 .... 10.18 — v National Trust Co (1912) 45 Can SCR 618 .... 17.62 — v Seghill Overseers (1875) LR 10 QB 422; [1874–80] All ER Rep 373 .... 7.6 Smith and Snipes Hall Farm Ltd v River Douglas Catchment Board [1949] 2 KB 500 .... 15.14, 15.26 Smith LJ in Hobson v Gorringe [1897] 1 Ch 182 .... 3.9 Smith R (on the application of) v The Land Registry (Peterborough) [2010] NPC 31 .... 4.7 Snedeker v Warring, 2 Kernan 178 .... 3.2

Cases Snowy Hydro Ltd v Commissioner of State Revenue [2010] VSC 221 .... 3.7 Socimer International Bank Ltd v Standard Bank London Ltd [2006] EWHC 718 (Comm) .... 16.41 Solling v Broughton [1893] AC 556 .... 4.9 Solomon v Metropolitan Police Commissioner [1982] Crim LR 606 .... 2.17 — v Vintners’ Co (1859) 4 H & N 585 .... 14.11 Somma v Hazelhurst [1978] 2 All ER 1011, [1978] 1 WLR 1014 .... 7.6 Souglides v Tweedie [2012] EWHC 561 .... 6.13 South Australia v Tanner (1989) 166 CLR 161 .... 11.52 South Maitland Railways Pty Ltd v Satellite Centres Australia Pty Ltd [2009] NSWSC 716 .... 4.9 South Staffordshire Water Company v Sharman [1896] 2 QB 44 .... 2.14 South-Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603; [1939] HCA 40 .... 11.50, 11.52, 11.56 South-Eastern Railway Co v Warton (1861) 6 H & N 520 .... 14.29 Southern Centre of Theosophy Inc v South Australia [1982] AC 706 .... 3.22, 3.24 Southwark London Borough Council v Tanner [1999] 3 WLR 939 .... 7.24 Southwell v Roberts [1940] HCA 23; (1940) 63 CLR 581 .... 16.8 Sovmots Investments Ltd v Secretary of State for the Environment [1979] AC 144 .... 14.26 Spark v Whale Three Minute Car Wash (1970) 92 WN (NSW) 1087 .... 2.11 Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 304 .... 7.24 Specialist Diagnostic Services Pty Ltd (Formerly Symbion Pathology Pty Ltd) v Healthscope Ltd (2012) 41 VR 1 .... 7.24, 7.35



Spencer v the Commonwealth (1907) 5 CLR 418 .... 8.39 Spencer, Re; Hale (Caveator) (1904) 4 SR(NSW) 471 .... 13.10 Spencer’s Case (1583) 5 Co Rep 16a; 77 ER 72 .... 7.35, 15.19 Spicer v Martin (1888) 14 App Cas 12 .... 15.38 Spina v Conran Associates Pty Ltd (2008) 13 BPR 25,435 .... 11.37 Sports and General Press Agency Ltd v Our Dogs Publishing Co Ltd [1916] 2 KB 880 .... 1.27 Sportscorp Australia Pty Ltd v Chief Commissioner of State Revenue (2004) 58 ATR 1 .... 9.7 Springette v Defoe [1992] 2 FCR 561 .... 17.30 Spyer v Phillipson (1931) 2 Ch 183 .... 3.2 Squire v Rogers (1979) 27 ALR 330 .... 17.42, 17.43, 17.44 St Alder v Waverley Local Council (2010) 172 LGERA 147 .... 11.51 St Catherine’s Milling and Lumber Co v R (1887) 13 SCR 577 .... 8.6 — v — (1888) 14 App Cas .... 5.8, 8.6, 8.8 St George Bank A Division of Westpac Banking Corporation v Zhang [2013] NSWSC 1418 .... 17.20 Staatz v Berry, in the matter of Wollumbin Horizons Pty Ltd (in liq) (No 3) (2019) 138 ACSR 231 .... 9.3 Stack v Dowden [2007] 2 All ER 929 .... 9.21, 17.29, 17.30, 17.31, 17.32 Stafford v Lee (1992) 65 P & CR 172 .... 14.24 Stanhill Pty Ltd v Jackson (2005) 12 VR 224 .... 15.47, 15.48, 15.49 Stanhope v Lord Verney (1761) 2 Eden 81 .... 10.23 Stanton v Federal Commissioner of Taxation (1955) 92 CLR 630 .... 1.6, 8.19 Starline Furniture Pty Ltd, Re (1982) 6 ACLR 312; 1 ACLC 312 .... 3.10 Stassinopoulos v Stassinopoulos [2011] VSC 647 .... 17.25 lxvii



Australian Property Law

State Bank of New South Wales v Berowra Waters Holdings (1986) 4 NSWLR 398 .... 11.78 State Electricity Commission of Victoria & Joshua’s Contract, Re [1940] VLR 121 .... 14.24 State of Queensland v Beames [2001] QSC 132 .... 3.19 State of Western Australia v Sebastian [2008] FCAFC 65 .... 8.6 Steadman v Steadman [1976] AC 536; [1974] 2 All ER 977 .... 9.14, 9.15 Stenberg v Lechowics [2010] NSWSC 926 .... 17.49 Stephens v Debney (1960) 60 SR (NSW) 468 .... 17.73 Stern v McArthur (1988) 165 CLR 489; 81 ALR 463; [1988] HCA 51 .... 9.2, 9.35, 9.36, 16.8 Stilwell v Blackman [1968] Ch 508 .... 15.32 Stockland (Constructors Pty Ltd) v Allan Richard Carriage (2002) 56 NSWLR 636 .... 2.15 Stoddard v McKay (1970) 2 NBR (2d) 366 .... 4.10 Stokes v Anderson [1991] FCR 539 .... 17.30 — v Berry (1699) 2 Salk 421; 91 ER 366 .... 2.11 — v Whicher [1920] 1 Ch 411 .... 16.27 Stolyar v Towers [2018] NSWCA 6 .... 14.3, 14.8 Stone, Re [1988] 1 Qd R 351 .... 17.8, 17.70 Stone v Registrar of Titles [2012] WASC 21 .... 17.57 Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 .... 11.32, 11.52, 11.56, 11.67, 14.26 Strachan & Co Ltd v Lyall and Sons Pty Ltd [1953] VLR 81 .... 9.14 Strand Electric and Engineering Co Ltd v Brisford Entertainments Ltd [1952] 2 QB 246 .... 17.36 Strata Management Pty Ltd v Nirta [2015] VSC 187 .... 11.24 lxviii

Street v Mountford [1985] AC 809 .... 1.13, 3.2, 7.6, 7.7, 8.23 Strelly v Winson (1685) 1 Vern 297, 23 ER 480 .... 17.42 Strong v Bird (1874) LR 18 Eq 315 .... 17.56 Stuart v Kingston (1923) 32 CLR 309 .... 10.18, 11.21, 11.23 Stump v Gaby (1852) 2 De GM & G 623; 42 ER 1015 .... 9.40, 10.28 Sturolson & Co v Weniz (1984) 272 EG 326 .... 7.6 Suatu Holdings Pty Ltd v Australian Postal Corporation (1989) 86 ALR 532 .... 11.52 Suffield v Brown (1864) 4 De GJ & Sm 185 .... 14.32 Suhr v Michelmore [2013] VSC 284 .... 15.32 Sun North Investments Pty Ltd as Trustee v Dale [2013] QSC 44 .... 16.4, 16.9 Suncorp Insurance and Finance v Commissioner of Stamp Duties [1998] 2 Qd R 285 .... 9.2 Sunshine Retail Investments Pty Ltd v Wulff [1999] VSC 415 .... 14.35, 14.36 Super 1000 v Pacific General Securities Ltd (2008) 221 FLR 427; [2008] NSWSC 1222 .... 11.26, 11.37 Super Jacobs Pty Ltd v Esera Faalogo [2019] VSC 778 .... 13.7 Sutherland, Duke of v Heathcote (1892) 1 Ch 475 .... 14.3 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 .... 10.28 Svanosio v McNamara (1956) 96 CLR 186 .... 3.28 Svendsen v State of Queensland [2002] 1 Qd R 216 .... 3.19 Swan v Sinclair [1925] AC 227 .... 14.44 — v Swan (1820) 8 Price 518; 73 ER 570 .... 17.42 — v Uecker [2016] VSC 313 .... 7.7, 7.8, 7.10 Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 .... 9.39, 13.7, 13.23, 13.27, 16.47 Swanville Investment Pty Ltd & Ors v Riana Pty Ltd [2003] WASCA 121 .... 7.37

Cases Swettenham v Wild [2005] QCA 264 .... 9.27 Swift v Wearing-Smith [2016] NSWCA 38 .... 7.23 Swiss Bank Corp v Lloyds Bank Ltd [1979] Ch 548 .... 16.21 — v — [1982] AC 584 .... 16.23 Swiss Re Life & Health Australia Ltd v Public Trustee of Queensland (No 3) [2018] FCA 1918 .... 17.8, 17.70 Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 .... 9.21, 11.37 T

T Choithram International SA v Pagarani [2001] 2 All ER 492…. 17.57 Taddeo v Catalano (1975) 11 SASR 492 .... 13.20, 13.27 Tadrous v Tadrous [2012] NSWCA 16 .... 7.16 Tailby v Official Receiver (1888) 13 App Cas 523 .... 9.36 Tamsco Ltd v Franklins Ltd (2001) 10 BPR 19,077 .... 7.31 Tanwar Enterprises Pty Ltd v Cauchi (2004) 217 CLR 315; [2003] HCA 57 .... 9.35, 9.36, 9.37, 9.38, 10.18, 16.8 Tanzone v Westpac [1999] NSW Conv R 55-908 .... 11.69 Tapling v Jones (1865) 11 HLC 290 .... 1.27 Tara Shire Council v Garner [2003] 1 Qd R 556 .... 11.7, 11.33, 11.34, 11.35, 11.36 Tarleton v Allhusen (1834) 2 A & E 32; 111 ER 13 .... 13.27 Tataurangi Tairuakena v Mua Carr [1927] NZLR 688 .... 11.11 Tatton v Mollineux (1610) Moore (KB) 809; 72 ER 920 .... 6.2 Taylor v Deputy Federal Commissioner of Taxation (1969) 123 CLR 206 .... 17.56 — v Needham (1810) 2 Taunt 278 .... 14.29 — v Wheeler (1707) 2 Salk 449; 91 ER 388 .... 16.23 TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 .... 10.28



Teasdale v Sanderson (1864) 33 Beav 534; 55 ER 476 .... 17.34, 17.36, 17.42 TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576; 273 ALR 134 .... 3.1, 3.7, 3.8, 3.11, 3.14 Tecbild Ltd v Chamberlain (1969) 20 P & CR 633 .... 4.1, 4.16 Tehidy Minerals Ltd v Norman [1971] 2 QB 528 .... 14.44, 14.45 Telstra Corporation Ltd v The Commonwealth (2008) 234 CLR 10 .... 1.7 Templeton v Leviathan Pty Ltd (1921) 30 CLR 34 .... 13.21 Tennant v Trenchard (1869) LR 4 Ch App 537 .... 16.21 Tennant & Burke v Adamczyk & Ellis [2005] EWCA Civ 1239 .... 4.15 Texaco Antilles Ltd Appellants v Dorothy Kernochan [1973] AC 609 .... 15.32, 15.46 Thambiappah v Commonwealth Bank of Australia [2010] NSWSC 520 .... 16.47 Thamesmead Town Ltd v Allotey [1998] 30 HLR 1052 .... 15.8, 15.9, 15.10, 15.11, 15.12 Thatched House (1716) 1 Eq Cas Abr 322; 21 ER 1075 .... 10.12 Theodore v Mistford (2005) 221 CLR 612 .... 16.11, 16.25, 16.26, 16.27, 16.28, 16.29 Thomas v Clydesdale Bank Plc [2010] EWHC 2755 (QB) .... 10.18 — v Sorrell (1674) Vaugh 330 .... 1.12, 1.13, 7.6 Thompson, Re [1906] 2 Ch 199 .... 6.11 Thompson, Re; Ex parte Nulyarimma (1998) 136 ACTR 9 .... 5.6 Thompson v Hurst [2012] EWCA Civ 1752 .... 17.31 — v Palmer (1933) 49 CLR 507 .... 13.14, 13.24 Thomson v Golden Destiny Investments Pty Ltd [2015] NSWSC 1176 .... 11.31, 13.7 — v McInnes (1911) 12 CLR 562 .... 16.27 Thorner v Major (2009) 1 WLR 776 .... 7.16, 7.18 Thorpe, Re (1961) 80 WN (NSW) 61 .... 17.8 lxix



Australian Property Law

Thorpe v Brumfitt (1873) LR 8 Ch App 650 .... 14.38, 14.39, 14.43 — v Lochel and Ors [2005] WASCA 85 .... 11.22 Thwaites v Ryan [1984] VicRp 7; VR 65 .... 9.14 Tighe & Anor v Pike [2016] QCA 353 .... 11.55 Tilbury West Public School Board and Hastie, Re (1966) 55 DLR (2d) 407 .... 5.18, 6.12 Tilley v Official Receiver (1960) 103 CLR 529 .... 13.27 Tiltwood, Re [1978] 1 Ch 269 .... 15.46 Titchmarsh v Royston Water Co Ltd (1899) 64 JP 56; 48 WR 201; 81 LT 673 .... 14.20 Tito v Waddell (No 2) [1977] Ch 106 .... 15.9 TL Rentals Pty Ltd v Youth on Call Pty Ltd [2018] VSC 105 .... 16.24 Tobias v Nolan (1985) 71 NSR (2d) 92 .... 4.10 Todrick v Western National Omnibus Co Ltd [1934] Ch 561 .... 14.14 Tolman’s Estate, Re (1928) 23 TAS LR 29 .... 17.34, 17.36, 17.42 Tom’s Settlement, Re; Rose v Evans [1987] 1 WLR 1021 .... 6.19 Tonks v Tonks (2003) 11 VR 124 .... 15.26 Toohey v Gunther (1928) 41 CLR 181; [1928] HCA 19 .... 16.6, 16.8 Toohey, Re; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 .... 5.19 Toohey’s Ltd v Commissioner of Stamp Duties [1960] SR (NSW) 539 .... 17.56 Toomes v Conset (1745) 3 Atk 261; 26 ER 952 .... 16.6, 16.8 Torbay Hotel Ltd v Jenkins [1927] 2 Ch 225 .... 15.43 Total Oil Great Britain Ltd v Thompson Garages (Biggin Hill) Ltd (1972) 1 QB 318 .... 7.37 Transphere Pty Ltd, Re (1986) 5 NSWLR 309 .... 9.7, 10.9 Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1; [1973] HCA 14 .... 11.52, 11.53, 11.56 lxx

Trego v Hunt [1896] AC 7 .... 15.19 Tregoyd Gardens v Jervis (1997) 8 BPR 15,845 .... 14.23 Treweeke v 36 Wolseley Road Pty Ltd (1973) 128 CLR 274; 1 ALR 104; 47 ALJR 394 .... 14.12, 14.42, 14.43, 14.44, 14.45, 14.46, 14.49 Trewin v Felton [2007] NSWSC 851 .... 14.39 Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98; [1964] NSWR 1226 .... 11.50, 11.76 Troja v Troja (1994) 33 NSWLR 269 .... 17.8, 17.70 Troncone v Aliperti (1994) 6 BPR 13,291 .... 13.7 Truman, Hanbury Buxton & Co Ltd’s Application, Re [1956] 1 QB 261 .... 14.47 Trustees Executors & Agency Co Ltd v Peters (1960) 102 CLR 537 .... 6.13 Trustees of Hollis’ Hospital and Hague’s Contract, Re The [1899] 2 Ch 540 .... 6.11, 6.12, 6.13 Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 80 ALJR 589 .... 9.22, 9.23, 17.31, 17.32, 17.67 Trustees, Executors and Agency Co Ltd v Federal Commissioner of Taxation (1917) 23 CLR 576 .... 9.2 Tsang Chuen v Li Po Kwai (1932) AC 715 .... 13.14 Tse Kwong Lam v Wong Chit Sen [1983] 1 WLR 1349 .... 16.41, 16.43 Tubantia, The [1924] P 78; [1924] All ER 615 .... 2.2 Tucker v Coleman (1885) 4 NZLR 128 .... 17.52 Tujilo v Watts [2005] NSWSC 209 .... 15.48 Tulk v Moxhay (1848) 2 Ph 774; 41 ER 1143 .... 15.2, 15.5, 15.8, 15.9, 15.16, 15.17, 15.18, 15.19, 15.21, 15.22, 15.23, 15.24, 15.25, 15.26, 15.31 Turner v Spooner (1861) 30 LJ Ch 803 .... 1.27 Twinsectra Ltd v Yardley [2002] 2 AC 164; [2002] 2 WLR 802 .... 9.19, 11.34

Cases Tymbook Pty Ltd v State of Victoria [2007] VSC 140, .... 7.39 Tyrrell’s Estate, Re (1907) 1 IR 292 .... 6.12 TZ Developments Pty Ltd v Rickman Pty Ltd (1993) 7 BPR 14,605 .... 14.47 U

Ultimate Property Group Pty Ltd v Lord (2004) 60 NSWLR 646 .... 16.41, 16.42, 16.43 Union Bank of London v Kent (1888) 39 Ch D 238 .... 13.14 Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514; [1997] 2 All ER 215 .... 9.36 Union of London and Smith’s Bank Ltd’s Conveyance, Re [1933] Ch 611 .... 15.31, 15.32 United Australia Ltd v Barclays Bank Ltd [1941] AC 1 .... 4.7 United Bank of Kuwait v Sahib [1997] Ch 107 .... 16.28, 16.29 United Starr-Bowkett Co-operative Building Society (No 11) Ltd v Clyne [1968] 1 NSWR 134; (1967) SR (NSW) 331 .... 11.70, 13.20 United States v Santa Fe Railways 314 US 339 (1941) .... 8.8 University of East London Higher Education Corporation v London Borough of Barking and Dagenham [2005] 3 All ER 398 .... 15.46 Uppington v Bullen (1842) 2 Dr & War 184 .... 9.40 Upton v Tasmanian Perpetual Trustees Ltd (2007) 158 FCR 118; 242 ALR 422 .... 16.41, 16.42, 16.43 V

V&O Princi Pty Ltd v Prestige Holdings Group Pty Ltd [2010] VSC 627 .... 7.37 Vacation Club Ltd v A G G Properties Pty Ltd [2019] NSWSC 1357 .... 17.73 Valoutin Pty Ltd v Furst (1998) 154 ALR 119 .... 11.42, 11.48 Valverde v Inch [2018] NSWSC 366 .... 17.18



Van Den Heuvel v Perpetual Trustees Victoria Ltd [2010] NSW Conv R 56-266 .... 11.14, 16.37 Vandervell v Inland Revenue Commissioners [1967] 2 AC 291 .... 9.4, 9.9, 17.56 Vandervell’s Trusts (No 2), Re [1974] Ch 269 .... 17.56 Vane v Vane (1873) 8 Ch App 383 .... 10.18 Vasiliou v Westpac Banking Corporation (2007) 19 VR 229; [2007] VSCA 113 .... 13.7, 16.41 Vassos v State Bank of South Australia [1993] 2 VR 316; (1992) V Conv R ¶54-443 .... 11.14, 11.32, 11.41, 11.46, 11.52, 11.67, 14.26 Vaudeville Electric Cinema Ltd v Muriset [1923] 2 Ch 74 .... 3.2, 3.14 Vaughan v Hancock [1846] EngR 1012; (1846) 3 CB 766; 136 ER 307 .... 9.11 Vernon v Bethell (1762) 2 Eden 110; 28 ER 838; [1762] EngR 18 .... 16.6, 16.8 Versaci v Rechichi [2019] VSC 747 .... 17.16 Vesco Nominees Pty Ltd v Shefan Hair Fashions Pty Ltd (2001) QSC 169 .... 3.8 Vickers v Cowell (1839) 1 Beav 529; 48 ER 1046 .... 17.26 — v Hearst LR 2 HL (Sc) 113 .... 10.13 Vickery v Municipality of Strathfield (1911) 11 SR (NSW) 354 .... 11.50 — v Strathfield Municipal Council (1911) 11 SR (NSW) 354 .... 11.56 Victoria Ground’s Recreation Application, Re (1981) 41 PCR 119 .... 15.46 Victoria Park Racing and Recreation Grounds Company Ltd v Taylor (1937) 58 CLR 479 .... 1.27, 1.28, 1.31, 14.36 Viro v R (1978) 141 CLR 88; [1978] HCA 9 .... 16.8 Voli v Inglewood Shire Council .... 7.22 Vopak Terminal Darwin Pty Ltd v Natural Fuels Darwin Pty Ltd (2009) 258 ALR 89 .... 3.8 Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 .... 3.11, 9.5 lxxi



Australian Property Law

Vrakkas v Registrar of Titles [2008] VSC 281 .... 15.48 Vukicevic v Alliance Acceptance Co Ltd (1987) 9 NSWLR 13 .... 16.18 Vyvyan v Arthur (1823) 1 B & C 410 .... 7.34 W

W v D [2012] SASCFC 142 .... 17.43, 17.44 Wade v New South Wales Rutile Mining Co Pty Ltd .... 8.23 Wade v Trnka [2006] NSWSC 1097 .... 4.22 Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1926] AC 101 .... 9.40, 11.21, 11.23, 11.24, 11.30 Wainwright v Miller [1897] 2 Ch 255 .... 6.12, 6.13 Wake v Hall (1883) 8 App Cas 195 .... 3.1 Walden v Hensler (1987) 163 CLR 561; 75 ALR 173 .... 1.6, 8.19 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 82 ALJR 489; [2008] HCA 5 .... 3.14 Walker v Dubord (1992) 92 DLR (4th) 257 .... 17.64 — v Hall [1984] FLR 126 .... 17.30 — v Linom [1907] 2 Ch 104 .... 10.13, 10.24 Wallis & Simmonds (Builders) Ltd [1974] 1 WLR 391, Re .... 16.28, 16.29, 16.31 Walsh v Lonsdale (1882) 21 Ch D 9 .... 1.12, 7.13, 7.14, 7.19 Walter v Handberg [2003] VSCA 122 .... 13.7 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; 76 ALR 513 .... 7.16, 7.17, 9.15 Wansborough v Maton (1836) 4 Ad & El 884 .... 3.2 Ward v James [1966] 1 QB 273 .... 7.31 — v Kirkland [1967] Ch 194 .... 14.12 — v Ward (1852) 7 Ex 838 .... 14.43, 14.44 Ward, Lock & Co v Operative Printers Assistants’ Society (1906) 22 TLR 327 .... 1.27 Waring (Lord) v London and Manchester Assurance Co Ltd (1935) 1 Ch 310 .... 16.46 lxxii

Warman International Ltd v Dwyer (1995) 182 CLR 544 .... 9.33 Warnborough Ltd v Garmite Ltd [2003] EWCA Civ 1544 .... 16.8 Warren v Keen [1954] 1 QB 15 .... 7.25 — v Lawton (No 3) [2016] WASC 285 .... 6.3, 6.7, 17.73 Washington Constructions Co Pty Ltd v Ashcroft [1982] Qd R 776 .... 11.41 Water Corporation v Hughes [2009] WASC 152 .... 4.7 Waterhouse v Power [2003] QCA 155 .... 9.27 Watson v Gass (1881) 51 LJ (Ch) 480 .... 17.42 Watt v Lord [2005] NSWSC 53 .... 17.47 Watts v Stewart [2016] EWCA Civ 1247 .... 1.13 Waverley Borough Council v Fletcher [1996] QB 334 .... 2.14, 2.15 Wayella Nominees Pty Ltd as Trustee for the DJ Gordon Family Trust v Cowden Ltd [2003] WASC 210 .... 14.35 We Are Here Pty Ltd v Zandata Pty Ltd [2010] NSW Conv 56-262 .... 11.69 Webb v Bird (1863) 13 CBNS 841 .... 14.15 — v Frank Bevis Ltd [1940] 1 All ER 247 .... 3.2 — v Ireland [1988] IR 353 .... 2.14, 2.17 Webb’s Lease, Re; Sandon v Webb [1951] 1 Ch 808 .... 14.22, 14.24 Webber v Lee (1882) 9 QBD 315 .... 9.11 Weber v Ankin [2008] NSWSC 106 .... 14.30 Websdale v S & JD Investments Pty Ltd (1991) 24 NSWLR 573 .... 16.40 Wegg Prosser v Evans [1894] 1 QB 108 .... 13.27 Weiland, Re (1945) 13 ABC 220 .... 17.62 Welldog Pty Ltd v Prox Pty Ltd [2017] WASCA 62 .... 16.47 Weller v Williams [2010] NSWSC 716 .... 13.22 Wells v Kingston-upon-Hull [1875] LR 10 CP 402 .... 1.12 Wells, Re; Swinburne-Hanham v Howard [1933] Ch 29 .... 16.4

Cases West Australia v Ward (No 3) (2015) 233 FCA 1 .... 8.27 West v Mead [2003] NSWSC 161 .... 9.27, 9.29 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669; [1996] 2 All ER 961 .... 9.4, 9.5, 9.33 Western Australia v Brown (2014) 306 ALR 168 .... 8.27 — v Manado (2020) 94 ALJR 352 .... 8.20 — v The Commonwealth .... 8.31, 8.42 — v Ward (2000) 99 FCR 316; 170 ALR 159; [2000] FCA 191 .... 5.9, 8.6, 8.16 — v — (2002) 213 CLR 1; 191 ALR 1; 76 ALJR 1098 .... 5.10, 8.15, 8.26, 8.27, 8.31, 8.47 — v Willis (2015) 239 FCR 175 .... 8.32 Westfield Holdings Ltd v Australian Capital Television Pty Ltd (1992) 32 NSWLR 194 .... 16.7, 16.8, 16.9, 16.27 Westfield Management Ltd v Perpetual Trustee Ltd (2007) 233 CLR 528 .... 14.38, 14.39, 14.40, 15.23, 15.43, 15.44 Westminster Bank Ltd v Lee [1956] Ch 7 .... 9.40, 13.27 Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1 .... 11.37, 16.43 — v Cronin (1990) 6 BPR 13,105 .... 16.28, 16.32 — v Dunn [2011] WASC 7 .... 13.12 — v Sansom (1994) 6 BPR 13,790 .... 17.73 Westpoint Corporation Pty Ltd v Registrar of Titles [2004] WASC 189 .... 15.21 Whaley, Re [1908] 1 Ch 615 .... 3.6 Wheeldon v Burrows (1879) 12 Ch D 31; 48 LJ Ch 853; 28 WR 196 .... 11.66, 11.67, 14.20, 14.25, 14.26, 14.27, 14.32, 14.33, 14.50 Wheeler v Baldwin (1934) 52 CLR 609 .... 2.11 Whiteley Ltd v Hilt [1918] 2 KB 808 .... 2.16 Wheeler v Horne (1851) Willes 208; 125 ER 1135 .... 17.42



Wheeler v JJ Saunders Ltd [1995] 2 All ER 697 .... 14.25 White v Betalli (2007) 71 NSWLR 381 .... 14.8, 15.2, 15.8 — v Bijou Mansions Ltd [1938] Ch 351 .... 15.37 — v Director of Public Prosecutions (2011) 243 CLR 478 .... 1.7 — v Garden (1851) 10 CB 919; 136 ER 364 .... 10.28 — v Tomasel [2004] 2 Qd R 438 .... 11.29, 11.37, 11.38 — v White [2001] 1 All ER 1; [2001] 1 AC 596 .... 17.30 White City Tennis Club Ltd v John Alexander’s Clubs Pty Ltd [2008] NSWSC 1225 .... 11.22 Whittlesea City Council v Abbatangelo (2009) 259 ALR 56; [2009] VSCA 188 .... 4.1, 4.10, 4.13, 4.15, 4.16 Wichniewicz v Registrar of Titles [2014] WASC 18 .... 13.7 Wickman Tools v Schuler AG (1974) AC 235 .... 7.37 Wicks v Bennett (1921) 30 CLR 80 .... 11.34 Wik Peoples v Queensland (1996) 187 CLR 1 .... 5.6, 7.3, 8.8, 8.21, 8.22, 8.23, 8.26, 8.27, 8.28, 8.29, 8.37, 8.42 Wilcox v Richardson (1997) 43 NSWLR 4 .... 14.25, 14.26 Wilken v Young 41 NE 68 (1895) .... 17.61, 17.62 Wilkes v Greenway (1890) 6 TLR 449 .... 14.19, 14.22 — v Spooner [1911] 2 KB 472 .... 10.21, 13.20 Wilkinson v Adam [1812] EngR 144; 1 V&B 422 .... 14.26 — v Haygarth (1847) 12 QB 837 .... 17.49 — v Kerdene Ltd [2013] EWCA Civ 44 .... 15.10 Wilks, Re [1891] 3 Ch 59 .... 17.65 Wilks, Re; Child v Bulmer [1891] 3 Ch 59 .... 17.50, 17.62 William Bkassini v Sonya Sarkis [2017] NSWSC 1487 .... 17.37 lxxiii



Australian Property Law

William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 .... 17.56 Williams and Glyn’s Bank Ltd v Boland [1981] AC 487 .... 10.18 Williams v Attorney-General (NSW) (1913) 16 CLR 404 .... 5.6 — v Booth (1910) 10 CLR 341 .... 3.22, 3.23, 3.24, 3.25 — v Hensman (1861) 1 J & H 546; 70 ER 862; [1861] EngR 701 .... 17.2, 17.15, 17.50, 17.56, 17.62, 17.64, 17.65 — v Legg (1993) 29 NSWLR 687 .... 17.73 — v Lloyd (1934) 50 CLR 341 .... 17.56 — v Perpetual Trustee Co Ltd (1913) 17 CLR 469 .... 6.11, 6.12 — v Sinclair Refining Co Inc 39 NM 388, 47 P 2d 910 (1935) .... 17.36 — v State Transit Authority of NSW (2004) 60 NSWLR 286 .... 11.66, 14.4, 14.26, 14.35 — v Usherwood (1981) 45 P & Cr 235 .... 14.44 — v Williams [1881] Ch D 659 .... 2.4 — v Williams (1899) 68 LJ 528 .... 17.42 Williams-Ellis v Cobb [1935] 1 KB 310 .... 3.19 Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers Appointed) (in liq) (2013) 251 CLR 592 .... 7.37, 7.38 Willoughby v Willoughby (1787) 1 TR 763; 99 ER 1366 .... 13.27 Wilson v State Rail Authority of New South Wales (2010) 78 NSWLR 704; [2010] NSWCA 198 .... 3.14 Wilson, Re [2019] VSC 211 .... 13.3, 17.25, 17.64 Wiltshear v Cottrell (1853) 1 E & B 674 .... 3.2 Wily v Endeavour Healthcare Services Pty Ltd (2003) NSWCA 321; (2003) 12 BPR 22,447 .... 16.8 — v — (No 5) [2003] NSWSC 61; (2003) 11 BPR 21,081 .... 16.7, 16.8 Wily v St George Partnership Banking (1999) 84 FCR 423 .... 1.7 lxxiv

Winau Aust Pty Ltd v LCC Property Development Pty Ltd [2020] NSWSC 434 .... 11.16 Windella (NSW) Pty Ltd v Hughes (1999) NSW ConvR 57,326 .... 16.18 Winder, Ex parte (1877) 6 Ch D 696 .... 2.11 Winkfield, The [1902] P 42 .... 2.16 Winkler v Shamoon [2016] WLR 101 .... 17.57 Wirth v Wirth (1956) 98 CLR 228 .... 9.22, 9.26 WJ Alan and Co Ltd v El Nasr Export and Import Co [1972] 2 OB 189 .... 13.24 Wolfson v Registrar-General (NSW) (1934) 51 CLR 300 .... 11.4 Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 .... 6.3, 6.6 Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (2019) 372 ALR 165 .... 15.20 Wongala Holdings Pty Ltd v Mulinglebar Pty Ltd (1994) 6 BPR 13,527 .... 16.40 Wood v Leadbitter (1845) 13 M&W 838; 153 ER 351 .... 1.12, 1.13 — v LeBlanc (1904) 34 SCR 627 .... 4.10 — v Seely 32 NY 105 (1865) .... 14.29 Wood, Re [1894] 2 Ch 310 .... 6.15 Wood, Re [1894] 3 Ch 381 .... 6.16 Woodberry v Gilbert (1907) 3 Tas LR 7 .... 15.26 Woods v Mason Bros Ltd (1892) 8 WN (NSW) 114 .... 2.17 Woodson (Sales) Pty Ltd v Woodson (Aust) Pty Ltd (1996) 7 BPR 14,685 .... 17.73 Woolf v Associated Finance Pty Ltd [1956] VLR 51 .... 11.52 Woolfe v Freijahs’ Holdings Pty Ltd [1988] VR 1017 .... 14.45 Woolley, Re [1903] 2 Ch 206 .... 17.15 Woolworths Ltd v About Life Pty Ltd (2017) 18 BPR 36,983 .... 6.3 World Tech Pty Ltd v Yellowin Holdings Pty Ltd (1993) ANZ ConvR 121 .... 16.32 Wright v Gibbons (1949) 78 CLR 313; [1949] ALR 287 .... 17.2, 17.7, 17.15, 17.19,



Cases 17.50, 17.52, 17.53, 17.54, 17.56, 17.62, 17.67, 17.68 Wright, Ex Parte (1827) Ch D 255 .... 16.11 Wu v Glaros (1991) 55 SASR 408 .... 13.27 Wyman (on behalf of the Bijara People) v The State of Queensland (No 2) [2013] FCA 1229 .... 8.17 X

Xiao Hui Ying v Perpetual Trustees Victoria Ltd [2015] VSCA 124 .... 9.21 Xenous v Katsaras (2002) 7 VR 335 .... 17.25, 17.29 Y

Yandama Pastoral Co v Mundi Mundi Pastoral Co Ltd .... 8.23 Yanner v Eaton (1999) 201 CLR 351; 166 ALR 258 .... 1.6, 1.7, 1.21, 8.6, 8.19, 8.20, 8.31

Yard v Yardoo Pty Ltd [2006] VSC 109 .... 9.17, 9.21 Yazgi v Permanent Custodians Ltd [2007] NSWCA 306; 13 BPR 24,567 .... 11.16 Yearworth v North Bristol NHS Trust [2009] All ER (D) 33 (Feb); (2009) 107 BMLR 47; [2010] QB 1; [2009] 2 All ER 986; [2009] 3 WLR 118 .... 2.5 Yeomans v Yeomans [2006] 1 QdR 390 .... 6.20, 6.21 Yerkey v Jones (1939) 63 CLR 649 .... 13.27 Yip v Frolich (2003) 86 SASR 162 .... 14.45 York v Stone (1709) 1 Salk 158; 91 ER 146 .... 17.2, 17.15, 17.62 Young v Hoger [2001] QCA 453 .... 11.24 Z

Zapletal v Wright [1957] Tas SR 211 .... 5.17, 5.21, 5.22 Zappullo, Re [1967] VR 390 .... 17.7

lxxv



Statutes References are to paragraph numbers COMMONWEALTH Aboriginal Land Rights (Northern Territory) Act 1976 .... 3.19, 8.2 s 4(1) .... 3.19 s 70 .... 3.19 s 70(1) .... 3.19, 8.30 s 70(2A) .... 3.19 s 73(1)(b) .... 3.19 s 73(1)(d) .... 3.19 Acts Interpretation Act 1901 …. 3.14 s 15AB …. 3.14 Australian Consumer Law .... 3.12 s 2 .... 3.12 s 122 .... 3.12 s 141 .... 3.12 Bankruptcy Act 1924–1955 Pt XII .... 11.40 s 193 .... 11.40 Bankruptcy Act 1966 .... 17.67 s 120 .... 17.67 s 120(7) .... 17.67 s 121 .... 9.21, 17.67, 17.68 s 121(1) .... 17.67 s 121(1)(a) .... 17.67 s 121(1)(b) .... 17.67 s 121(2) .... 17.67 s 121(4) .... 17.67 s 121(5) .... 17.67 s 121(9) .... 17.67 s 121(9)(b) .... 17.67 s 122 .... 9.19, 17.67 s 122(8) .... 17.67 Bankruptcy Legislation Amendment Act 1996 …. 17.67 s 120 …. 17.67 s 121 …. 17.67 s 122 …. 17.67 Carbon Credits (Carbon Farming Initiative) Act 2011 .... 11.7, 14.4 s 39 .... 11.7, 14.4

ss 39–40 .... 11.7 s 40 .... 11.7, 14.4 s 150 .... 14.4 Commonwealth Act of 1912 Sch …. 1.27 Competition and Consumer Act 2010 Sch 2 .... 3.12 Constitution s 51(xxxi) .... 8.7, 8.42 s 74 .... 1.12 s 109 .... 1.6, 8.19 Corporations Act 2001 .... 9.41 s 127(1) .... 10.6 s 127(2) .... 10.6 s 130 .... 10.18 s 180 .... 16.48 s 420A .... 16.48 s 1013D .... 16.8 Evidence Act 1995 .... 8.14 Family Law Act 1975 s 79 .... 9.22 Fish and Oyster Act 1952 .... 8.31 Fisheries Act 1952 .... 8.31 Fisheries Act 1988 .... 3.19 Fishing Act .... 8.31 Income Tax Assessment Act 1936 s 160M(6) .... 17.67 National Consumer Credit Protection Act 2009 .... 16.33 s 35 .... 16.33 s 45 .... 16.33 Sch 1 .... 16.33 National Credit Code s 14 .... 16.33 s 15 .... 16.33 s 16 .... 16.33 s 17 .... 16.33 s 72 .... 16.33 National Security Act 1939 .... 8.29 Native Title Act 1993 .... 1.6, 3.19, 5.6, 8.11, 8.13, 8.14, 8.15, 8.17, 8.19, 8.20, 8.21, 8.22, 8.23, 8.26, 8.27, 8.29, 8.31, 8.33, 8.36, 8.38, 8.42, 8.43, 8.45, 8.46, 8.48 Pt 2 .... 8.16, 8.26 Pt 2 Div 2 .... 8.16, 8.42 lxxvii

 Native Title Act 1993 – cont’d Pt 2 Div 2A .... 8.16, 8.42 Pt 2 Div 2B .... 8.16, 8.26, 8.42 Pt 2 Div 3 .... 8.42, 8.43 Pt 2 Div 4 .... 8.42 Pt 2 Div 5 .... 8.42 Pt 2 Div 3 Subdiv B .... 8.38 Pt 2 Div 3 Subdiv C .... 8.38 Pt 2 Div 3 Subdiv D .... 8.38 Pt 2 Div 3 Subdiv E .... 8.38 Pt 2 Div 3 Subdiv F .... 8.38 Pt 2 Div 3 Subdiv G .... 8.38 Pt 2 Div 3 Subdiv H .... 8.38 Pt 2 Div 3 Subdiv I .... 8.38 Pt 2 Div 3 Subdiv J .... 8.38 Pt 2 Div 3 Subdiv K .... 8.38 Pt 2 Div 3 Subdiv L .... 8.38 Pt 2 Div 3 Subdiv M .... 8.38 Pt 2 Div 3 Subdiv P .... 8.40, 8.43 Pt 7 .... 8.35 Pt 8 .... 8.35 Pt 8A .... 8.35 s 3 .... 8.11 s 4 .... 8.42 s 6 .... 8.30 s 8 .... 8.28 s 11 .... 8.34 s 11(1) .... 8.27 s 12M(1)(b)(ii) .... 8.26 s 13 .... 8.35 s 14 .... 8.36 s 15 .... 8.36 s 15(1) .... 8.42 s 15(1)(a)–(b) .... 8.36, 8.48 s 15(1)(c) .... 8.36, 8.48 s 15(1)(d) .... 8.36, 8.48 s 17 .... 8.36, 8.42 s 17(1) …. 8.42 s 17(2) .... 8.36, 8.42 s 19 .... 8.36 s 20 .... 8.36, 8.42 s 20(1) .... 8.42 s 22F .... 8.37, 8.42 s 23A .... 8.26 s 23A(2) .... 8.29 lxxviii

Australian Property Law s 23B .... 8.42, 8.48 s 23C .... 8.48 s 23F .... 8.37, 8.48 ss 23F–23J .... 8.37 s 23G .... 8.48 s 23G(1) .... 8.37 s 23G(1)(b)(ii) .... 8.26 s 23G(2) …. 8.42 s 23J .... 8.29, 8.42 s 24AA .... 8.43, 8.48 s 24AA(3) .... 8.48 s 24AA(6) .... 8.48 ss 24BA–24EC .... 8.46 s 24CA .... 8.46 s 24CB .... 8.46 ss 24CB–CE .... 8.46 s 24CC .... 8.46 s 24CD .... 8.46 s 24CG(1) .... 8.46 s 24EA .... 8.46 s 24GA .... 8.37 s 24GB .... 8.37 s 24GB(1)(d)(i) .... 8.37 s 24GB(1)(d)(ii) .... 8.37 s 24GB(2) .... 8.37 s 24GB(3) .... 8.37 s 24GB(4) .... 8.37 s 24GB(4)(a) .... 8.37 s 24GB(4)(b) .... 8.37 s 24GB(6) .... 8.37 s 24GB(9) .... 8.37 s 24GC .... 8.37 s 24ID(1)(b) .... 8.43 s 24ID(3) .... 8.43 s 26(2) .... 8.45 s 26(3) .... 8.45 s 31 .... 8.45 s 33(1) .... 8.38 s 38(1)(c) .... 8.38 s 38(1B)(2) .... 8.38 s 50A .... 8.38 s 51 .... 8.36, 8.38, 8.42 s 51(1) .... 8.38, 8.42 s 51(2) .... 8.38, 8.42 s 51(3) .... 8.36, 8.42



Statutes s 51(4) …. 8.42 s 51(5)–(8) .... 8.42 s 51A .... 8.38, 8.42 s 51A(2) .... 8.38 s 53 .... 8.38, 8.42 s 61 .... 8.35 s 82 .... 8.14 s 82(1) .... 8.14 s 203BE .... 8.46 s 211 .... 1.6, 8.19, 8.31 s 211(1)(b) .... 8.31 s 211(2) .... 1.6, 8.9, 8.19, 8.20, 8.31 s 211(3) .... 8.31 s 212(1) .... 8.20 s 212(2) .... 8.20 s 212(3) .... 8.20 s 212 .... 3.19 s 223 .... 1.6, 8.12, 8.14, 8.16, 8.19, 8.34 s 223(1) .... 8.11, 8.12, 8.13, 8.14, 8.15, 8.16, 8.17, 8.18, 8.30, 8.31, 8.42 s 223(1)(a) .... 8.16, 8.27 s 223(1)(a)–(c) .... 8.13 s 223(1)(b) .... 8.16, 8.26, 8.27, 8.43 s 223(1)(c) .... 8.14, 8.26 s 232A .... 8.37, 8.43 s 232C .... 8.37 s 225 .... 8.14, 8.35 s 225(c) .... 8.26 s 227 .... 8.31 s 228 .... 8.36, 8.42 s 229 .... 8.36 s 229(2) .... 8.36 s 229(3) .... 8.36 s 230 .... 8.36, 8.48 s 230(d)(i) .... 8.26 s 231 .... 8.36, 8.48 s 232 .... 8.36, 8.42, 8.48 s 232A–232D .... 8.48 s 233 .... 8.48 s 237 .... 8.45 s 238 .... 8.36, 8.48 s 240 .... 8.36 ss 246–249 .... 8.39 s 247B .... 8.37 s 248B .... 8.37

s 251A .... 8.46 s 251A(1) .... 8.46 s 251A(2) .... 8.46 s 251D .... 8.26 s 253 .... 8.30, 8.36, 8.37 Native Title Amendment Act 1998 .... 8.14 Pearl Fisheries Act 1952 .... 8.31 Personal Property Securities Act 2009 .... 2.16, 2.20, 2.21, 2.24, 3.14, 3.15, 3.17 Pt 4.3 Div 3 .... 2.20 Pt 4.3 Div 4 .... 2.20 s 8 .... 2.20 s 8(i)(j) .... 3.14 s 8(l)(j) .... 3.11, 3.14 s 10 .... 2.20, 3.11, 3.14 s 12 .... 2.20, 3.15 s 12(1) .... 2.20 s 13(1) .... 3.14 s 19(1) .... 2.16 s 19(2) .... 2.16 s 19(5) .... 2.16 s 20 .... 2.20 s 20(1)(a) .... 2.16 ss 21–22 .... 2.20 s 21(2)(c) .... 2.20 ss 23–24 .... 2.20 ss 25–29 .... 2.20 ss 43–59 .... 2.20 s 55 .... 2.20 ss 55–61 .... 2.20 s 55(2) .... 2.20 s 55(3) .... 2.20 s 55(4) .... 2.20 s 57 .... 2.20 s 73 .... 2.20 s 87 .... 3.11 s 88 .... 3.11 s 89 .... 3.11 s 90 .... 3.11 s 99 .... 3.11 s 115(1) .... 2.20 s 116 .... 2.20 ss 123–124 .... 2.20 s 126 .... 2.20 s 147 .... 2.20 lxxix



Australian Property Law

Personal Property Securities Act 2009 – cont’d ss 153–61 .... 2.20 s 267 .... 3.14 s 300 .... 10.18 Racial Discrimination Act 1975 .... 1.6, 2.11, 8.3, 8.7, 8.19, 8.21, 8.23, 8.26, 8.33, 8.36 Pt 2 .... 8.26 s 10(1) …. 8.42 Seas and Submerged Lands Act 1973 s 6 .... 8.30 Water Act 2007 .... 3.21 AUSTRALIAN CAPITAL TERRITORY Administration and Probate Act 1929 .... 1.29 Civil Law (Property Act) 2006 Ch 3 .... 16.13 s 201 .... 9.9, 15.29 s 201(4)(a) .... 9.11 s 202 .... 10.2 s 203(1) .... 7.4 s 203(1)(d) .... 9.14 s 205 .... 15.29 s 219(1) .... 10.5 s 219(3) .... 10.3 s 243 .... 17.72 s 301(1)(a) .... 16.39 s 304(1) .... 16.45 s 317 .... 16.2 s 400 .... 7.35 s 438 .... 2.23 Electronic Conveyancing National Law (ACT) Act 2020 .... 12.3 Forfeiture Act 1991 s 3 .... 17.70 Human Rights Act 2004 s 27 .... 8.20 Land Titles Act 1925 .... 11.2 Div 10.3 .... 16.16 s 14(1)(e) .... 11.78 s 43 .... 11.2 s 47A(1) .... 16.37 s 54(1) .... 17.18 s 57 .... 11.4 s 58(a) .... 11.59 s 58(c) .... 11.59 s 58(d) .... 11.70 lxxx

s 58(1)(b) .... 11.5 s 58(1)(d)–(e) .... 11.5 s 59 .... 11.7, 11.18 s 93 .... 16.15 s 94 .... 16.39 s 94(1) .... 16.40 s 96 .... 16.36 s 103E(3) .... 14.41 s 104 .... 13.6 s 110 .... 15.4 s 123 .... 11.13 s 124 .... 11.4, 13.1 ss 143–51 .... 11.71 ss 154–55 .... 11.71 s 154(1)(a) .... 11.71, 11.77 s 154(1)(b) .... 11.72 s 154(1)(d) .... 11.76 s 159 .... 11.6 Perpetuities and Accumulations Act 1985 s 8(1) .... 6.17 s 9 .... 6.17, 6.21 s 10(1) .... 6.13 s 18 .... 6.17 Real Property Act 1925 s 109(1) .... 15.14 s 120(d) .... 7.36 Real Property Amendment (Compensation) Act 2000 .... 11.71 Pt 14 .... 11.74 NEW SOUTH WALES Aboriginal Land Rights Act 1983 .... 8.5 s 40(2) .... 11.57 Agricultural Tenancies Act 1990 s 10 .... 3.8 Civil Procedure Act 2005 s 20 .... 2.23 Coastal Management Act 2016 s 28 .... 3.24 Common Law Procedure Act 1899 .... 1.12 s 95 .... 1.12 s 95(1) .... 1.12 s 97 .... 1.12 s 97(1) .... 1.12 Constitution Act 1855 s 2 .... 5.6

Statutes Conveyancing Act 1900 s 89 .... 14.3 Conveyancing Act 1919 .... 10.4, 11.36, 12.4, 14.4, 14.39, 14.44, 16.39 Pt 7 .... 16.13 Pt 7, Div 3 .... 16.16 s 3 .... 12.4 s 5(1)(d) .... 7.36 s 6(1) .... 17.18 s 7(1) .... 17.56 s 12 .... 15.29, 16.37 s 16 .... 5.20 s 19A .... 5.11 s 23B .... 10.2 s 23C .... 9.9 s 23C(2) .... 9.11 s 23D .... 10.2 s 23D(2) .... 7.4 s 23E(d) .... 9.14 s 24 .... 17.56 s 25 .... 17.7 s 26 .... 17.18, 17.19, 17.21, 17.24, 17.25 s 26(1) .... 17.18, 17.19, 17.20, 17.25 s 26(2) …. 17.18 s 30 .... 17.65 s 35 .... 17.7 s 36C .... 15.4 s 38 .... 17.56 s 38(1) .... 10.5 s 38(3) .... 10.3 s 44(2) .... 5.20 s 46 .... 10.4 s 47 .... 5.12 s 47(3) .... 5.12 s 43 .... 15.43 s 52A .... 3.27 s 53(1) .... 10.7, 11.1 s 54A .... 9.9, 9.10, 9.11 s 55(2A) .... 9.36 s 66 .... 17.42 s 66G .... 17.41, 17.42, 17.43, 17.72, 17.73 s 66G(4) .... 17.73 s 67 .... 14.29 s 70 .... 15.14 s 70(1) .... 15.26, 15.32



s 70A .... 15.22 s 70A(1) .... 15.26 s 78(1)(c) .... 16.13 s 82 .... 11.4 s 88 .... 14.39, 15.32, 15.43 s 88(1) .... 15.26, 15.32, 15.41, 15.43 s 88(1)(c) .... 15.46 s 88(3) .... 15.26, 15.43 s 88(3)(a) .... 15.22, 15.46 s 88AB(1) .... 14.4 s 88B .... 14.39, 15.8, 15.46 s 88B(2) .... 14.39 s 88B(3)(c) .... 14.39, 15.8, 15.46 s 88K .... 14.23 s 88K(1) .... 14.23 s 88K(2) .... 14.23 s 88K(2)(c) .... 14.23 s 88K(3) .... 14.23 s 89 .... 14.39, 14.41, 14.44, 14.46, 15.46 s 89(1) .... 14.41, 15.46 s 89(1)(a) .... 14.47 s 89(1)(b) .... 14.41, 14.43, 14.46 s 89(3) .... 14.43, 14.46 s 93(1) .... 16.2 s 96 .... 17.56 s 97 .... 14.23 s 103(2) .... 16.48 s 109 .... 9.40 s 109(1) .... 16.39 s 109(1)(c) .... 16.48 s 110 .... 9.40 s 111 .... 9.40 s 112(3) .... 16.45 s 112(3)(a) .... 9.40, 16.46 s 112(3)(b) .... 16.46 s 117 .... 7.35, 7.37 s 127 .... 7.2 s 127(1) .... 7.2 ss 128–31 .... 7.37 s 164 .... 10.18 s 164(1)(b) .... 10.18 s 178 .... 14.35 s 179 .... 14.35 s 181A .... 14.39 s 181A(3) .... 14.39 lxxxi



Australian Property Law

Conveyancing Act 1919 – cont’d s 181A(4) .... 14.39 ss 184A–184J .... 11.1 s 184G .... 11.1 Conveyancing (Amendment) Act 1930 .... 14.39, 17.42 Conveyancing and Law of Property Act 1898 .... 10.4 s 119 .... 17.7 Crimes Act 1900 Pt 15A .... 17.36 s 562 .... 17.36 s 562B .... 17.36 s 562D(1)(b) .... 17.36 s 562D(2)(a) .... 17.36 Crown Lands Act 1889 .... 8.23 Crown Lands Act 1989 .... 3.26 s 170 .... 4.7 s 172(7) .... 3.20 Crown Lands Alienation Act 1861 .... 5.6 Crown Lands Occupation Act 1861 .... 5.6 De Facto Relationships Act 1984 .... 17.42 Dividing Fences Act 1991 ss 6–7 .... 3.29 Duties Act 1997 s 30(1) .... 17.19 .... 17.42 Electronic Conveyancing (Adoption of National Act) 2012 .... 5.12, 5.21, 10.6, 12.3, 12.19, 13.4 App .... 10.6 Electronic Conveyancing National Law (NSW) .... 10.6, 11.75, 12.2, 12.3, 12.4, 12.5, 12.6, 12.7, 12.9, 12.12, 12.14, 12.15, 12.17, 12.18, 12.19, 12.20, 12.23, 12.29, 12.36, 12.37 s 3(1) .... 10.6 s 5(1)(b) .... 12.19 s 7 .... 10.6 s 9 .... 5.12, 5.21, 10.6 s 9(1) .... 12.12 s 9(2) .... 12.12 s 9(3) .... 12.12 s 10 .... 12.9 s 11 .... 12.9 s 11(2) .... 12.12 s 12 .... 10.6, 12.14, 12.15 s 12(1) .... 12.12, 12.15 s 12(4) .... 10.6 lxxxii

s 23 .... 12.5 Encroachment of Buildings Act 1922 .... 3.30 s 3(2) .... 3.30 Environmental Planning and Assessment Act 1979 .... 11.54, 11.55 s 28 .... 15.46 s 76A .... 11.54 s 123 .... 11.54 Forfeiture Act 1995 s 5 .... 17.70 Imperial Acts Application Act 1969 .... 5.20, 17.43 s 32 .... 5.13, 7.26 Industrial Arbitration Act 1940 .... 11.53 s 88B .... 11.53, 11.56 Interpretation Act 1987 s 34(1)(b)(i) .... 17.19 s 34(2)(a) .... 17.19 s 35(2) .... 17.19 s 35(5) .... 17.19 Land and Environment Court Act 1979 s 40 .... 14.23 Land Titles Registration and Transfer Act 1862 .... 13.17 Lands for Public Purposes Acquisition Act 1880, 44 Vict No 16 .... 2.9 Limitation Act 1969 .... 4.14 s 11(3)(a) .... 4.22 s 27(1) .... 4.7 s 27(2) .... 4.7 s 31 .... 4.8 s 47 .... 4.8 s 52(1)(e) .... 4.22 s 55 .... 4.22 Local Government Act 1919 .... 14.22 s 398 .... 11.49, 11.50, 11.51, 11.56 Local Government Act 1993 .... 11.56 s 45 .... 11.55, 11.57 s 45(1) .... 11.56, 11.57 Mining Act 1906 .... 8.23 s 16 .... 8.28 Minors (Property and Contracts) Act 1970 .... 11.52 Money-lenders and Infants Loans Act 1941 .... 9.40 Perpetuities Act 1984 .... 6.12, 6.19 s 3(1) .... 6.12



Statutes s 4(1) .... 6.12 s 7(1) .... 6.17 s 8 .... 6.17, 6.21 s 9(4) .... 6.21 s 14(2) .... 6.12, 6.13 s 15(a) .... 6.13 s 15(b) .... 6.13 s 17 .... 6.17 Property (Relationships) Act 1984 .... 9.22 s 4 .... 9.22 s 5 .... 9.22 Public Works Act 1900 .... 2.9 Real Property Act 1900 .... 3.23, 4.23, 9.40, 11.2, 11.4, 11.42, 11.50, 11.53, 11.54, 11.55, 11.56, 11.57, 11.66, 11.69, 12.4, 12.21, 12.29, 13.2, 13.3, 13.7, 13.12, 13.17, 13.18, 13.19, 13.20, 13.21, 13.23, 13.24, 14.4, 14.22, 14.26, 14.29, 14.39, 16.15, 16.17, 16.37, 17.18, 17.56 Pt 2 .... 12.4 Pt 6A .... 4.23, 11.5 Pt 7B .... 13.5 Pt 9 .... 13.2 Pt 14 .... 11.76 Pt 15 .... 14.39 s 2 .... 13.2 s 2(4) .... 13.2 s 3 .... 14.29, 16.39 s 3(1) .... 14.39 s 3A .... 11.4 s 3A(5) .... 12.4 s 31B .... 14.39 s 31B(2) .... 14.39 s 6 .... 11.50 s 8(1)(a) .... 13.19 s 12 .... 11.65 s 12(1)(d) .... 11.65, 11.78 s 12(1)(f) .... 13.19 s 12(6) .... 12.4 s 12A(1) .... 11.65 s 12A(3) .... 11.65 s 12E .... 12.4 s 13D(1) .... 8.5 s 28EA .... 11.1 s 31B(2) .... 13.17 s 31B(3) .... 11.2

s 32(6) .... 11.65 s 32(7) .... 13.17 s 33AAA .... 12.28 s 33AB .... 12.1, 12.21 s 36(1) .... 13.21 s 36(3) .... 13.21 s 39 (1A) .... 16.19 s 40 .... 14.29 s 41 .... 11.4, 11.65, 13.2, 13.21, 17.56 s 41(1) .... 11.4 s 42 .... 9.40, 11.6, 11.27, 11.28, 11.43, 11.44, 11.47, 11.52, 11.55, 11.56, 11.67, 13.21, 14.26, 14.29, 14.35 s 42(b) .... 11.64 s 42(1) …. 11.27, 11.28, 11.36, 11.54, 11.64, 11.66, 11.67, 14.26, 17.56 s 42(1)(a) .... 11.5, 11.59 s 42(1)(a1) .... 11.64, 11.65, 11.67, 14.26 s 42(1)(a)–(d) .... 11.27, 11.56 s 42(1)(b) .... 11.67, 14.4, 14.26 s 42(1)(c) .... 11.44, 11.59 s 42(1)(d) .... 11.5 s 42(3) .... 11.49 s 43 .... 9.40, 11.7, 11.18, 11.42, 11.44, 11.52, 11.67, 13.21, 14.26 s 43(2) .... 13.24 s 43A .... 13.4, 13.19, 13.20, 13.21, 13.22 s 43A(1) .... 13.20, 13.21 s 44 .... 13.2 s 45C .... 4.23 s 45D .... 4.23, 11.62 s 45D(1) .... 4.3, 4.23, 11.62 s 45D(3) .... 11.62 s 45D(4) .... 11.62 s 46 .... 11.67, 14.17, 14.26 s 47 .... 11.67, 14.17, 14.26, 14.29, 14.39 s 47(6) .... 14.41 s 47(7) .... 14.48 s 48 .... 13.2 s 49(a) .... 11.52 s 49(1) .... 11.65 s 51 .... 16.37 s 52 .... 16.37 s 52(1) .... 16.37 s 53(5) .... 11.56 lxxxiii



Australian Property Law

Real Property Act 1900 – cont’d s 56(6) .... 16.19 s 56C .... 11.14, 12.19, 16.19 s 56C (5)(b) .... 16.19 s 57 .... 16.15 s 57(2)(b) .... 16.40 s 57(3) .... 16.40 s 58 .... 9.40, 16.39 s 59 .... 9.40 s 60 .... 16.15, 16.36 s 61 .... 16.48 s 72 .... 13.2 s 74 .... 13.21 s 74F .... 13.6, 13.18 s 74F(1) .... 13.7 s 74H .... 13.17 s 74J .... 13.7 s 74K .... 13.7 s 74MA .... 13.7 s 74P .... 13.7 s 74P(1) .... 13.7 s 74P(1)(a) .... 13.7 s 74W .... 13.5 s 82 .... 13.1, 13.2 s 83 .... 13.19 s 86 .... 13.2 s 95(4) .... 11.4 s 96B .... 14.39 s 96D .... 11.54 s 98 .... 13.7 s 100 .... 17.18, 17.19, 17.21 s 100(1) …. 11.27, 11.28, 17.18, 17.19, 17.20 s 100(2) .... 11.27 s 100(3) …. 11.27 s 107 .... 13.2 s 108 .... 13.2 s 108(3) .... 12.15 s 110 .... 11.75 s 111 .... 11.76, 13.19 s 111(3) .... 11.76 s 118 .... 11.27, 11.28 s 118(1) .... 11.27 s 118(1)(d) …. 11.27 s 118(1)(d)(i) .... 11.27 s 118(1)(d)(ii) .... 11.27, 11.28 lxxxiv

s 120 .... 11.71 s 120(1)(b) .... 11.76 s 122 .... 11.65 s 122(1) .... 11.65 s 124(d) .... 11.44 s 124(e) .... 11.44 s 126 .... 11.74 s 128–35 .... 11.71 s 129 .... 11.74 s 129(1) .... 11.74, 11.76 s 129(1)(d) .... 11.72 s 129(1)(e) .... 11.73, 11.74 s 129(2) .... 11.76 s 129(2)(b)(i) .... 11.77 s 131 .... 11.76 s 132(1) .... 11.74 s 132(2) .... 11.74 s 133(4) .... 11.74 s 134(4) .... 11.76 s 135 .... 11.44, 11.76 s 136 .... 11.65 ss 136–138 .... 14.39 s 138 .... 11.65 Sch 5 .... 13.21 Sch 16 .... 13.2, 13.19 Real Property Act 1919 .... 11.53 s 57(1) .... 16.15 Real Property (Amendment) Act 1921 s 14 .... 11.50, 11.56 Real Property Regulation 2003 reg 6(1) .... 17.19 Residential Tenancies Act 2010 ss 32–34 .... 7.28 ss 38–39 .... 7.28 s 41 .... 7.28 s 44 .... 7.28 ss 50–52 .... 7.28 s 55 .... 7.28 s 63 .... 7.28 Roads Act 1993 .... 11.56 s 7(4) .... 11.56 s 145(3) .... 11.56 Supreme Court Act 1970 s 79 .... 2.23 Trustee Act 1925 s 9 .... 17.5

Statutes Water Management Act 2007 .... 3.21 s 3 .... 3.21 s 5 .... 3.21 s 392 .... 3.21 s 393 .... 3.21 Water Rights Act 1896 s 2 .... 3.21 Wills, Probate and Administration Act 1898 s 5 .... 5.13 NORTHERN TERRITORY Electronic Conveyancing (National Uniform Legislation) Act 2013 .... 12.3, 12.29 Encroachment of Buildings Act 1922 .... 3.30 Fisheries Act 1988 .... 3.19, 8.30 Land Title Act 2000 .... 11.2 Pt 6, Div 3 .... 16.16 s 6 .... 11.2 s 17(1)(a) .... 11.78 s 62(2) .... 16.37 s 74 .... 16.15 s 77 .... 16.28 s 80 .... 16.36, 16.39, 16.40 s 112 .... 15.46 s 125 .... 13.1 s 138 .... 13.6 s 142 .... 13.6 s 184 .... 11.4, 11.6 s 188(2)(a) .... 11.7 s 189(1) .... 11.59 s 189(1)(b) .... 11.5 s 189(1)(c) .... 11.5 s 189(1)(f) .... 11.59 s 189(3) .... 11.64 s 191 .... 11.18 ss 192–96 .... 11.71 s 192(1)(a) .... 11.73 s 192(1)(b) .... 11.76 s 193(1)(a)(b) .... 11.72 s 195(1)(b) .... 11.77 s 197 .... 9.24 Law of Property Act 2000 Pt 7 .... 16.13 s 5(c) .... 9.14 s 10 .... 9.9, 15.29 s 10(2) .... 9.11



s 11 .... 10.2 s 22 .... 5.11 s 29 .... 5.12 s 30 .... 5.14 s 30(2) .... 7.4 s 47(1) .... 10.5 s 47(2)(b) .... 10.3 s 56 .... 15.4 s 86(a) .... 16.39 s 90 .... 16.41 s 91(2) .... 16.42 s 109 .... 16.2 s 113 .... 16.2 ss 136–43 .... 7.37 s 163 .... 14.23 s 164 .... 14.23 s 170 .... 15.14 s 171 .... 15.22 s 177 .... 14.41 s 182 .... 15.29 s 187 .... 6.17 s 187(1) .... 6.17 s 187(2) .... 6.17 s 189 .... 6.15 s 190 .... 6.17 s 191 .... 6.21 s 197 .... 6.13 s 199 .... 6.17 s 217 .... 17.7 Minerals (Acquisition) Act 1953 s 3 .... 3.26 Mining Act 1980 s 185 .... 3.5 Property Law Act 1974 .... 3.30 s 34 .... 17.7 s 35 .... 17.18 s 36 .... 17.18 s 37A .... 17.72 s 37B .... 17.72 s 57(1) .... 17.18 Real Property Act s 125(3) .... 7.36 Validation Act 1994 .... 11.14 Water Act 1992 s 9 .... 3.20 lxxxv



Australian Property Law

QUEENSLAND Crown Lands Alienation Act 1876 s 91 .... 8.23 Electronic Conveyancing National Law (Queensland) Act 2013 .... 12.3, 12.29 Fauna Conservation Act 1974 .... 1.6, 1.7, 8.19, 8.20 s 5 .... 1.6 s 7 .... 1.6, 8.19 s 7(1) .... 1.6, 8.19 s 7(2) .... 1.6, 8.19 s 54(1)(a) .... 1.6, 8.19 s 54(1)(b) .... 1.6, 8.19 s 67 .... 1.6, 8.19 s 69 .... 1.6, 8.19 s 70 .... 1.6, 8.19 s 71 .... 1.6, 8.19 s 7(1) .... 8.19 s 71(2) .... 1.6, 8.19 s 83 .... 1.6, 8.19 s 83(3) .... 1.6, 8.19 s 84 .... 1.6, 8.19 Fish and Oyster Act 1914 .... 8.31 Fisheries Act 1877 .... 8.31 Forestry Act 1959 s 61J(5) .... 14.4 Justices Act 1886 .... 1.6 Land Act 1910 .... 8.23 Pt III .... 8.23 Pt III Div I .... 8.23 Pt III Div II .... 8.23 Pt VI Div VI .... 8.23 s 6 .... 8.23 s 6(1) .... 8.23 s 6(2) .... 8.23 s 40(2) .... 8.23 s 41(4) .... 8.23 s 42 .... 8.23 s 43 .... 8.23 s 45 .... 8.23 s 47 .... 8.23 s 203 .... 8.23 s 204 .... 8.22 Land Act 1962 .... 8.23 Pt III, Div I .... 8.23 lxxxvi

Pt VI, Div I .... 8.23 s 4(2) .... 8.23 s 6(1) .... 8.23 s 49(1) .... 8.23 s 53(1) .... 8.23 s 62(1) .... 8.23 s 135 .... 8.23 s 299(1) .... 8.23 s 299(2) .... 8.23 s 372 .... 8.23 Land Act 1994 .... 3.19 s 9 .... 3.19 s 10 .... 3.19 s 14C .... 12.15 s 99 .... 4.3 s 107(1) .... 4.23 s 185(1)(d) .... 4.23 Sch 6 .... 3.19 Land Title Act 1994 .... 11.2, 11.41, 11.59, 11.63, 16.26, 17.67 Pt 6, Div 3 .... 16.16 Div 4B .... 14.4 s 4 .... 11.70 s 8 .... 11.2 s 11A .... 11.14 s 11A(2) .... 11.14, 12.19, 16.18 s 11B(2) .... 11.14, 12.19, 16.18 s 15(1)(a) .... 11.78 s 15(3) .... 11.78 s 37 .... 17.67 s 38 .... 17.67 s 42 .... 11.41 s 42(1) .... 11.2 s 43 .... 11.37 s 45 .... 11.37 s 54(2) .... 17.18 s 57 .... 17.67 s 59 .... 17.68 s 59(1) .... 17.67, 17.68 s 60 .... 17.67 s 62 .... 16.37 s 62(1) .... 16.37, 17.67 s 62(4) .... 16.37 s 75 .... 16.26, 16.28 s 78 .... 16.36, 16.39, 16.40



Statutes s 78(2) .... 16.48 s 90(1) .... 14.41 s 112 .... 13.1 s 122 .... 13.6 s 126(4) .... 13.6 s 165 .... 11.41 s 170(1)(b) .... 11.70 s 176 .... 10.3, 16.11 s 178(3) .... 11.7, 11.18 s 181 .... 11.4 s 184 .... 11.6, 11.37 s 184(2)(a) .... 11.7, 11.18 s 185(1A) .... 11.14, 12.19, 16.18 s 185(1)(a) .... 11.33, 11.38 s 185(1)(b) .... 11.5 s 185(1)(c) .... 11.5 s 185(1)(d) .... 11.5, 11.63 s 185(1)(e) .... 11.59 s 185(1)(g) .... 11.59 s 185(2) .... 11.5 s 185(3) .... 11.64 s 186 .... 11.59 ss 188–90 .... 11.71 s 188A(3) .... 11.59 s 188(1)(b) .... 11.72, 11.76 s 189(1)(b) .... 11.77 s 191 .... 9.24 Law of Property Act s 12 .... 7.35 Limitation of Actions Act 1974 .... 4.14, 4.23 s 5(2) .... 4.22 s 6(4) .... 4.7 s 13 .... 4.7 s 15(2) .... 4.8 s 38 .... 4.22 s 39(1) .... 4.22 Mineral Resources Act 1989 s 8 .... 3.26 National Parks and Wildlife Act 1975 .... 1.6 Neighbourhood Disputes (Dividing Fences and Trees) Act 2011 .... 3.30 s 20 .... 3.29 s 21 .... 3.29 s 21(2) .... 3.29 s 52 .... 3.30

Petroleum Act 1923 .... 8.23 Planning (Urban Encroachment) Act 2008 .... 3.30 Property Law Act 1974 .... 5.20, 16.26 Pt 4 Div 2 .... 17.72 Pt 7 .... 16.13 s 5(1)(b) .... 16.26 s 6(d) .... 9.14 s 7 .... 5.20 s 10 .... 10.2 s 10(2) .... 7.4 s 11 .... 9.9, 15.29, 16.26 s 11(1)(a) .... 16.26 s 11(2) .... 9.11 s 12 .... 10.2 s 22 .... 5.11 s 29 .... 5.12 s 30 .... 5.14, 5.20 s 34 .... 17.7 s 35 .... 17.18, 17.25 s 36 .... 17.18 s 45(2) .... 10.3, 10.5 s 53 .... 15.14 s 53(1) .... 15.14 s 55 .... 15.4 s 59 .... 9.9, 16.26 s 61 .... 3.27 s 75 .... 16.26 s 75(2) .... 16.26 s 82 .... 10.20 s 83(1)(a) .... 16.39 s 83(1)(c) .... 16.48 s 84(1) .... 16.40 s 85 .... 16.41 s 85(1) .... 16.41, 16.42 s 87 .... 16.45 s 94 .... 16.2 s 99(2) .... 16.48 s 107(d) .... 7.36 s 117 .... 7.35 s 123 .... 7.37 s 128 .... 7.37 s 129 .... 7.2 s 155 .... 3.8 s 155(2) .... 3.8 lxxxvii



Australian Property Law

Property Law Act 1974 – cont’d s 180 .... 14.23 s 181 .... 14.41, 15.46 s 185 .... 3.30 s 196 .... 3.30 s 199 .... 15.29 s 200 .... 17.57 s 209 .... 6.17 s 209(1) .... 6.17 s 210 .... 6.17 s 212 .... 6.15 s 213 .... 6.21 s 215 .... 6.17 s 218(1) .... 6.13 s 237(1) .... 10.7, 11.1 ss 241–49 .... 11.1 s 250(1) .... 11.1 s 256 .... 10.18 s 346(1)(b) .... 10.18 Real Property Act 1861 .... 11.2 s 43 .... 7.14 s 129(1) .... 7.14 Real Property Act 1877 s 30 .... 16.26 s 35 .... 13.17 s 48 .... 11.13 Real Property Act Amendment Act 1877 .... 13.2 Retail Shop Leases Act 1994 .... 7.28 s 3 .... 7.28 s 22 .... 7.28 s 22A .... 7.28 ss 24–25 .... 7.28 s 27 .... 7.28 Stamp Act 1894 .... 11.13, 11.13 s 33 .... 11.13 s 44 .... 11.13 s 53(5) .... 11.13 s 96 .... 11.13 s 123 .... 11.13 s 124 .... 11.13 s 124(d) .... 11.13 s 125 .... 11.13 Succession Act 1981 s 8 .... 5.13 lxxxviii

s 65 .... 17.7 Supreme Court Act 1995 .... 2.23 Uniform Civil Procedure Rules r 22 .... 16.48 Water Act 2000 .... 3.21 Pt 3, Div 2 .... 3.21 s 5A .... 3.20 s 26 .... 3.21 SOUTH AUSTRALIA Electronic Conveyancing National Law (South Australia) Act 2013 .... 12.3, 12.29 Encroachments Act 1944 .... 3.30 Fences Act 1975 s 5 .... 3.29 Fisheries Act 1971 .... 8.32 Forest Property Act 2000 s 7(2) .... 14.4 s 7(3) .... 14.4 s 12 .... 14.4 Landlord and Tenant Act 1936 s 4 .... 7.37 s 5 .... 7.37 s 7 .... 7.37 s 9 .... 7.37 Law of Property Act 1936 .... 2.23, 17.56 Pt 4 .... 16.13 Pt 8 .... 17.72 s 24C .... 17.7 s 25 .... 5.20 s 26(1) .... 9.9 s 28 .... 10.2 s 29 .... 9.9 s 29(2) .... 9.11 s 30 .... 10.2 s 30(2) .... 7.4 s 31(d) .... 9.14 s 34 .... 15.4 s 37 .... 5.12, 7.35 s 41 .... 17.56 s 41(2) .... 10.5 s 41(5)(b) .... 10.3 s 44 .... 16.48 s 44(2) .... 16.48 s 47(1)(c) .... 16.48 s 49(2) .... 16.45



Statutes s 60 .... 6.21 s 61 .... 6.17 s 62 .... 6.17, 6.23 s 117 .... 10.18 Limitation of Actions Act 1936 .... 4.14, 4.22 s 4 .... 4.7 s 9 .... 4.8 s 45(1) .... 4.22 s 45(2) .... 4.22 Mining Act 1971 s 16 .... 3.26 Real Property Act 1857 .... 11.23, 13.17 s 39 .... 11.23 Real Property Act 1858 .... 11.2 Real Property Act 1886 .... 8.29, 11.2, 11.13, 11.14, 11.44, 11.50, 11.56, 13.2, 13.3, 15.43 Pt XI .... 11.15 Pt 12 .... 16.16 Pt 13A .... 13.5 s 3 .... 11.50 s 3(1) .... 15.43 s 3(2) .... 15.43 s 6 .... 11.56 s 10 .... 11.50 s 25 .... 8.29 s 50 .... 8.29 s 51B .... 11.2, 11.4, 15.43 s 54 .... 11.15 s 56 .... 11.15 s 57(3) .... 10.3, 16.11 s 65 .... 15.43 s 67 .... 11.4, 11.50 s 68 .... 11.21 s 69 .... 11.6, 11.15, 11.25, 15.43, 11.50, 11.60 s 69(b) .... 11.18, 11.22, 11.60 s 69(c) .... 11.59 s 69(d) .... 11.5 s 69(e) .... 11.59 s 69(f) .... 11.63, 11.63 s 69(h) .... 11.5, 11.70 s 69VI .... 4.23, 11.5 s 70 .... 11.6, 11.50 s 71 .... 11.50 s 74 .... 17.18 s 80A .... 4.3

s 80A–80I .... 11.5 s 90B(10) .... 14.41 s 116 .... 11.15 s 117 .... 11.15 s 119 .... 11.15 s 125(3) .... 7.36 s 128 .... 15.11, 15.22 s 131 .... 16.2 s 132 .... 16.15, 16.39 s 133 .... 16.39, 16.40 s 134 .... 11.21 s 137 .... 16.36 s 149 .... 16.28 s 150 .... 16.38 s 151 .... 16.15 s 162 .... 11.4, 13.1 s 187 .... 11.7, 11.18 s 191 .... 13.6 s 191(e) .... 13.6 s 191(f) .... 13.6 ss 201–05 .... 11.71 s 203 .... 11.72, 11.73, 11.76 ss 203–05 .... 11.77 s 207–19 .... 11.71 s 220(f) .... 11.78 s 251 .... 11.5 Real Property (Registration of Titles) Act 1945 .... 11.1 Registration of Deeds Act 1935 .... 11.1 s 10(1) .... 11.1 TASMANIA Acts Interpretation Act 1931 s 8B(1) .... 16.42 Boundary Fences Act 1908 s 8 .... 3.29 Conveyancing and Law of Property Act 1884 Pt IV .... 16.13 s 5 .... 10.18 s 5(1)(b) .... 10.18 s 11A .... 7.35 s 17 .... 16.2 s 21 .... 16.39 s 21(1)(c) .... 16.48 s 23(2) .... 16.45 s 27(2) .... 16.48 lxxxix



Australian Property Law

Conveyancing and Law of Property Act 1884 – cont’d s 35(1) .... 10.7, 11.1 s 35A .... 10.18 s 36 .... 15.29 s 38 .... 10.20 s 60 .... 10.2 s 60(2) .... 9.9, 9.11 s 60(3) .... 10.2 s 60(4) .... 7.4 s 60(5)(d) .... 9.14 s 61(c) .... 15.4 s 62 .... 17.7 s 63(2) .... 10.5 s 63(5)(b) .... 10.3 s 71A .... 15.22 s 75 .... 5.12 s 84C .... 14.41, 15.46 s 84J .... 14.23 ss 102–104 .... 15.22 s 104 .... 15.46 Electronic Conveyancing (Adoption of National Law) Act 2013 .... 12.3, 12.29 Forestry Rights Registration Act 1990 s 5(3) .... 14.4 Land Titles Act 1980 .... 11.2 Pt VI, Div 5 .... 16.16 s 21 .... 11.1 s 25 .... 11.1 s 33(3) .... 11.2 s 40(3) .... 11.64 s 40(3)(b) .... 11.59 s 40(3)(c) .... 11.5 s 40(3)(d) .... 11.5, 11.70 s 40(3)(e) .... 11.5, 14.17 s 40(3)(f) .... 11.59 s 40(3)(h) .... 11.5, 11.63 s 41 .... 11.7, 11.18 s 42 .... 11.6 s 44 .... 17.18 s 46 .... 4.23 s 48B .... 11.4 s 48B(3) .... 12.15 s 49 .... 11.4 s 52 .... 13.5 s 60 .... 16.37 xc

s 67(b) .... 7.36 s 73 .... 16.15 s 77 .... 16.40 s 78 .... 16.39, 16.42 s 78(1) .... 16.41, 16.42 s 78(1)(b) .... 16.42 s 81 .... 16.42 s 81(2)(iii) .... 16.42 s 82 .... 16.36 s 103 .... 15.46 s 105(7) .... 14.35 s 108(1) .... 14.41 s 109 .... 14.48 s 126 .... 11.76 s 127 .... 11.71, 11.76 s 127(1) .... 11.76 s 128 .... 11.71 s 132 .... 11.4, 13.1 s 133 .... 13.6 s 138I(2) .... 14.35 s 138U .... 4.3 s 138V .... 11.63 s 138W(2) .... 4.3 s 138W(4) .... 4.3 s 138X .... 4.3 s 139(1) .... 11.78 s 152(1)(a) .... 11.73 s 152(1)(b) .... 11.72 s 152(1)(d) .... 11.76 s 152(2)(b) .... 11.77 Land Titles Amendment (Law Reform) Act 2001 .... 14.35 Landlord and Tenants Act 1935 s 26 .... 3.8 Limitation Act 1974 .... 4.14 s 2(2) .... 4.22 s 10(1) .... 4.7 s 10(2) .... 4.7 s 12(2) .... 4.8 s 26(1) .... 4.22 s 32 .... 4.22 Mineral Resources Development Act 1995 s 6 .... 3.26 Partition Act 1869 s 3 .... 17.72 s 4 .... 17.72



Statutes Perpetuities and Accumulations Act 1992 s 6 .... 6.17 s 6(1) .... 6.17 s 10 .... 6.15, 6.21 s 12 .... 6.17 s 15(1) .... 6.13 Presumption of Survivorship Act 1921 s 2 .... 17.7 Real Property Act 1862 .... 11.2, 11.23, 17.52 s 39 .... 17.52 s 42 .... 17.52 s 87 .... 17.52 s 138 .... 17.52 Real Property Act 1886 s 27E .... 15.46 Registration of Deeds Act 1935 .... 11.1 s 3 .... 11.1 Supreme Court Act 1986 s 49 .... 11.52 s 49(a) .... 11.52 Supreme Court Civil Procedure Act 1932 s 11(14) .... 7.37 s 11(14A) .... 7.37 Supreme Court Rules 2000 .... 2.23 VICTORIA Alpine Resorts Act 1983 s 28 .... 7.7 Chattels Securities Act 1987 s 6 .... 3.12 Charter of Human Rights and Responsibilities Act 2006 .... 8.20 s 19 .... 8.20 ss 30–36 .... 8.20 Climate Change Act 2017 s 4(2) .... 14.4 s 4(3) .... 14.4 Crimes Act 1958 .... 17.8 Discharged Servicemen’s Preference Act 1943 s 10 .... 11.56 Electronic Conveyancing (Adoption of National Law) Act 2013 .... 12.3 Fences Act 1984 s 7 .... 3.29 Human Tissue Act 1982 ss 38–39 .... 1.29

Instruments Act 1958 s 126 .... 9.9 s 126(1) .... 7.17 Land Act 1958 s 385 .... 3.20 Landlord and Tenant Act 1958 s 28 .... 3.8 Limitation of Actions Act 1958 .... 4.8, 4.14 s 3(2) .... 4.22 s 7 .... 4.7 s 7A .... 4.7 s 7AB .... 4.7 s 7B .... 4.7 s 8 .... 4.7, 4.16 s 9(1) .... 4.16 s 9(2) .... 4.8 s 10(2) .... 4.8 s 14(1) .... 4.10, 4.16 s 14(4) .... 4.10 s 18 .... 4.16 s 21 .... 4.8, 11.41 s 21(1) .... 11.41 s 21(2) .... 11.41 s 23(1) .... 4.22 s 27(1) .... 4.22 Mines Resources (Sustainable Development) Act 1990 s 9 .... 3.26 Penalty Interest Rates Act 1983 s 2 .... 13.27 Perpetuities and Accumulations Act 1968 s 5(1) .... 6.17 s 5(3) .... 6.17 s 6 .... 6.17 s 8 .... 6.15 s 9 .... 6.17, 6.21 s 11 .... 6.17 s 15(1) .... 6.13 Planning and Environment Act 1987 .... 15.47 s 60(2) .... 15.46 s 173 .... 15.8 s 182 .... 15.8 Property Law Act 1928 s 5 .... 17.62 s 52 .... 17.62 xci

 Property Law Act 1958 .... 14.36 Pt 1 .... 11.1 Pt 2, Div 5 .... 16.17 Pt IV .... 17.72 Div 3 .... 16.13 s 6 .... 11.1 s 10 .... 15.47 s 19A .... 5.20 s 28 .... 17.7 s 40 .... 11.4 s 42 .... 11.6, 11.61 s 42(2) .... 11.61 s 43 .... 11.7 s 44(1) .... 10.7, 11.1 s 44(6) .... 10.7 s 51 .... 10.2, 17.62 s 52 .... 10.2, 17.62 s 52(1) .... 5.21 s 53 .... 9.10, 15.29 s 53(1) .... 9.10, 9.11, 9.12 s 53(1)(a) .... 9.11, 9.12 s 53(1)(b) .... 9.11, 9.12 s 53(1)(c) .... 9.11, 9.12 s 53(2) .... 9.11 s 54 .... 7.4, 10.2 s 54(2) .... 5.21, 7.4 s 55(d) .... 9.14 s 56(1) .... 15.4 s 60 .... 5.12 s 62 .... 14.36 s 62(1) .... 14.36 s 73 .... 10.5 s 73A .... 10.3 s 78(1) .... 15.14 s 79 .... 15.22 s 79A .... 15.25 s 84 .... 15.46, 15.47 s 84(1) .... 15.46, 15.47, 15.48 s 84(1)(a) .... 15.48 s 84(1)(c) .... 15.47, 15.48 s 88(1) .... 15.46 s 91(2) .... 16.48 s 94 .... 10.20 s 95(1) .... 16.2 s 101(1)(c) .... 16.48 xcii

Australian Property Law s 104(2) .... 16.45 s 121 .... 14.15 s 134 .... 15.29 s 134(b) .... 16.37 s 141 .... 7.35, 16.17 s 146 .... 7.37 s 147 .... 7.37 s 154A .... 3.8 s 154A(2) .... 3.8 s 154A(2)(b) .... 3.8 s 184 .... 17.7 s 190 .... 14.5 s 191 .... 5.20 s 199 .... 10.18, 13.27 s 199(1)(b) .... 10.18 s 225 .... 17.72 s 228 .... 17.33, 17.72 s 249 .... 5.11 s 269 .... 3.26 s 271 .... 3.26 Residential Tenancies Act 1997 s 7 .... 7.28 s 31 .... 7.28 s 40 .... 7.28 s 45 .... 7.28 ss 62–63 .... 7.28 s 65 .... 7.28 s 72 .... 7.28 s 81 .... 7.9, 7.28 s 85 .... 7.28 Retail Tenancies Act 2003 s 1 .... 7.28 s 11 .... 7.28 s 17 .... 7.28 s 21 .... 7.28 s 33 .... 7.28 s 35 .... 7.28 s 61 .... 7.28 Sale of Land Act 1962 .... 13.24 ss 3–32 .... 3.27 s 32 .... 13.24 Sale of Land Act (Amendment) Act 1982 .... 13.24 Subdivision Act 1988 s 23 .... 15.46



Statutes Supreme Court Act 1986 .... 11.53 s 49 .... 11.52, 11.53 s 49(a) .... 11.56 ss 79–84 .... 2.23 Supreme Court (General Civil Procedure) Rules 2015 r 37.01 .... 1.29 Transfer of Land Act 1862 .... 11.2 Transfer of Land Act 1866 .... 16.4 Transfer of Land Act 1890 .... 15.42 s 47 .... 15.42 s 50 .... 15.42 s 72 .... 15.42 s 74 .... 15.42 s 140 .... 15.42 Transfer of Land Act 1915 s 72 .... 11.23 s 179 .... 11.13 Transfer of Land Act 1928 s 3 .... 17.62 s 146 .... 17.62 s 161 .... 16.4 s 162 .... 16.4 Transfer of Land Act 1954 .... 11.40, 11.42, 17.62 s 3(1) .... 11.40 Transfer of Land Act 1958 .... 11.2, 11.24, 11.52, 11.53, 12.4, 12.29, 13.3, 13.7, 13.24, 13.27, 14.45, 4.20, 15.43, 16.42, 17.25 Pt IIIA .... 12.4, 11.52, 12.29 Pt V Div 1B .... 13.5 s 3 .... 11.40, 12.4 s 27(2) .... 11.2 s 30 .... 17.18 s 30(2) .... 17.5, 17.18 s 31 .... 11.14 s 33(4) .... 17.25 s 37 .... 11.4, 13.1 s 40(2) .... 14.12 s 41 .... 11.40 s 42 .... 11.5, 11.6, 11.34, 11.37, 11.40, 11.41, 11.42, 11.52, 11.53, 11.70 s 42(1) .... 11.14, 11.34, 11.36 s 42(1)(a) .... 11.41, 11.42, 11.59 s 42(1)(b) .... 11.59

s 42(1)(d) .... 11.70 s 42(2) .... 11.42 s 42(2)(a)–(f) .... 11.5 s 42(2)(b) .... 11.5, 11.42, 11.62 s 42(2)(d) .... 11.5, 11.64, 11.70, 14.36 s 42(2)(e) .... 11.5, 11.69, 4.23 s 43 .... 11.18, 11.40, 11.41, 11.42, 11.47, 11.52 s 43(1) .... 11.7 s 43A .... 11.70 s 44 .... 11.41, 11.52 s 44(1) .... 11.14, 11.41 s 44(2) .... 11.2, 11.40, 11.41, 11.42 s 44A .... 12.4, 12.29 ss 44A–44N .... 11.2 s 44B(1) .... 11.2 s 44E .... 12.4, 12.29 s 44G .... 11.2 s 44H .... 11.78 s 44S .... 11.4 s 46 .... 16.37 s 50 .... 11.40 s 52 .... 11.40, 11.42 s 52(4) .... 11.41 s 60 .... 4.23 ss 60–62 .... 4.3, 11.62 s 67 .... 7.36 s 67(1) .... 7.36 s 67(1)(d) .... 7.36 s 68 .... 11.30 s 72 .... 14.45, 16.42 s 73 .... 14.41, 14.45 s 73(2) .... 14.41 s 74 .... 16.15 s 74(2) .... 16.17, 16.18, 17.62 s 75 .... 16.16 s 77 .... 16.17, 16.39, 16.41, 16.42 s 77(1) .... 16.40, 16.41 s 77(4) .... 16.17 s 78 .... 16.36, 16.42 s 78(1) .... 16.17, 16.42 s 78(1)(a) .... 16.17, 16.42 s 78(1)(b) .... 16.42 s 78(2) .... 16.42 s 79 .... 16.48 s 81 .... 16.16, 16.17, 16.18, 17.62 xciii



Australian Property Law

Transfer of Land Act 1958 – cont’d s 81(1) .... 16.17, 16.18, 17.62 s 81(3) .... 16.18 s 84 .... 16.17 s 86 .... 16.18 s 87A .... 11.14, 12.19, 16.18 s 87A(1) .... 11.14 s 87B .... 11.14, 12.19, 16.18 s 88 .... 15.22 s 88B .... 14.3, 14.4 s 89 .... 13.6, 13.7 s 91M .... 12.15 s 91M(1) .... 12.15 s 91M(2) .... 12.15 s 96 .... 11.42 s 96(2) .... 14.30 s 103(2)(a) .... 11.78 ss 108–11 .... 11.71 s 110 .... 11.40, 11.42, 11.75 s 110(1)(a) .... 11.72 s 110(1)(c) .... 11.76 s 110(3) .... 11.40, 11.41 s 110(3)(a) .... 11.77 s 135 .... 11.42 s 199 .... 11.30 Transfer of Land (Electronic Transactions) Act 2004 .... 11.2 Transfer of Land Statute 1866 s 93 .... 16.17 s 94 .... 16.17 Transfer of Land (Single Register) Act 1998 .... 11.1, 11.2 Trustee Act 1958 s 3(1) .... 11.41 Water Act 1989 s 7(1) .... 3.20 s 15 .... 3.21 s 64L .... 3.21 s 64M .... 3.21 Wills Act 1997 s 4 .... 5.13 WESTERN AUSTRALIA Carbon Rights Act 2003 s 6 .... 14.4 xciv

Chattels Securities Act 1987 s 6 .... 3.12 Dividing Fences Act 1961 s 7 .... 3.29 Electronic Conveyancing Act 2014 .... 12.3, 12.29 Human Reproductive Technology Act 1991 .... 2.5 s 18(1)(f) .... 2.5 s 25(a) .... 2.5 Human Tissue and Transplant Act 1982 s 22 .... 2.5 Land Act 1898 .... 8.26 Land Act 1933 .... 8.23 s 32 .... 8.26 s 33 .... 8.26 s 109 .... 8.26 s 116 .... 8.26 Law Reform (Statute of Frauds) Act 1962 s 2 .... 9.9 Limitation Act 1935 .... 4.14, 4.23, 14.35 s 3 .... 14.35 s 7 .... 4.8 s 16 .... 4.22 ss 35–37 .... 4.22 s 36 .... 4.7, 14.35 s 69 .... 4.8 s 77 .... 4.8 Limitation Act 2005 .... 4.7, 4.14 s 4 .... 4.7 s 76 .... 4.7 Mining Act 1978 s 9 .... 3.26 s 114 .... 3.8 Property Law Act 1969 .... 6.4, 6.13, 13.10, 15.26 Pt VI .... 16.13 Pt VII .... 13.10 Pt XIV .... 17.72 s 6 .... 13.10 s 7 .... 13.10 s 9(1) .... 10.5 s 9(4) .... 10.3 s 11 .... 15.4 s 11(1) .... 15.26 s 20 .... 15.29

Statutes s 23 .... 5.11 s 26 .... 5.20 s 29 .... 17.7 s 33 .... 10.2 s 34 .... 9.9, 15.29 s 34(1)(a) .... 9.11 s 34(1)(b) .... 9.11 s 34(2) .... 9.11 s 35 .... 10.2 s 35(2) .... 7.4 s 36(d) .... 9.14 s 42 .... 5.12 s 47 .... 15.14, 15.19, 15.20, 15.26, 15.27, 15.28 s 47(1) .... 15.26 s 48 .... 15.22, 15.26 s 48(1) .... 15.26 s 49 .... 15.25 s 55(1) .... 16.2 s 55(2) .... 16.48 s 57(1)(a) .... 16.39 s 57(1)(c) .... 16.48 s 60(2) .... 16.45 s 68 .... 13.10 s 69 .... 13.10 s 71 .... 7.2 s 77 .... 7.35 s 78 .... 13.10, 15.26 s 101 .... 6.17 s 102 .... 6.15 s 103 .... 6.13 s 105(1) .... 6.21 s 109 .... 6.17 s 110 .... 6.13 s 110(1)(B) .... 6.13 s 110(2) .... 6.13 s 121 .... 14.15 s 122 .... 4.23 s 122(2) .... 4.23 s 123 .... 4.23 s 123(1) .... 3.30 s 126(1) .... 6.4 s 129A .... 15.22 s 137 .... 13.10 Registration of Deeds Act 1856 .... 11.1 s 3 .... 11.1



Rights in Water and Irrigation Act 1914 s 15(1) .... 3.20 Rules of the Supreme Court 1971 O 52 r 3(1) .... 2.5 Sale of Land Act 1970 s 22 .... 10.7, 11.1 Supreme Court Rules Amendment (No 8 of 1997) rr 12–15 .... 2.23 Titles (Validation) and Native Title (Effect of Past Acts) Act 1995 .... 8.16 Transfer of Land Act 1874 .... 11.2 Transfer of Land Act 1893 .... 4.23, 11.2, 13.3, 13.10, 13.11 s 4 .... 13.10 s 14 .... 11.4 s 27 .... 11.1 s 48 .... 11.2 s 48(1) .... 11.2 s 55 .... 11.4, 13.1 s 58 .... 11.4 s 60 .... 17.18 s 63 .... 11.70 s 68 .... 4.23, 11.5, 11.41, 11.64, 11.66, 13.10, 14.26 s 68(1) .... 11.34, 11.59, 11.62 s 77(4) .... 16.17 s 81 .... 16.17 s 81(1) .... 16.17 s 85 .... 10.3, 16.11 s 93(ii) .... 7.36 s 104 .... 11.66, 14.26 s 105(3)–(5) .... 16.18 s 106 .... 16.15 ss 106–108 .... 16.39 s 108 .... 16.40 s 111 .... 16.18 s 116 .... 16.17, 17.62 s 116(1) .... 16.16 s 117 .... 16.17 s 121 .... 16.48 s 122(4)(b) .... 11.59 s 129(1)(c) .... 14.47 s 129(1)(c)(b) .... 14.41 s 129(2)(e) .... 11.59 s 129A .... 15.19 xcv



Australian Property Law

Transfer of Land Act 1893 – cont’d s 129B .... 15.19 s 129B(1) .... 15.19 s 129B(2) .... 15.46 s 129C .... 14.41, 15.26, 15.46 s 188(1)(3) .... 11.78 s 134 .... 11.7, 11.18, 11.34, 11.41 s 137 .... 13.6 s 201 .... 11.71, 11.72, 11.73, 11.76, 11.77 s 202 .... 11.6 s 205–11 .... 11.71 s 222(1) .... 4.23 ss 222–223A .... 4.3, 11.62 s 238B .... 12.15 INTERNATIONAL European Convention on Human Rights and Fundamental Freedoms Protocol No 1 Art 1 .... 4.4, 4.6, 4.15 United Nations Law of the Sea Convention 1983 Pt XI .... 1.30 Pt XI s 4 .... 1.30 Annex IV .... 1.30 NEW ZEALAND Grantees of Reversions Act 1540 .... 7.34 Land Transfer Act 1952 s 62 .... 11.30, 11.67, 14.26 s 63 .... 11.30, 11.67, 14.26 s 85 .... 11.13 s 100 .... 17.62 Partition Act 1539 .... 6.4, 17.72 Public Works Act 1908 s 15 .... 11.56 SCOTLAND Abolition of Feudal Tenure Act 2000 .... 5.6 SINGAPORE Acquisition of Land (Assessment of Compensation) Act 1919 .... 15.47 UNITED KINGDOM Acquisition of Land (Assessment of Compensation) Act 1919 .... 15.47 xcvi

Agricultural Holdings Act 1948 .... 4.14 Australian Courts Act 1828, 9 Geo IV c 83 .... 5.6, 14.35 s 24 .... 17.43 Colonial Laws Validity Act 1865, 28 & 29 Vict c 63 .... 8.28 Common Law Procedure Act 1852 .... 2.14, 2.23 Contracts (Rights of Third Parties) Act 1999 s 1 .... 15.3 Conveyancing and Law of Property Act 1881 s 6 .... 14.11 s 21(2) .... 16.46 s 58 .... 15.26 s 58(1) .... 15.26 Copyright Act 1911 s 5(2) .... 1.27 s 35(1) .... 1.27 Crown Proceedings Act 1947 .... 4.7 Crown Suits Act 1769 (Imp) .... 4.7 Domestic Violence and Matrimonial Proceedings Act 1976 s 1(1) .... 17.36 Family Law Act 1996 Pt IV .... 17.30 Forfeiture Act 1982 .... 17.8 Imperial Land Act 1831 .... 5.6 Infants Relief Act 1874 s 1 .... 11.52 Infants Relief Act 1909 .... 11.52 s 3 .... 11.52 Inheritance (Provision for Family and Dependants) Act 1975 .... 17.30 Land Registration Act 1925 .... 4.15, 10.18, 11.2 Land Registration Act 2002 s 96 .... 4.4 Sch 6 .... 4.4 Land Transfer Act 1952 .... 11.11 s 62 .... 11.11, 11.67 s 63 .... 11.11, 11.67 s 80 .... 11.11 s 81 .... 11.11 s 183 .... 11.11 Law of Property Act 1922 .... 5.3



Statutes Law of Property Act 1925 .... 5.3, 15.26, 17.15 s 2(1) .... 9.15 s 11 .... 15.29 s 15 .... 15.29 s 36(2) .... 17.56 s 40 .... 9.15, 16.28 s 47…. 15.26 s 48 .... 15.26 s 53(1)(b) .... 17.30 s 53(2) .... 17.30 s 56 .... 15.3 s 62 .... 14.13 s 62(1) .... 3.2 s 78 .... 15.25, 15.26, 15.27, 15.28 s 78(1) .... 15.25, 15.26 s 79 .... 15.26 s 141 .... 7.34 Law of Property (Miscellaneous Provisions) Act 1989 .... 9.15, 16.26 s 2 .... 16.28, 16.29, 17.57 Limitation Act 1980 .... 4.7, 4.14, 4.15, 4.22 s 32(1) .... 4.22 s 32(1)(b) .... 4.22 s 32(2) .... 4.22 Sch 1 .... 4.14 Sch 1 para 8(4) .... 4.15 Limitations Act 1623 .... 4.4, 4.14 Married Women’s Property Act 1882 s 17 .... 17.30 Matrimonial Causes Act 1973 .... 17.30 Metropolitan Police Act 1839, 2&3 Vict c 71 .... 2.17 s 29 .... 2.17 New South Wales Act 1823, 4 Geo IV c 96 .... 5.6 Nullum Tempus Act, 9 Geo III c 16 .... 14.35 Open Spaces Act 1906 .... 2.14 s 9(b) .... 2.14 s 10 .... 2.14 s 15 .... 2.14 Partition Act 1868 .... 6.4, 17.42 s 4 .... 17.42 s 5 .... 17.42 Perpetuities and Accumulations Act 2009 s 9 .... 6.13

Police (Property) Act 1897 .... 2.17 s 1 .... 2.17 Prescription Act 1832 .... 14.11, 14.36 s 2 .... 14.8, 14.11, 14.35 Public Health Act 1875, 38 & 39 Vict c 55 s 164 .... 2.14 Public Health Acts Amendment Act 1907 .... 2.14 s 76 .... 2.14 Rights of Way Act 1932 .... 14.35 Statute of Anne 1705 .... 17.43 s 27 .... 17.42 Statute of Frauds 1677 .... 5.21, 9.9, 9.10, 9.13, 9.14, 9.15, 16.26 s 4 .... 9.9, 9.14, 9.15, 16.26 s 26 .... 9.15 s 26(2) .... 9.15 Statute of Gloucester 1278 .... 5.13 Statute of Limitations of 1623 .... 14.22, 14.35 Statute of Merton 1235 .... 14.35 Statute of Quia Emptores 1290 .... 2.22, 5.2, 5.3, 6.1, 6.3 Statute of Uses 1535 .... 2.22, 5.20, 6.22, 9.2, 9.6 Statute of Westminster 1275 .... 14.35 Statute of Wills 1540 .... 5.2 Tenures Abolition Act 1660 .... 5.3 Trusts of Land and Appointment of Trustees Act 1996 .... 17.30 s 12(1) .... 17.30 s 13(1) .... 17.30 s 13(2) .... 17.30 s 13(3) .... 17.30 s 13(5) .... 17.30 s 13(6) .... 17.30 s 14(2)(a) .... 17.30 s 15(1) .... 17.30 s 15(2) .... 17.30 Wildlife Act 1976 s 33D(2) .... 2.15 UNITED STATES OF AMERICA Constitution s 11 .... 5.6 Uniform Commercial Code Art 9 .... 2.20 xcvii



Chapter 1

Concepts of Property Characteristics of Western Property Interests 1.1 Private property 1.1 Associated property rights 1.2 Case: Property as the Law of Things 1.3 Commentary 1.4 Property is a relationship 1.5 Case: Yanner v Eaton 1.6 Commentary 1.7 Property is a legal construct 1.8 Fragmentation of property 1.9 Distinction Between Proprietary and Contractual Rights 1.10 Nature of the distinction 1.10 Lease or licence? 1.11 Case: Cowell v Rosehill Racecourse Co Ltd 1.12 Commentary 1.13 Overview of the distinction between property and contract 1.14 Rationales for ‘private’ property 1.15 Classical liberalism: natural rights and the social contract 1.16 Utilitarianism 1.17 Socialism perspectives 1.18 Modernist: legal positivism 1.19 Contemporary perspectives 1.20 Revision Questions 1.21 Property and the environment 1.22 Case: Property Rights and the Environment 1.23 Case: Climate Change and the Evolution of Property Rights 1.23 Commentary 1.24 Non-Private Resources 1.25 Resources outside of ownership: res communes 1.25 Boundaries of Ownership: Resources Incapable of Ownership 1.26 Rights to a spectacle 1.26 1

1.1

Australian Property Law Case: Victoria Park Racing and Recreation Grounds Company Ltd v Taylor 1.27 Commentary 1.28 Resources incapable of ownership: moral boundaries 1.29 Resources incapable of ownership: common heritage of humanity 1.30 Revision Questions 1.31 Overview — Categorisation of Property Objects 1.32

Characteristics of Western Property Interests Private property 1.1  Outside the legal world, a reference to ‘property’ is generally understood to be a reference to specific tangible objects such as land or goods. From a legal perspective, however, property refers to a specific form of legal relationship that an individual has with an object or a resource, whether that object or resource be tangible or intangible in nature. In this regard, the legal definition of property has a relational rather than an object focus. There are many different types of objects and resources that may be amenable to a ‘property relationship’ and these include: • land; • goods; • shares; • the benefit of a contract; • the lyrics to a song; • computer software; • ideas; • airspace; • encumbrances; • rights attached to land; and • Indigenous cultural relationships over land. The property relationship is, however, a fundamentally different relationship to other legal relationships and must therefore be treated as functionally exceptional to contract and tort. As outlined by J B Baron, ‘The Contested Commitments of Property’ (2010) 61 Hastings Law Journal 917 at 938: First, property is a system; like any system, property is governed by a ‘design principle, albeit an “unstated” one.’ It works in rem, and to do its work, it needs, inter alia, things. Moreover — and this is a second commitment — property is exceptional. It is different from contract or tort.

The primary definitive feature of most property relationships in Western society is the existence of a right to exclude. In Western society, the property relationship confers rights of autonomy and control. The definitive feature of the property relationship is therefore the existence of a right to exclude and property is often referred to as ‘private property’. The existence of a right to exclude elevates the property relationship into a relationship that is enforceable in rem; that is, enforceable against the rest of the world. The concept of native title is examined further in Chapter 8. An in rem relationship is distinguishable 2

Concepts of Property

1.1

from an in personam relationship because the rights conferred are enforceable against the rest of the world and not just enforceable between the parties who are privy to the relationship. The holder of a property relationship may exclude other persons from using or enjoying the object and this right of exclusion is enforceable against the rest of the world. Many authors have highlighted the importance of the right to exclude as a definitive feature of the property relationship. William Blackstone in Volume 2, Chapter 1, of his Commentaries on the Laws of England, 1765–1769, p 1, stated the following: There is nothing which so generally strikes the imagination, and engages the affections of mankind, as the right of property; or that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe.

See also the comments by T W Merrill, ‘Property and the Right to Exclude’ (1998) 77 Nebraska Law Review 730 at 731, where the author describes the right to exclude as the sine qua non of the property relationship: My claim is simply that in demarcating the line between ‘property’ and ‘non-property’ — or ‘un-owned things’ (like the air in the upper atmosphere or the resources of the ocean beyond a certain distance from shore) — the right to exclude others is a necessary and sufficient condition of identifying the existence of property. Whatever other sticks may exist in a property owner’s bundle of rights in any given context, these other rights are purely contingent in terms of whether we speak of the bundle as property. The right to exclude is in this sense fundamental to the concept of property … The right to exclude is more than just one of the most essential constituents of property … [it] is the sine qua non.

The right to exclude and the principle of inviolability is one of the most basic elements of social existence and when applied to ‘things’ is inward looking in that it functions as a behavioural guide to individuals whereby they regulate their conduct to accommodate it. Hence, ‘propertising’ a resource and ‘vesting someone with ownership of it conveys to the world a message of resource inviolability’ (S Balganesh, ‘Demystifying the Right to Exclude: Of Property, Inviolability and Automatic Injunctions’ (2008) 31 Harvard Journal of Law and Public Policy 593 at 623). See also L Katz, ‘Exclusion and Exclusivity in Property Law’ (2008) 58 University of Toronto Law Journal 275; K M Wyman, ‘Problematic Private Property: The  Case of New York Taxi-Cabs’ (2013) 30 Yale Journal on Regulation 125. In  this sense, the right to exclude is a foundational attribute of property that creates a triadic relationship between the owner, the thing and the right of the owner to exclude others from the thing (T W Merrill, Property and the Right to Exclude II (2014) 3 BrighamCanner Property Rights Conference Journal 1). It is, however, arguable that the right to exclude does not, in itself, properly identify the complex ‘moral core’ of the property relationship. The right to exclude may promote individual liberty and freedom with respect to the use of an object; however, it has been suggested that a more sophisticated ‘moral’ theory would ‘yield a more complex conception of the core of ownership’: G S Alexander, ‘The Complex Core of Property’ (2009) 94 Cornell Law Review 1063. Alexander argues that an evolved ‘moral theory’ of property ‘would understand in pluralistic terms the values that private ownership serves, including but not limited to individual liberty. Some other values that ownership serves include human dignity, just social relations, and self-development. All of these values, along with others, constitute the moral foundation of the complex core of ownership.’ Rights of exclusion and control are not necessarily characteristics of property as it is culturally acknowledged within all social frameworks. For example, Indigenous communities in Australia do not recognise private relationships as property because their relationship with the land is far 3

1.1

Australian Property Law

more communal in orientation. This is discussed further in Chapter 8, which examines the nature and scope of native title interests.

Associated property rights 1.2  While the right to exclude defines property relationships, it is not the only property right and there are other associated rights. The bundle of rights that make up property will generally also include: the right to use and enjoy the property; the right to possess (although the absence of possession does not deny the right its proprietary status); and the right to alienate (meaning the right to alter ownership rights by selling, giving, mortgaging, leasing etc property to another). The law has long used the ‘bundle of sticks’ metaphor as a way to describe and think about the nature of rights associated with the property relationship and this is particularly true where the property relationship applies to land. As signified by the bundle, ownership of land does not indicate title to a physical portion of the earth so much as a power to enforce certain rights over the land. Collectively, these enforcement rights make up the bundle that itself constitutes the sum total of property rights one can have over a parcel of land. This metaphor is a symbol of the complex, multidimensional character of property rights, and stems from two prominent property philosophers, W Hohfeld and A M Honore, who highlighted the social and legal dimensions of property relationships. The bundle metaphor is not, however, a completely accurate depiction; it is analytical and descriptive rather than normative. One of the most significant difficulties with the bundle of rights metaphor lies in the fact that it treats ownership, particularly land ownership, in an abstract way, not taking into account any of the social and ecological communities to which that land or resource may be attached. It defines land according to its constituent parts, treating each parcel of land as conceptually similar and therefore quintessentially fungible in nature. Consequently, the ownership of land, for example, is removed from the reality of its context. This assumption ignores the social, environmental, and cultural context of land ownership. As stated by Penner, ‘The “Bundle of Rights” Picture of Property’ (1996) 43 UCLA Law Review 711 at 712: … the slogan, ‘property is a bundle of rights’ is a verbal representation of a picture in which property is a complex aggregate of jural relations. But this picture is founded on the mistaken impression that the elaboration of how property protects the use of things, and its interrelation with other rights, shows that property is a natural composite which can be carved ‘at the joints’ into free-standing parts … This picture is out of focus. Property is indeed complicated, but it is complicated because of the natural ability of people to use different kinds of things in different ways, and because of its situation in a normative system wherein different rights and duties and powers interrelate and inform each other.

This is a strong concern because land is not just an abstract component of a property relationship, it is also our habitat and therefore fundamental to human flourishing. In the words of Joseph Sax, ‘habitat inheres in land’, which means that the social relevance of land is intricately connected to its role within the natural economy: Joseph L Sax, ‘Ownership, Property and Sustainability’ (2011) 31 Utah Environmental Law Review 1, 10. See also M A Heller, ‘Critical Approaches to Property Institutions’ (2000) 79 Oregon Law Review 41 at 430, where the author notes that as the bundle of rights theory waxes in judicial decision making, it wanes in property theory. The author suggests that ‘new definitions of private property, in constructive, integrative, and definitional variants, can update the ‘hoary metaphors of property law while carrying a powerful normative punch’. The bundle of rights metaphor is also problematic for the propertisation of natural resources. In his article ‘The Reconstitution of Property: Property as a Web of Interests’ 4

Concepts of Property

1.3

(2002) 26 Harvard Environmental Law Review 281, C A Arnold notes that focus upon an abstract bundle of associated rights can often result in a lack of attention being given to the natural resource interest that is the subject of the property relationship. He states at p 283: … abstraction of property as a bundle of various rights, such as use, alienation, exclusion, and possession, is inconsistent with the fundamental tenets of an environmental ethic, which emphasise both context-specific interconnectedness and the value of the object itself. Contrary to the bundle of rights concept, the ‘thing’ itself matters, both as an empirical and theoretical matter.

The bundle of rights metaphor has, however, been a useful analytical tool in other ways because it focuses upon the conceptual foundations of the property relationship, treating this relationship as a collection of interrelated rights rather than a single, definitive notion. 1.3  The utility of the bundle of rights metaphor and the architecture of exclusion and delineation strategies within the private property system is explored by Smith in the following extract:

  Property as the Law of Things  Henry E Smith (2012) 125 Harvard Law Review 16911 Introduction Private law deals with the interactions of persons in society. If we think about all the effects produced by the relation between each pair of persons and then unlimited chains of such interactions — A sells Blackacre to B, who sells to C, who mortgages to D and rents to E, and so on — then prescribing results for such interactions is a potentially intractable problem. Private law would be an impossible enterprise. This is where property comes in. Property is a platform for the rest of private law. The New Private Law takes seriously the need for baselines in general and the traditional ones furnished by the law in particular. And nowhere is this issue of baselines more salient than in property. I argue that the baselines that property furnishes, as well as their refinements and equitable safety valves, are shaped by information costs. For information-cost reasons, property is, after all, a law of things. Property as a law of things, however, suffers from a serious image problem in American legal theory. In stark contrast, other legal systems treat property as a right to a thing and property law as the ‘law of things.’ An ‘in rem’ right originally meant a right ‘in a thing,’ and I argue that it is the mediation of a thing that helps give property its in rem character — availing against persons generally. But if legal realism and its progeny insisted on anything, it was that property is not about things. According to this conventional wisdom, property is a bundle of rights and other legal relations availing between persons. Things form the mere backdrop to these social relations, and a largely dispensable one at that. Particularly with the rise of intangible property, so  this story goes, the notions of ownership and property have become so fragmented and untethered to things that property is merely a conclusion, a label we affix to the cluster of entitlements that result from intelligent policymaking. By contrast, according to the realist and postrealist conventional wisdom, the traditional baselines provided by property law not only were undertheorized and underjustified, but also represented a pernicious superstition and

1. Footnotes in this article have not been reproduced — for references, see (2012) 125 Harvard Law Review 1691. 5

1.3

Australian Property Law

an obstacle to clear thinking and progressive remaking of the social order. An inclination to take traditional property baselines seriously can then be dismissed as a failure to get with the program and a reflection of lack of sophistication or a partiality for entrenched interests. I want to suggest that this familiar picture has things exactly backward. It is the extreme realist picture that is myopic, inflexible, and ultimately unworkable and the traditional baselines that, while in need of constant improvement, are very worthy of explanation and a good deal of respect. The point is not to restore prerealist formalism but to ask why property sometimes is formal and sometimes is not. The first step toward understanding private law is to try not to take things for granted and to be as attentive to how things are not as to how things are. As we will see, this type of detachment makes some room for formalism, which is somewhat ironic because commentators since the legal realist era have generally criticized prerealist ‘formalism’ for being complacent and taking traditional baselines and doctrine as given. Whether that was ever so, it is first of all important to distinguish between, on the one hand, making open-ended inquiries about property law and, on the other, building open-ended inquiry into the decision-making processes of judges and others operating the system of property law. There is nothing inconsistent about a highly contextual explanation of a system that itself eschews context — is ‘formalist’ — in important respects. … We must avoid confusing the ordinary level of analysis within a system with the metalevel of propositions about that system … at a metalevel, the bundle of rights is hardly a theory of property at all and that an architectural approach to property can do much better. To get anywhere, we have to be clear about the difference between means and ends in property. Property has purposes and employs various means to serve them. The purposes of property relate to our interest in using things. Desirable features of a system of property — stability, promotion of investment, autonomy, efficiency, fairness — relate to the interest in use. There is no interest in exclusion per se. Instead, exclusion strategies, including the right to exclude, serve the interest in use; by enjoying the right to exclude through torts like trespass, an owner can pursue her interest in a wide range of uses that usually need not be legally specified. For certain important potential use conflicts, the law specifies uses more directly, either through private law (property governance regimes, torts, contracts), public regulation, or custom. What realism and the bundle of rights typically fail to do is to distinguish between the purposes of property and the various means — trespass, nuisance, servitudes, zoning, and custom — to achieve them. Realism tends to assume a one-to-one and relatively direct relationship between the features of property and the purposes they serve, and not surprisingly, realists also regard property as plastic and responsive to policy-oriented refashioning. Once we recognize the distinction between our interest in using things and the institutions that property law sets up to serve those interests, the role of property baselines as a means for achieving property’s ends becomes clearer. This article argues that an information-cost account of the means property uses to serve its ends helps explain many features of property — and how they work together to achieve property’s purposes. Property is a shortcut over the ‘complete’ property system that would, in limitlessly tailored fashion, specify all the rights, duties, privileges, and so forth, holding between persons with respect to the most fine-grained uses of the most articulated attributes of resources. Property starts by taking advantage of the fact that some connections among people, uses, and attributes of things are more important than others. Property organizes this world into lumpy packages of legal relations — legal things — by setting boundaries around useful attributes that tend to be strong complements. The law of property in effect encapsulates these lumpy packages, or modules, semi-transparently from other modules and the outside world generally. Thus, property defines things using an exclusion strategy of ‘keep off’ or ‘don’t touch’ and then enriches the system of domains of owner control with interfaces using governance strategies. These strategies zoom in on relations between neighbors in the case of land, and between owners (and their things) and other parties in the case of both land and personal property. 6

Concepts of Property

1.3

Importantly, taking the architectural view raises the overlooked question of why things could not be otherwise. Why not use governance rules all the time? Why does property seem to be related to the notion of a thing and to residual claims? Why is the right to exclude important but also easy to overstate as the be-all and end-all of property? I will show that an architectural theory of property based on information costs and the advantages of using modularity to manage complexity can help answer those questions in a unified fashion. At the same time, such a theory shows how property fits, with its thing-based baselines, into the larger picture of private law. …

I. What is a theory of property? What makes for a good theory of property is not different from what makes for a good theory of anything else. But the advent of the New Private Law is a good occasion for taking stock of how current property theories stack up as theories. I argue that the bundle of rights by itself is more of a description than a theory and that the more extreme versions of the bundle of rights fail to be a theory at all — in contrast to a modular theory of property, and to property as a thing in particular. The bundle-of-rights picture of property draws on social science and accordingly aspires to be a scientific theory of property. To be sure, other types of theorizing, based on a more interpretative methodology and seeking coherence as a main goal, are also compatible with the New Private Law. But in this Article I accept the social-scientific theoretical style of the bundle in order to show that an information-cost theory succeeds better on those terms. … Does the bundle meet these criteria for good theorizing? The bundle has at its core a basic ambiguity: it is both an analytical device and a family of theories of property that elevate that analytic device to a central place. As an analytical device, the bundle of rights theory harks back to Wesley Newcomb Hohfeld and before, in attempts to analyze legal relations into their smallest atoms. Hohfeld disliked ambiguity in terms like ‘right’ and thought that concepts like property were collections of more fundamental legal relations that were related to each other as correlates and opposites. Thus rights, privileges, powers, and immunities in one party corresponded to duties, no-rights, liabilities, and disabilities in the party at the other end of the relation. And the scheme was quite elegant in that rights were the opposite of no-rights, and privileges the opposite of duties; similarly the pairs power-disability and immunity-liability were also opposites. In an attempt to capture the in rem aspect of some relations — that a right, for example, could avail against others generally — Hohfeld treated those relations as collections of in personam relations: a ‘multital’ relation was a collection of many similar ‘unital’ relations, and a ‘paucital’ relation was the collection of few similar unital relations. As an analytical device, the bundle picture can be very useful. It provides a highly accurate description of who can do what to whom in a legal (and perhaps nonlegal) sense. It provides an interesting theoretical baseline: how would one describe the relation of a property owner to various others if one were writing on a blank slate and doing the description in a fully bottomup manner, relation by relation, party by party? In this, the Hohfeldian world is a little like the Coasean world of zero transaction costs — a useful theoretical construct. … The problem with the bundle of rights is that it is treated as a theory of how our world works rather than as an analytical device or as a theoretical baseline. In the realist era, the benefits of tinkering with property were expressed in bundle terms without a corresponding theory of the costs of that tinkering. Indeed, in the most tendentious versions of the picture, the traditional baselines of the law were mocked, and the idea was to dethrone them in order to remove them as barriers to enlightened social engineering. In this version of the bundle picture, Hohfeldian sticks and potentially others are posited to describe the relations holding between persons; the fact that the relations hold with respect to a thing is relatively unimportant or, in some versions, of no importance. ‘Property’ is simply a conclusory label we might attach to the collection. In its classic formulation, the bundle picture puts no particular constraints on the contents of bundles: 7

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they are totally malleable and should respond to policy concerns in a fairly direct fashion. These policy-motivated adjustments usually involve adding or subtracting sticks and reallocating them among concerned parties or to society. This version of the bundle explains everything and so explains nothing. But the bundle is nothing if not protean. In recent times, various commentators have argued that property is not fully captured by the bundle picture. Going beyond the bundle usually involves emphasizing exclusion or some robust notion of the right to use. It can be motivated by analytical jurisprudence, natural rights, or information-cost economics. The bundle theory can incorporate some of these perspectives. Consider, for example, the recent resurgence of interest in the numerus clausus; this principle that property forms come in a finite and closed menu can be added onto the bundle theory as a ‘menu’ of collections of sticks. Bundle theorists can accommodate this development. But they are being reactive in this regard: it is hard to say that the bundle picture would have led anyone to view the numerus clausus as important in the common law. In this article, I present a theory that aims higher. At the most basic level, the extreme bundle picture takes too little account of the costs of delineating rights. The stick-by-stick, party-byparty ‘complete’ method of delineation is a nonstarter. Delineation involves defining the object of property, specifying the legal interests in it, and providing notice to the relevant parties, including duty bearers and enforcers. If so, then we need a theory of starting points and shortcuts over the hypothetical complete but infeasible system. As I also argue, once we do take the costs of delineation — information costs in particular — into account, then the baselines of traditional property, including property as a right to a thing, become easier to understand and to justify. Relatedly, if property is more than a collection of sticks, then a theory of property must address how the features of property relate to each other. Many aspects of property are only fully describable at the level of the property system as a whole, and some of property’s desirable (and undesirable) effects emerge holistically. The right to exclude, the residual claim, and so on are not detachable sticks serving detachable purposes. They are integral — but not absolute — aspects of property that follow from its architecture. That architecture responds in turn to the problem of managing the complexity of interactions between private parties with respect to a variety of attributes of resources in a world of positive delineation costs. … There is a basic architecture of property, and many features of property follow from it. They can be tweaked, but they are not as detachable as the bundle view would have it. Property is a holistic system made up of interactive components, not a system in which anything can in principle relate to anything else. Further, property law provides for actual bundles of rights (or legal relations) that exhibit features relating to their completeness not captured as the sum of their parts. No reasonable version of the bundle view, thankfully, fully exploits unconstrained interactivity, and that is the point: the bundle-of-sticks picture does not explain the organization and structure of property, but seems to take it for granted. Property as a bundle of sticks could be a partial outlook, but is not a theory.

II. Things as modules The alternative to the bundle should not be a return to prerealism or to pure doctrinalism. Unreflective conceptualism or formalism is a nonstarter and is not what the New Private Law is about. Here, I present an alternative to the bundle picture that I call an architectural or modular theory of property. This theory responds to information costs — it conceives of property as a law of modular ‘things.’ …

B. The Modular Things of Property The modular theory is more explanatory than the bundle picture. It helps explain the structures we do not find, shows how property can be used to maximize option value, and demonstrates why innovation in property takes the institutional paths it does. 8

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Because it makes sense in modern property systems to delegate to owners a choice from a range of uses and because protection allows for stability, appropriability, facilitation of planning and investment, liberty, and autonomy, we typically start with an exclusion strategy — and that goes not just for private property but for common and public property as well. ‘Use’ can include non-consumptive uses relating to conservation. The exclusion strategy defines a chunk of the world — a thing — under the owner’s control, and much of the information about the thing’s uses, their interactions, and the user is irrelevant to the outside world. Duty bearers know not to enter Blackacre without permission or not to take cars, without needing to know what the owner is using the thing for, who the owner is, who else might have rights and other interests, and so on. But dividing the world into chunks is not enough: spillovers and scale problems call for more specific rules to deal with problems like odors and lateral support, and to facilitate co-ordination (for example, covenants, common interest communities, and trusts). These governance strategies focus more closely on narrower classes of use and sometimes make more specific reference to their purposes, and so they are more contextual. The exclusion-governance architecture manages complexity in a way totally uncaptured by the bundle picture, and importantly, the former is modular while the latter is not. The exclusion strategy defines what a thing is to begin with. A fundamental question is how to classify ‘things,’ and, hence, which aspects of ‘things’ are the most basic units of property law. Many important features of property follow from the semitransparent boundaries between things. Boundaries carve up the world into semiautonomous components — modules — that permit private law to manage highly complex interactions among private parties. Property clusters complementary attributes — land’s soil nutrients, moisture, building support, or parts of everyday objects like chairs — into the parcels of real estate or tangible and intangible objects of personal property. It then employs information-hiding and limited interfaces to manage complexity. For example, if a car is not mine, I do not need to know who owns it, whether it is subject to a security interest or lease, and so forth, in order to know not to take or damage it. When A sells the car to B, many features of A and B are irrelevant to each other, and most are irrelevant to in rem duty holders, who only need know not to steal the car. Many details about A and B are irrelevant to their successors in interest. In the case of negotiable property (cash being the extreme example), most information about predecessors in interest is irrelevant to the current holder: one can gain good title to cash even from a thief. Because we want money to be easy to evaluate and to plug into transactions, it is the most modular property of all. … The architecture of property emerges from the process of solving the problem of how to serve use interests in a roughly cost-effective way. In modern societies, the solution usually involves first the application of a use-neutral exclusion strategy, and then refinement through contracts, regulations, common law doctrine, and norms. Exclusion is at the core of this architecture because it is a default, a convenient starting point. Exclusion is not the most important or ‘core’ value because it is not a value at all. Thinking that exclusion is a value usually reflects the confusion of means and ends in property law: exclusion is a rough first cut — and only that — at serving the purposes of property. It is true that exclusion piggybacks on the everyday morality of ‘thou shalt not steal,’ whereas governance reflects a more refined Golden-Rule, ‘do unto others’ type of morality in more personal contexts. It may be the case that our morality itself is shaped to a certain extent by the ease with which it can be communicated and enforced in more impersonal settings. I leave that question for another day. But the point here is that the exclusion-governance architecture is compatible with a wide range of purposes for property. Some societies will move from exclusion to governance — that is, some systems of laws and norms will focus more on individuated uses of resources — more readily than others, and will do so for different reasons than others. At the base of the architectural approach is a distinction that the bundle theory — along with other theories — tends to obscure: the distinction between the interests we have in using things and the devices the law uses to protect those interests. Property serves purposes related to use by employing a variety of delineation strategies. Because delineation costs are greater 9

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than zero, which strategy one uses and when one uses it will be dictated in part by the costs of delineation — not just by the benefits that correspond to the use-based purposes of property.

Commentary 1.4  Smith notes that according to conventional wisdom, property exists when we ascribe that label to the cluster of entitlements or the bundle of rights that arise from a particular relationship incorporating rights of exclusion. This approach has been criticised by realists and post-realists, and Smith suggests that its utility is unclear. The bundle of rights theory may be useful as a descriptive foundation but at the ‘metalevel’, Smith suggests it is less effective because it explains ‘everything and nothing’. Smith argues that a broader architectural approach to the descriptive foundation of property would be preferable to one that focuses upon exclusion and governance strategies. This framework would acknowledge the fact that property confers interests in use and that rights of exclusion serve these ‘use’ interests. See also the discussion by T W Merrill, ‘Property as Modularity’ (2012) 125 Harvard Law Review Forum 151; H E Smith, ‘Exclusion versus Governance: Two Strategies for Delineating Property Rights’ (2002) 31 Journal of Legal Studies S453. In ‘The Concept of Property: Relations Through Objects of Social Wealth’ (2003) 53 University of Toronto Law Journal 325, David Lametti considers the importance of the ‘objects’ that exist within the property relationship. He argues that property cannot be effectively understood without also understanding the objects of social wealth to which the property relationship applies and the moral implications of conferring a property relationship over these objects: In my view, we cannot avoid the idea that property is about the relationship between persons and resources, even with less traditional objects of social wealth. By concentrating on what is unique about the relations and on the role of objects of property, whether tangible or intangible, as filters for the relationship, we put the emphasis where it ought to be. From there we can go on to discuss implications. As a result, I would define private property as follows: ‘Private property is a social institution that comprises a variety of contextual relationships among individuals through objects of social wealth and is meant to serve a variety of individual and collective purposes. It is characterised by allocating to individuals a measure of control over the use and alienation of, some degree of exclusivity in the enjoyment of, and some measure of obligation to and responsibilities for scarce and separable objects of social wealth.’

When defining private property, Lametti argues that it is important to emphasise the significance of the object as an item of social wealth. This allows us to remember that while the private property relationship ranges in form and content, serving a range of individual and collective purposes, its primary responsibility is to confer exclusivity and responsibility for particular objects of social wealth. This raises a strong connection between property and democracy because many of the rights that are dealt with in the property relationship require attention to be given to the norms, values and ways of life that society embraces. (See J W Singer, ‘Property and Democracy’ (2014) 63 Duke Law Journal 1287. Hence, the morality that underpins a property system must be clear and accessible for all members of the community. See also A Dorfman, ‘The Normativity of the Private Property Form’ (2012) 75 Modern Law Review 981. Understanding the nature of the object is an important aspect of the property relationship. In The Idea of Property in Law (Oxford University Press, Oxford, 1997, p 13), 10

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J Penner concluded that to fully appreciate the nature of in rem rights we need to discard the ‘idea that a right in rem is a simple relation between one person and an indefinite set of others’ and refocus on the relationship with the object itself. In ‘The “Bundle of Rights” Picture of Property’ (1996) 43 UCLA Review 711 at 719–720, Penner noted that property rights are usage rights and that the right of exclusion arises from the conferral of these usage rights. He stated: The right to property is a right of exclusion which is granted by the interest we have in the use of things … our interest in the use of things is social. We have an interest in dealing with things largely so that, as social creatures, we can engage others in the way we want to make use of them … Second, our interest in things that justifies a right to property is an interest in using things as such … On this formulation use justifies the right, while exclusion frames the practical essence of the right.

See also H E Smith, ‘Property and Property Rules’ (2004) 79 New York University Law Review 1710, where the author argues at 1772 that the inclusion of the right to exclude within the bundle of usage rights conferred upon an owner is a ‘fast and frugal heuristic that allows boundedly rational beings to make surprisingly accurate decisions in a low cost way’.

Property is a relationship 1.5  Legally, property refers to the relationship that an individual has with an object rather than the object itself. The property relationship differs from other forms of relationship that may arise with respect to the object. This is because the property relationship confers upon the holder rights to use and enjoy the object. These rights are exclusive and enforceable against the rest of the world. This gives the holder a legally enforced concentration of power and control over the object. The relational foundation of property gives it the capacity to evolve in accordance with the changing nature of society, shifting social values and the ever-expanding category of objects and resources capable of being propertised. Determining whether the relationship between a person and an object constitutes a property relationship will depend upon the character of the rights conferred. The status of property as a ‘human relationship’ was outlined by F Cohen, ‘Dialogue on Private Property’ (1954–55) 9 Rutgers Law Review 357, who notes at 373 that ‘Private property is a relationship among human beings such that the so-called owner can exclude others from certain activities and permit others to engage in those activities and in either case secure the assistance of the law in carrying out his decision’. 1.6  The scope and status of the property relationship and the rights it confers was examined by the High Court in Yanner v Eaton (1999) 166 ALR 258 in the context of considering the nature and enforceability of native title interests. The decision is extracted below.

  Yanner v Eaton  (1999) 166 ALR 258 Facts: In 1994, the appellant, a member of the Gunnamulla clan of the Gangalidda tribe of Aboriginal Australians, used a traditional form of harpoon to catch two juvenile estuarine crocodiles in Queensland. The appellant was charged before a magistrate with the offence of taking and keeping fauna without a permit under the Fauna Conservation Act 1974 (Qld). The magistrate found that the appellant’s clan had a connection with the land from which the 11

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crocodiles were taken, which connection had existed ‘before the common law came into being in the colony of Queensland in 1823 and … thereafter continued’; that it was a traditional custom of the clan to hunt juvenile crocodiles for food; and that the evidence suggested that the taking of juvenile rather than adult crocodiles had ‘tribal totemic significance and [was based on] spiritual belief’. The magistrate found the appellant not guilty and dismissed the charge. On the informant’s application for an order to review the magistrate’s decision, a majority of the Court of Appeal set aside the magistrate’s order and remitted the matter to the magistrates court for the matter to proceed according to law. By special leave, the appellant appealed to the High Court. Gleeson CJ, Gaudron, Kirby and Hayne JJ: The appellant contended that the magistrate was right to dismiss the charge because in taking the crocodiles the appellant was exercising or enjoying his native title rights and interests; these rights and interests were preserved by the Native Title Act. It followed (so the argument went) that the Fauna Act, to the extent to which it prohibited or restricted the taking of crocodiles in the exercise of those rights and interests for the purpose of satisfying personal, domestic or non-commercial communal needs, was invalidated by s 109 of the Constitution. The respondent contended that any native title right or interest to hunt crocodiles in Queensland which the appellant 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 Act which provided that: All fauna, save fauna taken or kept otherwise than in contravention of this Act during an open season with respect to that fauna, is the property of the Crown and under the control of the Fauna Authority. It followed, so the respondent submitted, that the Native Title Act provisions preserving native title rights and interests to hunt and fish had no relevant operation in this case, because the native title rights and interests upon which the appellant relied had been extinguished before the Native Title Act was enacted. Earlier forms of Queensland fauna legislation had provided expressly that those Acts (with some presently irrelevant exceptions) did not apply to ‘[a]ny aboriginal killing any native animal for his own food’. Unlike these earlier Acts, however, the Fauna Act did not deal expressly with Aboriginals taking native animals or birds for food. That being so, much of the argument in this court concerned what effect the Fauna Act’s vesting of ‘property’ in some fauna in the Crown had on the native title rights and interests asserted by the appellant.

The Fauna Act The meaning of s 7(1) can be identified only by construing it in the light of the whole Fauna Act. It is necessary, therefore, to refer to a number of other provisions, but before doing so it is as well to emphasise that s 7(1) did not make all fauna ‘the property of the Crown and under the control of the Fauna Authority’. What the subsection described as ‘fauna taken or kept otherwise than in contravention of this Act during an open season with respect to that fauna’ was excepted. The Fauna Authority was defined by s 5 as the minister for the time being administering the Fauna Act ‘and subject to the Minister’ the Director of National Parks and Wildlife appointed under the National Parks and Wildlife Act 1975 (Qld). ‘Fauna’ was defined by the Fauna Act (in effect) as any bird or mammal indigenous to Australia or declared by Order in Council to be fauna, and any animal or member of a species of animal declared by Order in Council to be fauna. ‘Fauna’ included the young, the egg, the carcass, skin or nest of the animal or member of species but did not include any processed products except those declared by Order in Council. ‘Bird’ and ‘mammal’ were defined respectively to mean a bird or mammal, ‘wild by nature whether native to a State or Territory of the Commonwealth, migratory or introduced, in captivity, bred in captivity or tamed’. Estuarine crocodiles were declared by Order in Council made on 29 August 1974 to be fauna for the purposes of the Act. 12

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The Fauna Act divided fauna into four classes: ‘permanently protected fauna’, ‘protected fauna’, ‘non-protected fauna’ and ‘prohibited fauna’. Fauna other than permanently protected fauna, non-protected fauna and prohibited fauna was defined as protected fauna for the purposes of the Act. Subject to declaration of an open season, protected fauna could lawfully be taken or kept only in certain limited circumstances: if it was orphaned, injured, sick or emaciated; or if it was causing or likely to cause damage or injury. In addition, a snake or estuarine crocodile might be killed if it had caused, was causing or was likely to cause injury to a person. Non-protected fauna might be taken at any time. An open season might be declared in respect of protected fauna and in that case permits could be issued permitting the taking of that fauna. Additionally, the Director of National Parks and Wildlife was empowered to issue permits to fauna dealers to buy, keep, sell or otherwise dispose of protected fauna during a close season. The terms of s 54(1)(a) prohibiting the taking or keeping of fauna without a licence are set out above. The apparent generality of that prohibition must be understood in the light of not only its reference to the holder of a licence, permit, certificate or other authority granted and issued under the Fauna Act, but also the further exemptions created by s 54(1)(b). That paragraph exempted (among other things) the keeping of protected fauna that was taken otherwise than in contravention of the Act during an open season and the taking of fauna at a time and place when and where it is non-protected fauna. The penalty for contravening s 54(1)(a) was a fine or imprisonment (or both) and the offender was liable ‘in any case to an additional penalty not exceeding twice the royalty on each fauna in respect of which the offence is committed’. The reference to royalty is significant. Section 67 of the Fauna Act provided: (1) Subject to subsection (4), royalty at the rates prescribed shall be payable to the Crown on prescribed fauna. (2) Notwithstanding this Act or any other Act or law, payment of royalty on fauna pursuant to this Act does not transfer property in that fauna from the Crown. (3) Rates of royalty may vary in respect of different species of fauna. (4) The regulations may exempt from the payment of royalty species of fauna specified therein in cases where that fauna is taken otherwise than in contravention of this Act. Fauna protection legislation in Queensland had contained generally similar royalty provisions for many years. They were introduced in 1924 to take the benefit of what was seen at the time to be a valuable and developing fur trade. The obligation to pay royalty under the Fauna Act was supported by several other provisions of that Act including s 69 which made it an offence to fail to pay royalty, s 70 which provided for recovery by summary proceeding under the Justices Act 1886 (Qld) or by action ‘as for a debt due to the Crown’, and s 71 which permitted a fauna officer to detain fauna in respect of which royalty payable was not paid. Section 71(2) provided that: Fauna so seized and detained shall, without further or other authority, be forfeited to Her Majesty, unless all royalty payable thereon is paid within one month of its seizure and detention. Similar provision was made by s 83 in respect of fauna, appliances or other things seized under the Act. Section 83(3) provided that: Notwithstanding this Act, the Minister may order that any fauna, appliance or other thing seized under this Act be forfeited to Her Majesty though proceedings have not been taken for, nor any person convicted of, an offence against this Act in respect thereof. No doubt ss 71(2) and 83(3) must be read in the light of s 84 which provided that: The provisions of this Act with respect to the seizure, detention or forfeiture of fauna shall not prejudice or affect in any way the rights of the Crown with respect to fauna that by virtue of section 7 is the property of the Crown, and those rights may be exercised at any time. 13

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What, then, is the meaning to be given to s 7(1) and its provision that some fauna is the property of the Crown and under the control of the Fauna Authority? Did it, as the respondent submitted, give rights to the Crown in respect of fauna that were inconsistent with the rights and interests upon which the appellant relied?

‘Property’ 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 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, 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?

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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: ‘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) 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 FCT: … 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. 15

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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, among 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 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 (eg, wild game) into res publicae and to justify a more stringent regulation of individual use of res communes (eg, 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 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). 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 respondent expressly disclaimed a contention that the enactment of legislation forbidding the taking or keeping of fauna except pursuant to licence would be sufficient to extinguish the rights and interests relied on by the appellant. This concession was rightly made and it follows, therefore, from what we have said about the meaning and effect of the Fauna Act (and, in particular, the vesting of property in some fauna in the Crown) that the Act did not extinguish those rights and interests. It is as well, however, to examine why the respondent’s concession was right. That examination must begin from a consideration of what is meant by native title rights and interests.

Native title rights and interests Section 223 of the Native Title Act provides (in part): (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: 16

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(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 (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. 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 ‘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 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 1975 (Cth) and the Native Title Act was consistent with the continued existence of native title rights and interests. (The Racial Discrimination Act 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, ‘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’. 17

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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. 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 information. For completeness it is as well to note two further matters. First, although the respondent did not rely on the earlier decision of this court in Walden v Hensler it must be recalled that the issues discussed in that case were radically different from those that arise in the present, not least because they arose before the passing of the Native Title Act. Secondly, a number of submissions were made in the course of argument that touched upon questions much broader than those that must be decided in this proceeding. It is neither necessary nor desirable to express any view about them when this case can be decided on the narrow question whether the Fauna Act should be given the construction for which the respondent and the Commonwealth contended. It should not be given that construction. The appeal should be allowed, the orders of the Court of Appeal of Queensland set aside and in lieu it should be ordered that the order nisi be discharged.

Commentary 1.7  The judgment of Gleeson CJ, Gaudron, Kirby and Hayne JJ in Yanner v Eaton highlights the relational character of property in the specific legislative context of the Fauna Conservation Act 1954 (Qld). Their Honours concluded that property, as it is referred to in the Act, is not a reference to the physical object but rather a reference to the degree of power that the property relationship confers. Hence, when the legislation conferred upon the Crown all of the property in the fauna, it did not intend to vest ownership of the fauna itself, but rather an aggregate of various rights of control, which included the right to establish a regulatory regime over the fauna but which did not include full beneficial or absolute ownership of the fauna. In reaching this conclusion, their Honours made reference to the conclusions of Professor Kevin Gray who stated that 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 18

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and resources …’. Professor Gray argued that the relational focus of property means that ultimately, references to property are illusory and that talk of property is ‘merely talk without substance’ because upon closer inspection, it is a concept that ‘vanishes into thin air’: Gray, ‘Property in Thin Air’ (1991) 50 Cambridge Law Journal 252 at 299. In Telstra Corporation Limited v The Commonwealth (2008) 234 CLR 10 at 44 the High Court observed that in many cases it may be helpful to speak of property as ‘a bundle of rights’ whereas at other times it may be more helpful to speak of property as ‘a legally endorsed concentration of power over things and resources’. The court concluded that ‘Seldom will it be useful to use the word “property” as referring only to the subject matter of that legally endorsed concentration of power’. See also White v DPP (2011) 243 CLR 478 at [10–11] and S Worthington, ‘The Disappearing Divide Between Property and Obligation: The Impact of Aligning Legal Analysis and Commercial Expectation’ (2007) 42 Texas International Law Journal 917 at  920, where the author notes that transferability and excludability define private property rights and therefore allow the holders of property rights to control allocation and access. These relationship aspects of private property are problematic when applied to fundamental natural resources because private control may result in a correlative diminution in public benefit. In Australia, where many natural resources, including water, minerals and hydro-carbons, are vested in the State, the private property relationship in land is qualified by state rights over interconnected natural resources. This qualification reflects the importance of protecting these public resources against private control allocation and access. As outlined by the Full Federal Court in Esposito v The Commonwealth of Australia [2015] FCAFC 160 at [54]–[55] per Allsop CJ, Flick and Perram JJ, where the court made two observations regarding the nature of land ownership: First, the proprietor of an estate in fee simple does not own the land itself. The land is held in radical title by the Crown; what the proprietor owns is the estate in fee simple which carries with it permanent rights of possession and so on. Secondly, the content of the bundle of rights constituting the fee simple is governed by common law, parts of which are nearly 800 years old. It is inherent in the nature of the common law that it is susceptible to variation by statute. Since the passage of the EPA Act the common law rights attaching to the fee simple in New South Wales have been varied extensively. Relevantly, in this case they have been varied by the operation of that Act and the Plan which has, at all material times, removed what would have been the appellants’ otherwise unfettered right to build on their land what they please. The consequence is that the rights actually owned by the appellants comprise: (a) the common law fee simple; but (b) diminished by the provisions of the EPA Act and the Plan.

This was further discussed by the High Court in Commissioner of State Revenue v Placer Dome Inc (2018) 93 ALJR 65 at [163] per Kiefel CJ, Bell, Nettle and Gordon JJ who stated: Property is not a monolithic notion of standard content and invariable intensity. Accordingly, to characterise something as a proprietary right … is not to say that it has all the indicia of other things called proprietary rights. Nor is it to say how far or against what sort of invasions the [right] shall be protected, because the protection given to property rights varies with the nature of the right. Statutory use of the term “property” correspondingly invokes a protean concept, the content of which is informed by the statutory context.2

2. See also Northern Territory v Griffiths [2019] HCA 7 at [67] per Kiefel CJ, Bell, Keane, Nettle and Gordon JJ. 19

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Australian Property Law

Property is a legal construct 1.8  Property can only exist where it is supported by a legal system that recognises it. There can be no property in the absence of a recognised enforcement regime. As noted by Finkelstein J in Wily v St George Partnership Banking (1999) 84 FCR 423 at 431, ‘From a lawyer’s perspective, the concept of property is inextricably interwoven with the content of legal rules and principles’. Similarly, J Bentham (Theory of Legislation, R Hildreth trans, Trübner & Co, London, 1864, p 111–13) concluded: ‘Property and Law are born together and die together. Before laws were made there was no property. Take away the laws, and property ceases’. The state that creates property can (by implication) limit its extent at will. Property rules determine when the community will recognise a person’s assertion of a right to use a particular resource. (C E Baker, ‘Property and its Relation to Liberty’ (1986) 134 University of Pennsylvania Law Review 741.) Native title rights are recognised in Australia because they have been accepted by the common law and this recognition has been reinforced within the statutory framework. Significantly, however, not all Indigenous cultural traditions are protected as property relationships because they are not derived from any connection with Crown sovereignty. In the words of the majority in Members of the Yorta Yorta Aboriginal Community v Victoria (2002) 77 ALJR 356 at [44]: The only rights or interests in relation to lands or waters, originating otherwise than in the new sovereign order, which will be recognised after the assertion of that new sovereignty are those that find their origin in pre-sovereignty law and custom.

Thus, the Australian legal system is prepared to recognise native title rights in land, but only where those rights have their origin in pre-sovereignty law and custom. The rationale underlying this is that pre-sovereignty rights may encumber the underlying radical title of the Crown. Any post-sovereignty rights would, by parity of reasoning, be destroyed because following colonisation, the Crown became the absolute owner of all land and therefore was only bound by those rights that pre-existed its claim: see further discussion on this in Chapters 5 and 8. This reasoning illustrates the operational status property rights. They  only exist where they are supported by a legal and social framework that acknowledges and supports their existence.

Fragmentation of property 1.9  The relational nature of property means that it is possible for different forms of property relationships to be enforced against a single object or resource. Property relationships are capable of assuming a variety of different forms. Consider the following example as an illustration: 1. Rhea owns a fee simple in land; 2. Rhea leases the fee simple to Amanda for three years; 3. Rhea creates a will over the land for the benefit of a sole beneficiary, Tom; 4. Rhea enters into a mortgage with SaraBank giving the bank a security in the land; 5. Matt helps Rhea repay the mortgage instalments. In this situation five different forms of property relationship may potentially arise: Rhea holds a common law fee simple reversion in the land after the lease has been granted (discussed in Chapter 5). Amanda holds a three-year fixed-term lease interest (discussed 20

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in Chapter 7). Tom will acquire beneficial entitlement in the land pursuant to the will that, once probate is administered, is enforceable (discussed in Chapter 9). Matt may claim a constructive trust in the land based upon his contribution to the mortgage repayments (discussed in Chapter 9). If upheld, Rhea may hold a proportionate share of the property on trust for Matt. SaraBank holds a mortgage over the land that is known as a security interest (discussed in Chapter 15). The mortgage also creates a loan contract between Rhea and the bank that, if breached, will give SaraBank the right to sell the property so that the debt may be discharged. The above example highlights very clearly how a range of different forms of property interest may apply to a single object. Each of these property relationships is different in form but may nevertheless coexist because of their temporal or jurisdictional differences. The above example highlights the potential for multiple fragmentation of property rights over a single land parcel. Property relationships may be fragmented according to a number of factors: • the jurisdiction in which the interest is enforced; • the subject matter to which the interest relates: that is, whether the subject matter is tangible or intangible because this will affect the nature of the rights; • the duration of time for which the relationship exists: that is, whether the interest endures for a definite or indefinite period; • the culture in which the right is enforced: that is, whether it is enforceable within a tenure system or an indigenous system; • the moral atmosphere in which the right is claimed: this is relevant to new and developing rights; • whether the interest is created by statute.

Distinction Between Proprietary and Contractual Rights Nature of the distinction 1.10  There is an important difference between a property right and a contractual right.

A property right is enforceable against the rest of the world (in rem). A contractual right is only enforceable against the other parties to a contract (in personam). The enforceability of in rem rights is supported by a range of property remedies that entitle the holder to preclude anyone other than those with a better title from interfering with that right. By contrast, in  personam rights are only enforceable against other parties privy to an enforceable contract and are therefore supported by a range of personal remedies. While there is a fundamental difference in terms of enforceability between a property and a contract right, it is important to remember that a contract right is itself a resource that is capable of forming the subject matter of a property relationship. Thus, while enforcement of a contractual right is in personam, ownership of a contractual right is in rem because the right to contractual performance may be characterised in property terms. See, for example, the discussion by Stephen A Smith, Contract Theory 72 (2004), (arguing that the promissory basis of contract explains why a promise can be regarded as owning a right to the promisor’s performance of the promised act). Common examples of contracts that may be owned — the contracts being categorised as ‘intangible personal property’ or ‘choses in action’ — include: shares, life insurance policies and bank accounts. For a full outline of the different categories of rights and things capable of being ‘owned’ see the chart at the end of the chapter. 21

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Lease or licence? 1.11  In some circumstances a right that begins as a contractual right may be converted into a property interest. This is particularly apparent in the equity jurisdiction where the Courts of Chancery focus upon the intention underlying the transaction and the unfairness of denying the existence of a property interest. For example, a contract that is entered into for the benefit of a third party may be construed as a constructive trust where it would be unfair to deny an intention to confer a beneficial interest upon a third party. Further, a contract that confers possession may be interpreted as creating a lease because in substance, the possession that is conferred is exclusive in nature. In this respect, it is important to understand the difference between a pure contractual relationship and a contractual relationship that may be interpreted as conferring a property relationship. 1.12  This distinction is well illustrated through the cases that have dealt with contractual licences and leases. The decision of the High Court in Cowell v Rosehill Racecourse Co Ltd is extracted below.

  Cowell v Rosehill Racecourse Co Ltd  (1937) 56 CLR 605 Facts: The appellant bought a ticket for the races at the Rosehill Racecourse. Subsequently, the plaintiff was asked to leave the races but the plaintiff refused to go. The appellant was subsequently physically removed by the racecourse officials. The appellant sued Rosehill Racecourse for damages for assault. Rosehill Racecourse defended the claim arguing that the plaintiff was trespassing on their land and refused to leave and so they forced him to leave using no more force than was necessary. In reply, the appellant argued that Rosehill Racecourse was conducting a race meeting and that upon purchasing his entry, the appellant acquired an irrevocable licence to remain and watch the spectacle. 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, 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. The Full Court of the Supreme Court of New South Wales in Naylor’s Case refused to apply Hurst’s Case 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, 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 shows that where a licence is revoked the actual revocation may (if there be a contract) 22

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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 à 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 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 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) 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. In that case Buckley LJ 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 word ‘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. 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 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, 23

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contractual rights and obligations. In Wells v Kingston-upon-Hull, 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; JC Williamson Ltd v Lukey and Mulholland; Commissioner of Stamp Duties (NSW) v Yeend — 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 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 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 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). 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. Buckley LJ applies to the facts of Hurst’s Case the statement of Parker  J in James Jones & Sons Ltd v Tankerville (Earl) that an injunction restraining the revocation of a licence ‘merely prevents’ the defendant ‘from breaking his contract, and protects a right in equity which but for the absence of a seal would be a right at law, and since the Judicature Act it may well be doubted whether the absence of a seal in such a case can be relied on in any court.’ This statement was made with respect to a proprietary right (a profit à prendre) and it is a begging of the question to apply it to a case in which the matter in dispute is whether the alleged interest is such that it can be an interest in land, whether created by deed or not. Frogley v Earl of Lovelace, which is relied upon in Hurst’s Case, was a case of an agreement for a profit à prendre, an incorporeal hereditament. Thus the second ground for the majority judgments in Hurst’s Case cannot, in my opinion, be supported. I regard the dissenting judgment of Phillimore LJ as a convincing statement of the true position both at law and in equity. In New South Wales the Judicature Act is not in force, but the Common Law Procedure Act 1899, sec 97, provides that ‘the plaintiff may, in answer to any plea, reply facts avoiding such plea upon equitable grounds.’ In this case the plaintiff relies upon an equitable replication containing an allegation that the defendant for consideration agreed not to revoke the licence to enter and remain upon the racecourse. Whether this replication is good or not depends upon whether such an agreement, if proved, prevents in equity the revocation of the licence in such a sense as to make entirely ineffectual anything purporting to be a revocation of the licence. Except in Hurst’s Case there is no authority for the proposition that such a licence cannot be revoked at law in cases where no proprietary interest has been granted. The question is whether there is any principle of equity which prevents the effectual revocation of such a licence even though the revocation be a breach of contract. No authority apart from Hurst’s Case has been cited to show that this is a principle of equity. Whether the replication is good or bad depends, not upon rules of pleading, but upon whether the facts alleged constitute a good answer in equity to the plea raised by the defendant that the plaintiff was a trespasser. If his licence was effectually revoked, though wrongfully, he was a trespasser, and the removal of him from the racecourse without the use of undue force did not constitute an assault. The plaintiff can escape from the position of being a trespasser only by showing that the licence was not effectually revoked. The only argument 24

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to support this proposition is to be found in the contention that the defendant cannot be heard to rely upon his own wrongful act in revoking the licence which he had agreed not to revoke. If the principle to be applied is a principle that the defendant cannot rely upon his own breach of contract, then that principle would surely have been mentioned in the reports of decided cases. No reference, however, has been made to any cases decided upon the basis of this principle. It is common ground that an equitable replication under the Common Law Procedure Act 1899, sec 97, can be sustained only where the facts pleaded are such that a court of equity would upon the basis of those facts have granted an absolute unconditional and perpetual injunction (See Stephen’s Principles of Pleading, 7th ed (1866), at p 210; Gee v Smart). It is clear that equity would never have decreed the specific performance of a contract to provide an entertainment. Equity would never have granted an unconditional injunction restraining the proprietor of a place of entertainment from excluding from that place a person who had bought a ticket of admission. Any injunction granted would necessarily have been subject at least to the condition that the plaintiff coming into equity should behave himself with due propriety during the entertainment. But it is urged that equity would have granted an unconditional and perpetual injunction restraining the defendant from setting up an unconscientious plea, namely, a plea based upon his own wrongful withdrawal of a licence. This argument is suggested in a note to the article of Sir John Miles criticising Hurst’s Case in the Law Quarterly Review, vol 31, p 217. In the first place there is no authority to support the contention in such a case as the present case. The real rule is that an equitable defence to a common law action is admissible under the Common Law Procedure Act only ‘where it discloses facts which would entitle the party pleading it to an absolute and unconditional injunction in a court of equity against the judgment which the opposite party might otherwise have obtained at law’ (Stephen’s Principles of Pleading, 7th ed (1866), at  p  210). If the suggested principle were sound, it is remarkable that it was never advanced as a practical means of avoiding the law as laid down in Wood v Leadbitter. Secondly, the contention appears to me to be based upon an idea that equity will always do whatever it can to bring about the specific performance of any contract according to its terms. The argument rests upon a vague assumption that equity would, by limiting the pleading in a common law action of a party who had broken a contract, seek to prevent him from merely paying damages for his breach if an injunction against his pleading would prevent him from gaining some ‘unconscientious’ advantage by his breach. There is no such general equitable principle (see per Pollock CB, Hyde v Graham). In cases of wrongful dismissal, for example, the only remedy for the breach of contract is to be found in damages. Even though the employer admits the wrongful dismissal, he cannot be ordered to re-employ his former servant. If the servant under an ordinary contract of service sues for wages in respect of a period after dismissal, the employer would never have been restrained from pleading that he had dismissed him, though wrongfully. In such cases — and there are many others, for example, sale of goods and commercial contracts generally — equity left the parties to their remedies at law. The equitable remedies of injunction and specific performance were never applied merely or generally on grounds of unconscientiousness. They would be used to protect proprietary rights, to enforce negative agreements, and, in special cases only, to enforce affirmative agreements (Doherty v Allman). These agreements never included contracts to provide an entertainment in a particular place in return for payment. Thus I am unable to accept the contention that equity would at any time have restrained the defendant from pleading the replication in question. This aspect of the case should be considered in relation to established principles of equity and not in relation to the arguments ab inconvenienti which are so prominent in the majority judgments in Hurst’s Case. There are arguments from inconvenience on both sides. The right to see an entertainment is doubtless a valuable right. It is a right for which people are prepared to pay and which they esteem. There are other rights, the exercise of which involves entry upon land, which are still more valuable from a practical point of view. Consider, for example, the case of a servant 25

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who is employed for a term to do work upon certain premises. He is wrongfully dismissed. He is then excluded from the premises. His right to earn a living in accordance with a lawful contract is a right at least as important as a right to witness an entertainment. The principle approved in Hurst’s Case would entitle him to go into and remain upon the premises, although he had been dismissed from his employment, and to obtain damages for assault if he were forcibly removed. Similarly an ordinary building contract enables the building contractor to go upon land for the purpose of conducting building operations so that he can perform his contract and earn his expected profit. This right continues to exist even if the building owner wrongfully repudiates the contract. But the only remedy of the building contractor for an infringement of the right is in damages. If he goes on the land against the will of the owner he may be treated as a trespasser. The adoption of the principle involved in Hurst’s Case would alter these established rules. Consider further a case where a building devoted to entertainment becomes overcrowded by persons who have bought tickets. This may happen without any default on the part of the person in control of the building. If, however, the legal position is as stated in Hurst’s Case, 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, 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. I agree with what Jordan CJ says as to ‘common sense and practical convenience’ in Naylor’s Case. Hurst’s Case has been criticised again and again by learned writers, although it has necessarily been accepted as an authority in Great Britain by subordinate courts (See references given in Hanbury’s Modern Equity (1935), p 118). The question, therefore, as it presents itself to me, is whether this court should hold itself bound by Hurst’s Case for the simple and single reason that it is a decision of the Court of Appeal in England. In matters affecting title to property, where rights have been paid for and where persons have acted upon the faith of established decisions, it is very desirable that those decisions should be followed, if possible, even though a court not strictly bound by a particular decision should be of opinion that it was wrong. So also in cases affecting mercantile practice. See Sexton v Horton where it was also said by Knox CJ and Starke J that unless a decision of the Court of Appeal was manifestly wrong it should be followed. In Smith v Australian Woollen Mills Ltd a decision of the Court of Appeal was not followed because it was held to be inconsistent with established principles. I am of opinion, for the reasons which I have stated, that Hurst’s Case is manifestly wrong, and that it is not possible to extract from it any general principle which is consistent 26

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with well-recognised principles of law. Hard cases may be put on both sides. One cannot but sympathise with the position of a person who is asked to leave a place of entertainment without just cause. On the other hand, there are grave inconveniences involved in the adoption of Hurst’s Case as sound law, and it may be added that, if the law is not correctly stated in Hurst’s Case, such a person may successfully avoid indignity by recognising the law and going quietly. The decision in Hurst’s Case has never been considered by the Privy Council or the House of Lords, and in view of my clear opinion that it is a wrong decision I think that it is proper so to hold and to refuse to follow it in this court. In my opinion Naylor’s Case was rightly decided, and the Full Court was right in this case in upholding the demurrer. The appeal should be dismissed. Evatt J (in dissent): This is an appeal from the Supreme Court of New South Wales. The question has arisen upon a demurrer by the defendant to a replication of the plaintiff. The plaintiff in his declaration alleged an assault upon him by the defendant. The defendant, in its third plea, justified the assault, alleging that, at the material time, the plaintiff was trespassing upon certain land of which the defendant was possessed, whereupon molliter manus imposuit. The plaintiff’s replication (purporting to be on equitable grounds under sec 97(1) of the Common Law Procedure Act 1899 (NSW) made the following allegations, which must here be taken as established:— (i) The defendant was conducting a race meeting upon the land of which it was possessed. (ii) The defendant agreed with the plaintiff (a) that, on payment of four shillings by the plaintiff, it would allow the plaintiff to enter the land, and (b) that it would allow the plaintiff to remain on the land for the purpose of attending the race meeting and viewing the races, and (c) that, until the end of the race meeting, the defendant would not revoke the plaintiff’s licence to remain on the land. (iii) Performance by the plaintiff of the contract upon his part, payment being followed by entry on the land pursuant to the agreement. (iv) Wrongful breach of the agreement by the defendant’s purporting to revoke the licence during the period of the race meeting. The questions raised are, first, whether, in the circumstances I have summarised above, according to the law of England and of every State in Australia where law and equity are administered concurrently, the forcible ejection of the plaintiff by the defendant amounts to an actionable assault; and, second, whether in the State of New South Wales the plaintiff is deprived of his remedy for damages for assault by reason of the fact that, although equitable principles must be taken cognisance of by the Supreme Court of New South Wales on its common law side, this is subject to the requirements of sec 97 of the Common Law Procedure Act (which allows equitable replications), and those requirements have not been observed. Of course, the first of these two questions is of supreme importance, and the argument of the respondent to this court was a direct challenge to the correctness of the decision of the Court of Appeal in the case of Hurst v Picture Theatres Ltd, which was pronounced in July 1914, nearly twenty-three years ago. No doubt that decision, or part of the reasoning for the decision, was subjected to criticism at the hands of some commentators. One writer asserted that Hurst’s Case was based on a ‘spurious’ equity, but the supposedly spurious coin has become part of the accepted currency of the law. For, though at first a little grudgingly perhaps, its accuracy has long since been recognised by the leading text writers, and works like Smith’s Leading Cases and Pollock on Torts and Salmond on Torts have long declared the law of England in strict accordance with it. I shall refrain from lengthy quotation, but one observation of Professor P H Winfield should be referred to:— Two minor improvements in the law of trespass may be mentioned. Until the present century, a man might possibly be liable for trespass in two instances which any layman 27

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would have considered unjust: first, if he forcibly re-entered his land in pursuance of a right to do so and with no more force than was necessary; and secondly, if he refused to comply with the arbitrary request of the occupier to leave premises (eg a theatre) for admission to which he had paid. The Court of Appeal has rid the law of these hereditates damnosae’: Law Quarterly Review, vol 51, p 257. Why should this court not follow Hurst’s Case? So far as I can ascertain, it has always been regarded as declaring the law of England by the Courts of the Dominions and of Ireland before the establishment of the Irish Free State. For instance, in Heller v Niagara Racing Association, Hodgins JA, of the Ontario Appellate Division said:— It appears to be settled law in England that a licence granted by the sale of a ticket includes a contract not to revoke the licence arbitrarily, which contract entitles the purchaser to stay and witness the whole performance, provided he behaves properly and complies with the rules of the management, and that this licence and agreement, if given for value, is an enforceable right (Hurst v Picture Theatres Ltd). There is no reason why this court should not adopt what seems to be a most reasonable view, having regard to modern conditions. Later, Ferguson JA said that Hurst’s Case had been followed in numerous cases in England and in this country (See Cox v Coulson; British Actors Film Co Ltd v Glover; Said v Butt; Hubbs  v Black). In the case of Sexton v Horton, decided by this court ten years ago, it was stated by Knox CJ and Starke J that unless some manifest error is apparent in a decision of the Court of Appeal, this court will render the most abiding service to the community if it accepts that court’s decisions, particularly in relation to such subjects as the law of property, the law of contracts, and the mercantile law, as a correct statement of the law of England until some superior authority has spoken. If this court declines to follow Hurst’s Case on the present occasion the legal situation created will be most confusing. Hurst’s Case has been regarded as a binding authority by those courts in the several States of Australia where equity and law are administered concurrently. In future, they will be placed in the dilemma of deciding between a decision of this Court, and a longestablished decision of the Court of Appeal. If they follow the decision of this court, an appeal to the Judicial Committee may be brought direct from any of the Supreme Courts of the various States. In England, moreover, Hurst’s Case would certainly be followed, only the House of Lords being at liberty to overrule it. Sec 74 of the Commonwealth Constitution was devised to preclude or restrict appeals to the Judicial Committee in constitutional cases of Australian concern only. But the prerogative to allow an appeal by special leave was left remaining, so that there might be no contradictory ruling of Empire courts as to the general principles of the common law or of equity. I feel strongly that it is a mistake on the part of this court to proceed to an independent review of the correctness of Hurst’s Case, and, with all respect, I think the Supreme Court of New South Wales should not have taken liberty to re-examine that decision as it did very recently in Naylor’s Case. As a result of that action, it is Naylor’s Case which is really under review on the present appeal. But, if Hurst’s Case is to be reviewed, I am unable to agree that it was ‘manifestly erroneous,’ to use the expression of this court in Sexton v Horton. In his judgment, Buckley LJ emphasised that the patron of the entertainment had expressly bargained for ‘the right … to attend a performance from its beginning to its end’. That being so, it was a very inadequate legal description of the relationship between the parties to say simply that the patron was a licensee upon the theatre proprietor’s ground; it was an essential feature of the relationship that, during the currency of the performance, the occupier of the land was bound to refrain from exercising his legal rights as occupier for the purpose of ejecting the patron from the place of entertainment. And it is to be noted that, in the present case, the pleadings specifically allege that it was a definite part of the contract between the parties that the defendant should not exercise its legal power or 28

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right to revoke the plaintiff’s licence to remain on the racecourse throughout the period of the race meeting. But, before proceeding to examine certain aspects of the decision in Hurst’s Case, it is convenient to dispose at once of the second part of the present appeal, and determine whether the Common Law Procedure Act, although it allows equitable pleas and replications, does not enable the Supreme Court on its common law side to give effect to Hurst’s Case. I am clearly of opinion that the New South Wales statute can be applied so that, if Hurst’s Case is to be regarded as good law in England, the plaintiff would be entitled to judgment on the present demurrer. That opinion is, I gather, shared by other members of this court. There can be no question that Hurst’s Case decided that, under circumstances closely corresponding to those admitted to exist in the present case, the person forcibly removed from the place of entertainment became entitled to recover damages for assault. In other words, by virtue of the Court of Appeal’s application, concurrently, of the principles of common law and of equity, the plaintiff succeeded in an action at law. In New South Wales, sec 97(1) of the Common Law Procedure Act entitled the present plaintiff to answer the defendant’s plea by alleging facts ‘avoiding such plea upon equitable grounds.’ Similarly, under sec 95(1) of the Act, a defendant at law who would have become entitled to obtain equitable relief against a judgment at common law is given a statutory right to plead the facts showing that he has a right to obtain equitable relief against the enforcement of the common law judgment and to plead such facts at law by way of equitable defence. It is true that, in England, between the passing of the Common Law Procedure Act in 1854 and the introduction of the Judicature system some twenty years later, a rule was established in accordance with which equitable pleas and replications were allowed by the courts of common law only where, on the facts there pleaded, a court of equity would have decreed an absolute, unconditional and perpetual injunction (Bullen and Leake’s Precedents of Pleading, 3rd ed (1868), p 568). In the case of Wood v Copper Miners’ Co, Jervis CJ suggested (in the year 1856) that the rule as to ‘perpetual, unqualified and continued injunction’ was not necessarily applicable to every case of an equitable pleading. But the general rule was applied until the passing of the Judicature Act, and it has always been recognised in New South Wales in administering the equitable pleading provisions of the Common Law Procedure Act. Of course, the reason for the rule lay in the practical necessities of the case, the common law courts possessing no machinery for doing more than pronouncing judgment either for the plaintiff or for the defendant on specific issues. But, as Ferguson J pointed out of equitable pleas in Rance v Kensett, ‘where the issue raised can be effectively dealt with by such a judgment, there is no reason why the plea should not be pleaded.’ The present defendant’s argument is that the facts admitted by the demurrer do not enable the plaintiff to recover damages for assault, because if, at the time of the plaintiff’s ejection from the racecourse, he had applied to the Supreme Court in equity to restrain the revocation of his licence, the Supreme Court would not have granted him an injunction which was ‘absolute, unconditional and perpetual.’ This is the gist of the Supreme Court’s decision in Naylor’s Case. The argument is that, under the contract between the parties, there was an implied obligation upon the plaintiff to behave himself properly during the progress of the race meeting; therefore an injunction restraining the revocation of the licence would have been subject to the condition that the plaintiff should behave himself properly during the race meeting. In my opinion this method of argument quite misunderstands the purpose of secs 95 and 97 of the Common Law Procedure Act. Those sections look to the situation as it exists when the proceedings at law are being taken. If at that time the Supreme Court in equity would give relief (a) to a defendant at law against the enforcement of a common law judgment which was being sought by the plaintiff at law in respect of a good common law claim, or (b) to a plaintiff at law against a defendant at law who was setting up a plea contrary to the equities then existing between the parties, then the defendant or plaintiff in the common law court was entitled, by the statute, to allege and prove before the court of common law the facts which would have justified 29

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the Supreme Court in equity in interposing its jurisdiction to restrain the defendant or plaintiff in the common law action from enforcing mere legal rights. In other words, the ‘absolute, perpetual and unconditional injunction’ to which the established rule refers is an injunction restraining the bringing of a claim or the setting up of a defence contrary to equitable principles, not restraining some act as at some earlier point of time. Stephen points out that an equitable pleading should disclose facts entitling the party pleading to an absolute and unconditional injunction ‘against the judgment which the other party might otherwise have obtained at law’ (Principles of Pleading, 6th ed (1860), p 197; italics are mine). It is clear that the relevant time is the time when the common law action is proceeding. No doubt, in determining the present existence of an equity to relief against the inequitable use of the common law courts, the court of equity would necessarily have to pay regard to the antecedent transaction between the parties which was entered into prior to the commencement of the action at law. But, none the less, the Supreme Court on its common law side, once seized of the issues raised by equitable pleadings, has to look at the matter from the point of view which the Supreme Court in equity would take if it was hearing the case simultaneously with the common law action, and was placed in possession of all the facts pleaded and proved at common law. If we apply the principle just elaborated to the present case, it is plain that the argument suggesting that any injunction granted would be conditional upon the plaintiff’s behaving himself properly during the race meeting, merely confuses the issue. The relevant time to define the attitude of a court of equity is the time of the proceedings for assault, ie, here and now. The facts material to the question of intervention by a court of equity have all been pleaded, and they are now before us. It must be assumed that, throughout the race meeting, the plaintiff was not guilty of any such improper behaviour or conduct as would have justified the defendant in rescinding the contract between the parties. And the question is whether, by the operation of equitable principles, the equitable replication pleaded avoids the plea. It does avoid the plea if, on the facts, a court of equity should restrain the defendant from pleading that the plaintiff was a trespasser at a time when, according to Hurst’s Case, in the eyes of a court of equity he was not a trespasser but the holder of an irrevocable licence to remain on the property. Assuming Hurst’s Case to be good law, it seems equitable that a court of equity should restrain the defendant at law from pleading that, by effectively revoking what he could not in equity revoke, and by deliberately repudiating his negative undertaking not to exercise his legal right to revoke, he became entitled to treat the plaintiff as a trespasser. Such an injunction, if granted at all, would be, not a conditional, qualified or temporary injunction, but an absolute, perpetual and unconditional injunction, restraining the defendant at law from setting up an obviously inequitable defence (Cf Professor Geldart’s note, Law Quarterly Review, vol 31, p 219, note (i)). Such an injunction would not only be perpetual, absolute and unconditional according to its terms, but it would leave the present plaintiff in the position at law established by Hurst’s Case, viz, the position of being successful in his action for damages for assault, for the only defence relied on would be avoided. As an illustration of the fact that no outstanding equities remain between the parties as at the time of the common law action, Hurst’s Case itself is conclusive. There the judgment was for the plaintiff for the damages caused by an unjustified assault. Nothing else was ordered to be done except that the defendant pay such damages. Further, even if the court had to consider the question as to the character of the injunction as at the time of the original revocation of the licence, the injunction ordered would still, I suggest, be ‘absolute, perpetual and unconditional.’ It would have addressed itself to the contract between the parties and restrained the defendant from ‘revoking the licence in breach of the contract.’ It is nothing to the point that the defendant could have lawfully revoked the licence or rescinded the contract on and by reason of the plaintiff’s breach of his own obligation to behave himself properly. For such revocation or rescission would not be ‘in breach of the contract,’ but would be permissible under the contract. So far as I know, it is not the practice of the equity court, when granting an injunction to restrain a particular breach of a contract containing a 30

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series of mutual promises and forbearances, to make the grant of the injunction conditional upon the continued performance by the plaintiff of his contractual obligations or to so express its order. For instance, when the court grants an injunction based upon the lessor’s covenant for quiet enjoyment, it is not necessary to state that the injunction is only to operate so long as the plaintiff, the lessee, continues to pay rent and otherwise perform the covenants on his part. As Lord St Leonards said in relation to covenants as between landlord and tenant, With respect to the negative covenants, if the tenant, for example, has stipulated not to cut or lop timber, or any other given act of forbearance, the court does not ask how many of the affirmative covenants on either side remain to be performed under the lease, but acts at once by giving effect to the negative covenant, specifically executing it by prohibiting the commission of acts which have been stipulated not to be done (Lumley v Wagner). Therefore, I think it is plain that despite the continued separation of the common law and equitable jurisdictions of the Supreme Court of New South Wales, the introduction of equitable principles into the former jurisdiction by the Common Law Procedure Act enables the present plaintiff to succeed in his action at law. The plaintiff in Hurst’s Case was able to succeed by virtue of equitable principles according to which the defendant’s attempt to set up the fact of trespass on land was defeated. But the question remains, was Hurst’s Case 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. And certainly the judgment of Dodderidge J in Webb v Paternoster (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). The main part of the reasoning in Wood v Leadbitter was based on the well-known judgment of Vaughan CJ in Thomas v Sorrell, 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 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). 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), 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 purpose 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 31

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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, because a recognised proprietary right, ie, a ‘grant’ was under consideration in James Jones & Sons Ltd v Tankerville (Earl). 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 contract. No doubt, Buckley LJ dwelt upon that part of the judgment in Wood v Leadbitter 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. 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 p 12). He also regarded the contract as creating ‘an irrevocable right to remain until the conclusion of the performance’ (at p 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 p 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 p 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 did not need to invoke the principle of Walsh v Lonsdale, 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. 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 32

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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 lies in the continuous insistence upon discovering a proprietary right as a condition of equitable intervention. Sir J C 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, 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.

Commentary 1.13 In Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605, the High Court held

that a contractual licence to enter a racecourse was not irrevocable and could not be construed as a property interest. If the contract had been construed as being irrevocable, it would have borne a greater similarity to a property right, because the availability of the remedy of specific performance would have, in effect, prevented the licensee from being removed from the premises. However, the fact that a contract may be enforced so that it has a similar effect to a property right does not mean that the contract is transformed into a property right. On the facts of Cowell v Rosehill Racecourse, the plaintiff sued the defendant for damages for assault after being removed from a racecourse that he had paid to enter. The defendant argued that the plaintiff was trespassing on the defendant’s land and the defendant had used no more force than was necessary to remove him. The plaintiff said that the defendant was conducting a race meeting and he had paid four shillings to enter and view the races and that the contractual licence was not revocable and so the defendant was in breach by ejecting him from the land. In reaching its determination, the Australian High Court referred to the doctrine in Wood v Leadbitter (1845) 13 M&W 838; 153 ER 351 where it was held that where a man creates a proprietary right in another and gives that other a licence to go upon 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. The grantee owns the property to which the licence is incident and is unaffected by any purported revocation of the licence. The court also referred to the conclusions of the majority in Hurst v Picture Theatres Ltd (1915) 1 KB 1 where it was held that a right to see a spectacle constituted an interest that could be granted; therefore, a licence to go into a theatre or a racecourse, to see a play or to witness races, was, when given for value, irrevocable. The High Court in Cowell ultimately rejected the conclusions of the Hurst decision to the extent that 33

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it ignored the distinction between a proprietary and a contractual right. Latham CJ held that a right to see a spectacle cannot, in the ordinary sense of legal language, be regarded as a proprietary interest. His Honour held that a distinction had to be made between the creation of a proprietary interest in land by a contract conferring possession or enjoyment of the land, and the creation of a contractual right to use the land pursuant to which the owner of the land retained possession and rights in that land. The opportunity to witness 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 the plaintiff ’s presence at the place where the licence, while unrevoked, authorised the plaintiff to enter and remain. Therefore the plaintiff was unable to recover damages in tort for forcible exclusion. The court further noted that a contract entitling a patron to admission to a public amusement does not confer any equitable title upon the holder entitling them to deny any subsequent revocation of that contract of admission. No right of a proprietary nature was created by the contract. As stated by Starke J at 618: The plaintiff had a licence given for value, coupled with an agreement not to revoke it. That was an enforceable right, and it was a breach of contract to revoke the licence. The replication in the present case expressly alleges that for a certain consideration the defendant ‘promised the plaintiff that it would not during the period of the race meeting and before the conclusion thereof revoke the said licence’. On demurrer, that allegation must be accepted as a fact, however improbable it may be as a matter of proof. It is, of course, true that a court of equity had jurisdiction to restrain the violation of stipulations in contracts. Normally, it so restrained the breach of purely negative stipulations, but exercised a wide discretion in the case of affirmative stipulations (Doherty v Allman). But rights in property and contractual stipulations must not be confused. In Hurst’s Case the plaintiff did not establish any right at law or in equity in any ascertainable property, but at best the breach of a contractual obligation. Assuming that a court of equity had jurisdiction to restrain and would by injunction have restrained such a breach — and cases may be put even of rights ‘to hear and see performances’, for instance, a contract for a box or a seat during a season of opera, in which equity might so act — still, the contract would not create a licence coupled with a grant or interest in any ascertainable property, which is the relevant consideration. The question is not whether a court of equity would grant an injunction for a breach of the contract, but whether an action of trespass is maintainable. Further, as Ashburner (Principles of Equity, 2nd ed (1933), p 19) observes, citing Cooper v Chitty, ‘there is no case in the books in which a court of common law held that an action could be maintained for trespass on account of some act of the defendant which was not a trespass at law at the time when it was committed and only became so ex post facto if the effect of a decree of specific performance were related back’.

The distinction between a lease and a licence represents the classic dichotomy between property and non-property; or, where the licence is coupled with a contract, between property and contract. A lease is an estate in land whereas a licence, ‘properly passeth no thing nor alters or transfers property in any thing, but only makes an action lawful, without which it would have been unlawful’: Thomas v Sorrell (1693) Vaugh 330 at 351 per Vaughan CJ. The fact that a licence may be coupled with a contract does not mean that it becomes proprietary, and this is so even where the contract contains a provision making the licence irrevocable. The availability of injunctive relief enforcing a negative stipulation within a contract is not automatic and its availability will not change the enduring contractual or permissory status of a licence. According to Australian cases, a contractual licence may be similar to a proprietary interest; however, depending upon the nature of the contract, this ‘similarity’ does not mean that it amounts to a property interest. As noted 34

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by Dixon J in Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 with respect to a contractual licence to enter and witness the races: … 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.

See also Hinkley v Star City Pty Ltd [2011] NSWSC 1389 at [135] where Ward J noted that ‘an owner (or occupier) of a public venue such as a racecourse (or casino), not having a statutory power or some form of governmental or administrative control, does not have an obligation to afford natural justice when deciding to exclude a person from that venue, even though it may be in breach of a contractual obligation in so doing’. English cases have generally followed the same principles with the exception of the English Court of Appeal in Errington v Errington and Woods [1952] 1 KB 290, where Lord Denning suggested that the availability of equitable remedies to enforce contractual licences may give them ‘a force and validity of their own’. His Honour suggested that in assessing whether a transaction was a licence or a lease: Broadly speaking, we have to see whether it is a personal privilege given to a person (in which case it is a licence), or whether it grants an interest in land (in which case it is a tenancy). At one time it used to be thought that exclusive possession was a decisive factor. But that is not so. It depends on broader considerations altogether. Primarily on whether it is personal in its nature or not.

This decision has not been endorsed by subsequent English cases that have consistently rejected the characterisation of a contractual licence as anything other than a purely in personam right. Indeed, the House of Lords has held that the existence of exclusive possession is the primary indication of a lease and an estate in land and in its absence, a licence should never be characterised as a proprietary estate. In Street v Mountford [1985] AC 809, Lord Templeman expressly rejected the conclusions of Errington v Errington and Woods [1952] 1 KB 290, stating at 820: … in my opinion in order to ascertain the nature and quality of the occupancy and to see whether the occupier has or has not a stake in the room or only permission for himself personally to occupy, the court must decide whether upon its true construction the agreement confers on the occupier exclusive possession. 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 wholly unidentifiable.

This was subsequently confirmed in Cameron Ltd v Rolls Royce Pty Ltd [2007] EWHC 546 (Ch) at 18–22 and Watts v Stewart [2016] EWCA Civ 1247 at [35]–[39] It should also be remembered, as outlined by Lord Neuberger in Berrisford v Mexfield Housing Co-Operative Ltd (2012) 1 AC 955 at [63], that the fact that the parties may have thought they were creating a lease but not done so, is no reason for not holding that they have, in fact, agreed to create a contractual licence.

Overview of the distinction between property and contract 1.14  In examining the distinction between proprietary and contractual interests the

following points are relevant: • property is in rem whereas contract is in personam; • property confers different rights to contract. These rights may overlap but the foundation of all in rem proprietary interests is the right to exclude; 35

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• some contracts may commence as in personam rights; however, because of their character, come to be treated as proprietary interests. A lease contract, where a lessor confers exclusive possession upon a lessee, will create a lease estate; • a lease should be distinguished from a licence. A licence is merely permission to enter and cannot constitute a property interest although it may be coupled with a contract. In Cowell the majority held that because the contractual licence conferred nothing more than contractual rights the only remedy was that of damages. In dissent Evatt J argued that in appropriate cases an injunction could be awarded to restrain actions in breach of contract. The availability of such relief should not be regarded as transforming a contractual right into a property right; • property can describe many different relationships between a person and an object or resource and the existence of a contract does not mean that the relationship can never be regarded as proprietary. It is possible for a relationship to confer both contractual and proprietary rights.

Rationales for ‘private’ property 1.15  Western property interests are defined by their private status; owners have the

capacity to exclude the rest of the world. This characteristic has come to be accepted as the primary definitional feature of the property ‘stack’ of rights. In the words of Penner, ‘The “Bundle of Rights” Picture of Property’ (1996) 43 UCLA Law Review 711 at 742: The right to property is the right to determine the use or disposition of an alienable thing in so far as that can be achieved or aided by others excluding themselves from it, and includes the right to abandon it, to share it, to license it to others (either exclusively or not), and to give it to others in its entirety.

The notion of excludability incorporates a range of powers including: control and use of the property; a right to transfer or sell the property; the right to any benefit flowing from the property (apart from Crown reservations); and a general right to exclude others from the property. Excludability is not, however, an absolute concept. It does not allow the holder to use the property in a manner that interferes with the private property rights of surrounding owners and it does not entitle the holder to use the property in a manner that interferes with public property, health or safety rights. The institution of private property has been rationalised in Western society in a number of different ways. It provides great benefits in its promotion of individual liberty, personal space and human dignity. The ‘parcelisation of land is a relatively low-transaction-cost method of inducing people to “do the right thing” with the earth’s surface’: R C Ellickson, ‘Property in Land’ (1993) 102 Yale Law Journal 1315 at 1327. Private property confers rights that ‘preserve the owners position as the exclusive agenda setter for the owned thing’: L Katz, ‘Exclusion and Exclusivity in Property Law’ (2008) 58 University of Toronto Law Journal 275. Some of the individual and social advantages of private property may be summarised as follows: • private property protects privacy; • private property rewards labour: it is a fair exchange for money/labour; • private property promotes security: society grants ‘exclusive possession’ in return for compliance with social conditions; it is a social construct; 36

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• private property has personal and economic incentives: it promotes economic and individual happiness; • private property promotes personal liberty because it provides individuals with a ‘sphere of self-assertion’: M R Cohen, ‘Property and Sovereignty’ (1927) 13 Cornell Law Quarterly 8. Counterbalanced against these advantages is the awareness that private property rights have had a dramatic effect upon the social, economic and environmental landscape of the  world. Excludability has become synonymous with social and economic power. An owner acquires the capacity to control and exclude, which is concerning if there are moral issues associated with the imposition of such rights or, if the object or resource is important to human flourishing or where the imposition of such rights generates social and economic inequity. Private ownership can facilitate social and economic inequality and exploitation as well as breaches in human and environmental rights. This tension was well articulated by M R Cohen, ‘Property and Sovereignty’ (1927) 13 Cornell Law Quarterly 8, who argues that the capacity of private property to detrimentally impact human life means that it is crucial to implement a proper balance between private ownership and state regulation: 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 determination 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.

In this section we briefly examine some of the different philosophical perspectives, which both defend and critique the institution of private property.

Classical liberalism: natural rights and the social contract 1.16  John Locke famously argued that humans were, originally, born into a state of nature

and in this state they were rational, tolerant and happy, and naturally enjoyed universal, ‘state of nature’ rights of life, liberty and property. Locke felt that humans were by nature ‘free, equal and independent’ and natural law meant ‘no one ought to harm another in his life, health, liberty or possessions’. Natural law protected the right to property that individuals naturally accrued through their labour. These ‘primitive’ rights were subsequently, according to the theorists, incorporated into the social framework via an underlying social contract. When individuals gave up their natural power to the State, the State in return was expected to protect and uphold the natural rights of that individual. Thus, the right of property may be justified on the grounds of mutual benefit. As Locke stated, ‘The reason why men enter into society is the preservation of their property’: Second Treatise on Civil Government, Prometheus Books, New York, 1986, p 222. There are, however, difficulties with the natural rights rationale for private property. The natural rights theorists justified private property on the grounds of a fictional exchange. Civil order is not necessarily defined by the existence of property and individuals do not necessarily ‘deserve’ to have their private property protected purely on the basis of an 37

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implied benefit. Natural rights and the social contract justify private property on the basis of constructed laws that are not naturally occurring. As Montesquieu noted, natural rights theorists assume that ‘all virtues and all vices depend on the establishment of laws made by men’: The Spirit of the Laws, Cambridge University Press, Cambridge, 1989, A Cohler, B Miller and H Stone (eds), pp 701–2.

Utilitarianism 1.17  Utilitarianism focuses upon the greatest good for humanity. In its application to private property, utilitarianists, following the idea that actions should be chosen according to whether they maximise expected utility, suggest that private property is justifiable because it promotes individual happiness. Thus, the inherent benefit underlying private property lay in the fact that it encouraged individual and social wellbeing. Hegel argued that a human being cannot live a proper life without coming to a full consciousness and appreciation of itself as a person sharing a society. This self-appreciation occurred through an interaction with the material world and the acquisition of rights to control and possess the material world is integral to an individual’s self-recognition and identity. The perspectives of utilitarianists have endured and it is accepted that private property is closely associated with individual happiness, dignity and self-realisation. However, utilitarianism does not fully embrace the social impact of private property and the need to ensure that individual benefit is not gained at the expense of broader social and community needs. See also G S Alexander, ‘The Social-Obligation Norm in American Property Law’ (2009) 94 Cornell Law Review 745; and E R Claeys, ‘Virtue and Rights in American Property Law’ (2009) 94 Cornell Law Review 889, where the authors discuss the moral core of property relationships and their connectedness to social worth. S R Foster and D Bonilla in ‘The Social Function of Property: A Comparative Perspective’ (2012) 80 Fordham Law Review  1003 at 1011 discuss the notion that the classic liberal conception of private ownership is regulated by social obligations. The authors state that ‘Property’s social function, and the owner’s obligation to provide certain benefits to society, work as an internal constraint on private property rights. As such, a society’s shared values and moral commitments exist, perhaps uncomfortably, alongside the owner’s right to exclude. The core of property then ideally reflects the plurality of values that we as a society believe property should serve, and it is up to the legal system to negotiate them in defining the contours of private property.’ See also G S Alexander, ‘The Complex Core of Property’ (2009) 90 Cornell Law Review 1063 at 1066; G S Alexander, ‘The Social Obligation Norm in American Property Law’ (2009) 94 Cornell Law Review 745.

Socialism perspectives 1.18  By the mid-nineteenth century, the industrial revolution had transformed England

and had commenced in France. Within this environment, a new ideology, broadly described as socialism, was emerging. Socialism explored the relationship between private property and broader economic and social justice concerns. The fundamental principle underpinning socialism is the notion that private property is an individualistic pursuit that does not provide greater benefit for the broader society at large. In his examination of private property, Proudhon concluded that ‘property is theft’ (What is Property? (1840). This edition was translated from the French by Benjamin R Tucker. The Dover edition, first published in 1970, is an unabridged and unaltered republication of the English translation originally published by Humboldt Publishing Company c. 1890) and essentially argued that justice could only exist where individuals experienced

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equality of conditions. He suggested that private ownership of natural resources should be extinguished and property should belong to those who laboured to create it. Karl Marx re-examined the capitalist system of production. He argued that its foundation is based in exploitation because all value comes from labour. Capitalists own the means of production and therefore control the workers. The wages received by the workers do not equate to the real value of the object produced and the capitalists receive surplus value from the workers, enabling them to accumulate profit and wealth. This, in turn, meant that the capitalists dominated society and accumulated property. Hence, private property is an institution that benefits the capitalist class and according to Marx, it is only where the means of production are owned collectively rather than exclusively by a dominant class, that the benefits could be maximised to the community as a whole. Hence, private property was regarded by Marx and Engels as an extension of a capitalist framework and, in the interests of social justice, an institution that should be abolished. The legal framework that upheld private property was perceived as an instrument of class oppression benefiting the ruling class through control of the proletariat. Private property was therefore described as ‘a system of coercion designed to protect bourgeois ownership of the means of production’: N Barry, An Introduction to Modern Political Theory, Macmillan, London, 1989, p 53.

Modernist: legal positivism 1.19  Positivism is a way of looking at the world from a ‘natural sciences’ perspective. It is

founded upon the idea that there is a pre-existing order or reality and postulates a way of thinking about what the law is rather than what the law ought to be if broader moral and policy issues had been taken into account. Jeremy Bentham, said to be the father of legal positivism, developed a theory known as ‘expository jurisprudence’, whereby he argued that the morals and rights behind laws were irrelevant. All that was required was that the laws be found and enforced because they represented the will of the existing political sovereign. John Austin further developed this theory, arguing that every law is a command and every command has a correlative duty. Positivism has become one of the dominant approaches to the examination of law since the eighteenth century. It was recently defined as ‘that which is formally enacted or made by human institutions of state as binding prescription within a particular society, in distinction from, for example, the law of god, the laws of nature or scientific law’: H McCoubrey, The Development of Naturalist Legal Theory, Routledge, London, 1987 at 452. Legal positivism accepts private property not as a naturally occurring right, but rather as a right conferred by a higher authority, whether that authority be a government or court. From a positivist perspective, private property rights exist because they have been created by the State. Positivists do not adopt a broader, normative inquiry as to whether private property is an acceptable institution. In the words of Austin: ‘The existence of law is one thing; its merit and demerit another. Whether it be or be not is one enquiry; whether it be or be not conformable to an assumed standard, is a different enquiry’: R Campbell (ed), Lectures on Jurisprudence, 4th ed, Thoemmes Press Reprint, Bristol, 2002, Vol 1, p 157. Positivism accepts that private property exists as an inherent part of our legal framework and while the concept of property may, at times, vary according to the dictates of governments and courts, the fundamental validity of the formal legal framework endures. As Hart stated: ‘So long as the laws which are valid by the system’s tests of validity are obeyed by the bulk of the population this surely is all the evidence we need in order to 39

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establish that a given legal system exists’: ‘Definition and Theory in Jurisprudence’ (1954) 70 LQR 37 at 114; see also Hart, ‘Are There Any Natural Rights?’ in Waldron J (ed), Theories of Rights, Oxford University Press, Oxford, 1995.

Contemporary perspectives 1.20  Contemporary analysis of private property has focused upon broader social,

economic, and environmental concerns connected to the enforcement of private property frameworks. Recognition and protection of private property has become an important and fundamental characteristic of a capitalist market economy. Demestz has argued that the emergence of new property rights takes place in response to ‘new benefit-cost possibilities as resource values change’. According to this thesis, property rights become valuable when the social framework in which they are recognised develops to such an extent that the benefit of ownership exceeds the cost of acquiring it. Further, individual holdings reduce the transaction cost of the negotiation process because it reduces the number of people who need to negotiate: H Demestz, ‘Towards a Theory of Property Rights’ (1967) 57 American Economic Review Papers and Procedures 347. See also T W Merrill, ‘The Demestz Thesis and the Evolution of Property Rights’ (2002) 31 Journal of Legal Studies 331. As the Peruvian economist, Hernando de Soto has argued, private property promotes economic growth, providing a range of benefits including increased fungibility, better documentation of property ownership, and consequently, higher availability of credit and loans, greater protection against exploitation, and an increased sense of economic independence and networking. Developing countries have been largely unable to achieve the benefits associated with private property because the absence of property rights means that people are forced to rely upon non-uniform, extra-legal customary rules with no record system and no recognition at law. De Soto there argued that giving formal title deeds to the land would give the poor the means of raising finance for investment. The economic importance of recognising property rights by means of formal deeds is that this increases certainty and thereby incentivises investments in the existing resources. Property that is not formally recognised by means of records and titles is left outside the financial market and this inhibits the ability of the holder to access capital. Property rights, de Soto argues, are ‘human rights’ and the promotion of individual economic benefit can, in turn, assist in the protection of fundamental human rights. De Soto states: Property rights are human rights. They protect an external sphere of freedom of human beings as such and of their free associations. A working property system is an indispensable vehicle of ethical, economic and political progress. Especially small businesses, women and fragile groups such as refugees can claim the protection of property rights as human rights: Realizing Property Rights, H de Soto and F Cheneval, Rüffer and Rub, Zurich, 2006, p 1.

Other commentators have argued that the increasingly abstract nature of the social compact has created an ownership regime whereby holders are progressively more estranged from social and community responsibilities. Within such a context, the unconditional nature of private property has undermined broader social, economic, and environmental goals. As noted by C B Macpherson in A Political Theory of Property from Democratic Theory: Essays in Retrieval, Clarendon Press, Oxford, 1973, pp 123–35: From the sixteenth and seventeenth centuries on, more and more of the land resources in settled countries was becoming private property, and private property was becoming an individual right unlimited in amount, unconditional on the performance of social functions and freely 40

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transferable, as it substantially remains to the present day. Modern private property is indeed subject to certain limits on the uses to which one can put it: the law commonly forbids using one’s land or building to create a nuisance, using any of one’s goods to endanger lives, and so on. But the modern right, in comparison with the feudal right which preceded it, may well be called an absolute right in two senses: it is a right to dispose of, or alienate, as well as to use; and it is a right which is not conditional on the owner’s performance of any social function.

A further concern lies in the issues associated with the implementation and enforcement of private property regimes within developing economies, which can be fraught with social and cultural difficulties. The attempt to introduce private property models within complex pluralist, third world states, requires careful reform. In ‘Evolution and Chaos in Property Rights Systems: The Third World Tragedy of Contested Access’ (2006) 115 Yale Law Journal 996 at 1002, D Fitzpatrick makes the following comments: Put in more economic terms, because Demestz and Coase focus on property rights as a mechanism for internalising externalities, they overlook the possibility that the allocation process will create its own externalities in the form of social conflict. This has two important implications for economic models of property rights. First, in circumstances of legal, normative, and institutional pluralism, property rights will not necessarily emerge when resource users calculate that the gains from internalisation outweigh the costs. In dynamic social environments, the costs of conflict may be exacerbated rather than internalised by the distributional consequences of emergent property rights. Second, the normative implication that Third World states should establish secure property rights is impractical when the process of establishing and securing those rights itself creates new forms of uncertainty and conflict. In this case, instead of simplistic exhortations to establish secure property rights, Third World states need detailed proposals for property rights reform that address the issues of law and norms …

In contemporary Western societies, property rights have evolved substantially. The shift from small organised groups to large, developed nation states has encouraged a simultaneous shift in the evolution of property rights. Today, different forms of property rights have emerged and continue to do so on the basis of social rather than natural engineering. In  Demestzian terms, property has become worthwhile because higher resource values have made property rights valuable and, with an expanding population, this trend will continue. This trend is largely facilitated through legislative intervention. The tendency of the State to generate new property interests via legislative articulation is increasing and this has created new opportunities for the social and economic assessment of property creation. There is also an increase in what G S Alexander has described as ‘governance property’; that is, ‘multiple’ ownership property that requires the implementation of both internal and external governance norms. See: G S Alexander, ‘Governance Property’ (2012) 160 University of Pennsylvania Law Review 1853 at 1856–58. If we conceive of property as a varying bundle of sticks rather than a pre-existing and fixed package, courts and legislatures may add or remove sticks to achieve a variety of social and economic goals. This is crucial for the survival of property because it acknowledges the centrality of property for social stability and civic virtue. It recognises that property provides a basis for imposing social obligations for the good of the community. Under this civic conception of property, the core purpose of property is not to satisfy individual preferences or to increase wealth, but rather to fulfil a normative vision of how society and its institutions should operate. For a further discussion on this see the interesting discussion by the following: A de Robilant, ‘Property: A Bundle of Sticks or a Tree?’ (2013) 66 Vanderbilt Law Review 869; J R Nash, ‘Property Frames’ (2009) 87 Washington University Law Review 449; ‘When Government Intrudes: Regulating Individual Behaviours that Harm the Environment’ K F Kuh, (2012) 61 Duke Law Journal 1111; L L Butler, ‘The Resilience of Property’ (2013) 55 Arizona Law Review 847. 41

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This brief overview highlights some of the different philosophies, rationalisations and theories underlying the institution of private property as it has evolved over time. These perspectives remind us that private property, whether a natural or positive right, and whether socially or economically justifiable, is necessarily a product of the prevailing legal, cultural and social attitudes.

1.21  Revision Questions 1. What is the definitive characteristic of private property? 2. David Lametti in ‘The Concept of Property: Relations Through Objects of Social Wealth’ (2003) 53 University of Toronto Law Journal 325 at 353 stated: In analytic terms, we know that objects of property are central to the private property relationship because it is the in rem character of property rights that serves to differentiate property rights from in personam rights. Moreover, we have seen that rights and duties in the property relationship change with respect to particular objects of wealth; thus, in order to understand the relationship between individuals in property regimes, it makes analytic sense to place the object itself at the core of this relationship. In this extract, is the author suggesting that the object of the property relationship is more important than the relationship itself? Why does it make ‘analytic sense’ to place the object at the core of the property relationship?

3. What are some of the rationales underlying the ‘private’ and ‘excludable’ nature of property and can they be sustained in contemporary society? 4. In what way may a contractual licence be likened to a property interest? 5. What is the relevance of equitable remedies to the enforcement of contractual licences and how do they align the contractual licence with a property interest? 6. What are some of the difficulties associated with a ‘positivist’ approach to the articulation of private property rights? 7. Demestz in his famous article, ‘Towards a Theory of Property Rights’ (1967) 57 American Economic Review Papers and Procedures 347, focuses upon a cost/benefit analysis of private property. What do you think he means? 8. In Yanner v Eaton (1999) 166 ALR 258, the High Court referred to Professor K Grey’s conclusions that ‘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’. Discuss this comment and its relevance to the facts of that decision.

Property and the environment 1.22  The creation and enforcement of property can have a fundamental effect upon the natural world that surrounds us. The unrestrained use of natural resources is ecologically damaging and may dramatically impact upon our quality of life. In light of this, environmental planning regulation has become increasingly important, particularly in a world where anthropogenic climate change has resulted in a profound imperative to reduce greenhouse gas emissions. Over the past few decades, the attitude of the public 42

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towards environmental norms has altered dramatically. Greater attention has been given towards the protection of wetlands, wildlife habitat, coastal areas and historic structures, and to climate change mitigation policies. This, in turn, has generated a shift in attitude towards the property rights and obligations of landowners, and there is increasing focus upon the ethics and responsibilities associated with environmental protection and land preservation. Arguably, property rights and the ‘bundle of rights’ metaphor is maladaptive to the social and ecological dynamics of complex and evolving natural environments. It has been argued that the ‘object regarding and context-considering’ concept of property as a ‘web of interests’ rather than a bundle of rights metaphor is better equipped to respond to change within complex and interconnected ecological environments. The ‘web of property’ idea was raised by C  A  Arnold, ‘The Reconstitution of Property: Property as a Web of Interests’ (2002) 26 Harvard Environmental Law Review 281 at 356–60. It is important to understand the interconnection between property and nature so that property rights can be constructed in a manner that is consistent with emergent understanding about changing ecological systems. As outlined by K W Hirokawa, ‘Three Stories About Nature: Property, The Environment and Ecosystem Services’ (2011) 62 Mercer Law Review 541 at 542: Property is the process of dividing the world into bits that may be subjected to private control. As such, how we understand the world, its characteristics, and its processes is very important. If, for instance, we think of water as an infinite resource that serves growth needs, we might not be concerned with how that resource is acquired, used, or even wasted. On the other hand, if we believe that water is a scarce and essential resource, we may find that an allocation scheme bears the weight of accomplishing many social and economic objectives. Nature matters because our understanding of the world matters to the manner in which we construct rights to property. Of course, at some point, the converse also obtains: how we conceive of property influences what we enjoy, fear, and want in the world. A new understanding of nature may be resisted precisely because it undermines the persuasiveness of the way we protect possessions as property. Property and nature are codependent, but their connection is an indeterminate one. When we view both nature and property as social constructions, it becomes apparent that the terms ‘property,’ ‘environment,’ and the more recent description of nature based on ‘ecosystem services’ can often be used interchangeably. At least, it should not be surprising that these terms share some common ground, as they share the same referent(s). Yet advocates from different perspectives certainly do not agree on the meaning of these terms or the values that they invoke, and it is to these divergent perspectives that this Article is addressed. These terms, whether considered synonymous or divergent, reflect on the contingency of an inevitable and ongoing clash of values that results when we allow rights to vest in natural things.

1.23  Consider the following extracts that examines the relationship between private

property rights, environmental law, resource management and climate change. Grinlinton concludes that the unrestrained use of natural resources is both economically and ecologically damaging and that private property rights must be increasingly subjugated to public interest concerns for broader community and social benefit.

  Property Rights and the Environment  David Grinlinton (1996) 4 Australian Property Law Journal 41 Throughout the industrial revolution and well into the present century, western nations were intent on creating wealth and exploiting environmental resources, whether they be clean air or water, undisturbed scenery, forests, or minerals. A belief in utilitarianism was matched by a love of private property, for private property conferred not only social status, but certain safeguards 43

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against environmental abuse. So, during the past hundred years, jurists and legislators have tended to favour use over preservation, private property rights over common property rights, and the generation of wealth and productivity over amenity, largely because society as a whole wanted it that way.

The movement from private right to public interest A broader ‘land ethic’ began to emerge as it was recognised that the ‘free enterprise’ system had no immediate economic interest in disposing of the waste products, protecting ecological viability, or furthering social equity objectives. The unrestrained use of natural resources and cumulative degeneration of air and water ‘sinks’ was not only ecologically damaging, but also imposed long-term economic costs on social structures dependent upon a sustainable resource base. Such problems could not be left to individual remedy or belated legislative intervention in response to direct threats to an obvious economic or social interest. Environmentalism is not only compatible, it is essential to private property rights. … Access to, and the use of, common property resources has also become increasingly controlled by the state. In affirming the legitimacy of a regulation imposing a fee to control the taking of abalone from the sea, the High Court of Australia had this to say: The right of commercial exploitation of a public resource for personal profit has become a privilege confined to those who hold commercial licences. This privilege can be compared to a profit à prendre. In truth, however, it is an entitlement of a new kind created as part of a system for preserving a limited public natural resource in a society which is coming to recognise that, in so far as such resources are concerned, to fail to protect may destroy and to preserve the right of everyone to take what he or she will may eventually deprive that right of all content. This ascendancy of public control of natural resources at the expense of private property rights is, to some extent, a reflection of changing social attitudes and responses to the environment and diminishing resources, and a wider public perception of their finite nature. In practical terms; this decline has been manifested by abridgement of rights of use traditionally associated with ‘ownership’ of real property rather than as a result of a fundamental re-orientation of concepts of property ownership. Some writers have recognised the dynamic nature of private property rights in the development of natural resources: When any resource is in abundant supply, the laws relating to its allocation and use are likely to be simple; as the resource becomes scarce, society’s stake greatly increases, and the laws tend to become complex. Property concepts need not be identical for all objects. In the case of real property, however, we need a revised land ethic to guide our decisions in an uncertain future. Other writers have similarly recognised the peril of maintaining the primacy of private property rights in contemporary legal jurisprudence and have asserted the need for a re-orientation of fundamental concepts of such ownership and use. Lippmann saw no theoretical barrier to such a re-orientation of western legal thought: … rights of property … Are a creation of the laws of the state. And since the laws can be altered there are no absolute rights to property. There are legal rights to use and to enjoy and to dispose of property … The ultimate title [to land] does not lie in the owner. The title is in ‘mankind’. Similarly, Bryant argues the need to re-establish the social responsibility element in property ownership: In respect of land, we hold that there is very good reason for radical reappraisal and very particular reasons for holding to the view that property rights in land exist only so far as they are delegated to individuals by law, implicitly or explicitly. Such rights may 44

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endure to the extent that the individuals concerned are able and willing to exercise them according to the public interest, but ought to be withdrawn where they are not so willing or capable. It has even been advocated that individual land ownership per se is an outdated concept, and that land should be treated as a ‘common property resource’ in much the same way as air and water, but with ‘ownership’ vesting in rights of use rather than in an estate in the land itself. Indeed, such a fundamental change in legal concepts of common law property ownership may be a more accurate reflection of present reality with the restrictions on individual use of land by planning and environmental protection laws, and the progressive re-assertion of ownership of certain minerals and control of other property rights by the state. Arguments for reform aside, private property ownership continues to underpin western economic and social organisation, and is likely to do so for the foreseeable future. However, the justification for the traditional dominance of private property rights continues to be challenged as those rights become increasingly subjugated to the public interest.

  Climate Change and the Evolution of Property Rights  Holly Dorenus (2011) 1 UC Irvine Law Review 1091 Human activity has radically altered the global climate system over the last two hundred years. Greenhouse gases resulting from the combustion of fossil fuels have accumulated in the atmosphere at an accelerating rate; the atmospheric concentration of C02, the primary greenhouse gas, is now more than a third higher than it was before the industrial revolution. …The physical and biotic changes resulting from greenhouse gas accumulation will disrupt the expectations of property owners in a variety of ways, undermining the security of their investments and putting pressure on current definitions and distributions of property rights. Two examples, vulnerable coastal lands and freshwater, illustrate this phenomenon. Each is already the center of property rights disputes; global climate change will inevitably heighten those tensions…. Absolute sea level rise varies with local ocean temperatures, currents and winds, and other local variables. Sea level rise relative to land also varies locally depending upon whether the land is uplifting (from, for example, loss of the weight of glaciers as they melt) or subsiding (for example, as a result of groundwater withdrawals). Small island states and the coasts of Africa and Asia are especially vulnerable to sea level rise because their populations are heavily concentrated in coastal zones and they lack the financial resources to adapt. But sea level rise will also affect developed nations, including the United States. Roughly one-third of Americans live in counties immediately bordering the nation’s ocean coasts. Sea level rises can break barrier islands in pieces or cause them to move rapidly shoreward. It increases coastal erosion and damage from storm surges. Synergistically, warmer ocean waters are likely to increase the intensity of hurricanes and tropical storms, making them even more damaging. Homes, roads, rail lines, power lines, pipelines, and other built infrastructure are all at risk, as are coastal ecosystems. Higher atmospheric temperatures mean that a higher proportion of precipitation will fall as rain, rather than snow. Together, the shift from winter snow to rain and warmer spring temperatures will push peak flows and spring runoff earlier in the year. Such changes will be problematic for both water management and aquatic ecosystems. Climate change will also alter the total amount of precipitation. In general, the northern and eastern portions of the country are expected to get wetter, while the already arid Southwest gets drier. On a worldwide basis, scientists have high confidence that climate change will substantially alter hydrology: for every one degree Celsius increase in global mean temperature, we should expect five to 45

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ten percent changes in precipitation and streamflow in many areas. In addition to changing average precipitation levels, climate change is expected to increase precipitation variability. Both drought and flood will become more common. The examples of coastal lands and fresh waters illustrate the extent to which climate change is a legal as well as practical problem. It is a legal problem because law inhibits society’s ability to respond to the changes climate disruption brings. In each context, individuated property rights butt up against common rights that cannot be effectively privatized. In each, adapting to climate change will be more difficult, and will reach a different endpoint, if current property holders enjoy rigid rights which cannot be adjusted without consent or compensation. In each context, even without climate change, the extent of those individuated rights is already contested and property law, which strives for stability, struggles to cope with what are already dynamic systems. Climate change further emphasizes the dynamic nature of land and water, raises the economic and emotional stakes, and increases the likelihood of conflict. Coastal development affects both public and private interests. Coastal lands lie at the intersection of public and private lands; in most coastal states, the state owns lands below the mean high-water mark, or at least the public holds an easement to access those lands for purposes of navigation, fishing, and recreation.’ Private landowners who have developed coastal lands often want to armor their shoreline with seawalls and similar structures to halt erosion before … it threatens their structures. But such armoring can destroy the public beach seaward of the wall and block access to the remaining public beach. Armoring can also cause erosion on adjacent lands, which may be privately owned…. In the absence of armoring, the mean high water mark, vegetation, or whatever line of demarcation the states regard as separating public and private rights, can move both coastward and seaward as sand accumulates (accretes) and erodes away. When hurricanes erode the beach, that line can move landward to the extent that shorefront homes are suddenly located on the state’s dry sand, at which point the state may demand their removal. …The coasts have always been dynamic; shorelines have moved landward and seaward with storms and sediment deposits. In order to deal with that dynamism, the common law long ago developed doctrines to readjust property rights as the physical reality shifted. Although the reasoning behind the doctrines may have been lost or misconstrued over time and application of the rule has shifted over time, the principle is well established at common law that if the shore moves gradually (by erosion or accretion) the title boundary moves with it, but if it moves rapidly (by avulsion) title does not shift. The accretion/avulsion rules are dynamic in the sense that they allow property boundaries to change under certain circumstances according to a set of principles that are easy to state but more challenging to apply. There is considerable resistance within the judiciary, however, to another kind of shift: changes in the principles that govern property… . As it currently stands, the law that applies to coastal properties is hardly clear, but does stand in the way of efficient and effective response to the problem of rising seas. With respect to fresh water, property rights conflicts have focused on the balance between rights to divert water for use and obligations to leave water in streams to maintain aquatic ecosystems. Like the coastal lands disputes, the water conflicts have not coalesced around a common understanding of the relevant principles. The rush for surface waters has created another legacy problem. Once gained, appropriative water rights persist forever so long as water continues to be put to beneficial use. That means that early appropriators retain the most senior rights, even as societal goals and the relative value of their use change. Frozen in the past as it is, the allocation of water rights under prior appropriation fails to account for modern views of the value of environmental protection. As competition for limited waters has intensified and environmental protection obligations have become more stringent, conflicts over rights to divert at the cost of aquatic ecosystems have become more frequent and more intense. 46

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Like the law of coastal property rights, the law of water rights remains uncertain, in much the same way and for much the same reasons. At the coast and in western waters, public and private rights butt up against one another, sometimes overlap, and more and more often find themselves in tension. Identifying clear boundaries between the two and deciding which prevails in a conflict are tasks which have become more difficult over the last fifty years as notions of the nature of the public interests at stake have expanded to include environmental protection. Climate disruption makes changes in property rights more urgent, but not necessarily more likely. Crisis can lower political barriers to legal change; There are several reasons, however, not to wait for climate disruption to reach the point of crisis before thinking through, and beginning to make, needed changes to property rules. First, climate change is not the kind of immediate crisis that breaks political logjams. By the time the effects of climate disruption become sufficiently catastrophic to grab political attention, the world will be committed to far worse. Second, climate adaptation is not a rapid endeavor. It may require construction of new infrastructure or even movement of populations away from high-risk areas. Those kinds of steps cannot be taken overnight. Third, climate adaptation will require careful reflection and planning, yet the response to crisis is not always (or even often) rational, carefully considered, or well adapted to future conditions. In particular, a crisis affecting human health, or even human economic well-being, can override any concern Adapting to climate disruption in a way that protects not only human but also environmental interests will require revision of existing property rules. Coastal states will need to be able to discourage, and perhaps even to prohibit, new construction on lands vulnerable to sea level rise or needed for migration of coastal wetlands. Western states will need to be able to reduce water deliveries to low-value agricultural users, and to require that more water remain in streams to meet the needs of aquatic ecosystems. Evolution of property rights in response to climate change will have to occur rapidly, before the changing climate produces a crisis. That evolutionary process will be a difficult one, because it unsettles established property rights on which people have come to rely. Given the difficulty of the adaptation task, government at all levels needs to be part of the solution, rather than part of the problem.

Commentary 1.24  The conclusions of Grinlinton and Dorenus reinforce the importance of regulating

private property rights so that the effects of human behaviour on the environment can be more effectively mitigated and controlled. The interconnectedness between the ‘environment’ and property is examined to highlight the fact that laws protecting the environment are increasingly critical for the continued functionality and existence of property. As outlined by Grinlinton, ‘environmentalism is not only compatible, it is essential to property law’. Arguably, however, the entitlements that underpin private property are not equipped to address the emergent demands of environmentalism. As outlined by Dorenus, individual property rights confer entitlements that are often very difficult to adapt to the imperatives of climate change, particularly where property owners retain rigid rights that cannot be adjusted without consent or compensation. The difficulties with a bundle of rights framework in this context is something recognised by C A Arnold, ‘Legal Castles in the Sand: The Evolution of Property Law, Culture and Ecology in Coastal Lands’ (2011) 61 Syracuse Law Review 213 at 256: The bundle of rights concept, with its emphasis on abstract, commodifiable rights, promotes the alienation of people from the object of their rights and the environments in which those rights arise, including alienation from self, others, work, faith, and nature. Furthermore, it does not accurately reflect many different types of property relationships in society, in which 47

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people form non-legal, non-market, concrete connections to the things of our lives, emerging out of passions and emotions, the social, cultural, biological, religious, and psychological dimensions of group and family relationships, biophilic connections between people and natural environments, the politics of geography, human concepts and definition of place and space, and the like. In other words, real-world property practices do not fit neatly into each stick associated with a separate abstract legal right.

This issue was also discussed by A B Klass, ‘Property Rights on the New Frontier: Climate Change, Natural Resource Development and Renewable Energy’ (2011) 38 Ecology Law Quarterly 63, where the author argues that early natural resources law was based primarily upon the conferral of property rights in natural resources to private parties with the aim of encouraging economic development. The future will necessarily involve a shift away from this with greater reliance upon integrating resource access into state and local permitting and land use planning frameworks. As outlined by Eric Biber in ‘Law in the Anthropocene Epoch’ (2018) 106 Georgetown Law Journal 1, 46: The Anthropocene will create pressures for property systems to update in response to the increasingly rapid changes in human impairments to the global systems and the impacts of those impairments on human and natural systems. … The Anthropocene will drive greater regulation of the uses of private property and the level and nature of that regulation will change in an accelerating manner. Activities that property owners could take without legal regulation will now be subject to regulation, changing property rights. … As the consequences of human impairments of global resources affect societies, many of the adaptation responses might require restricting individual use of property rights, or even reallocating those property rights.

Non-Private Resources Resources outside of ownership: res communes 1.25  There are many resources that are capable of forming the subject matter of a

property relationship, and objects and resources are continually being ‘privatised’ within contemporary society. Nevertheless, it is arguable that some objects should remain outside the boundaries of ownership on the grounds that to propertise such objects would infringe basic moral and social principles. One of the core common law principles is that the public need to possess inviolable rights to natural resources which make them immune to privatisation. Resources coming within this category include access to beaches, the sea, parks, air and running water. The concept of a public trust over natural resources was first introduced into English law through the writings of Bracton in the thirteenth century. Bracton’s writings were founded upon early Roman principles, which made it clear that not all resources were amenable to private ownership. According to Roman law, res nullius indicated that the property belonged to nobody, res publicae that it was the property of the State, and res communes that it was a bountiful resource, which should therefore be common to all. Resources that are res nullius or res communes are things that could be owned but at a given moment are not owned by anyone. For example, a wild animal is a res nullius that, upon capture, could become subject to private ownership (res intra commercium). In the words of Chancellor Kent, these resources are ‘bestowed by Providence for the common benefit of man’. (Quoted by B Parke in Embrey v Owen (1851) 6 EX 353 at 372; 155 ER 579 at 587 quoting from J Kent, Commentaries on American Law, O Halstead, New York, 1828, Vol 3, Lecture 51 at 354.) See further, P Wiel, ‘Natural Communism: Air, Water, Oil, Sea and Seashore’ (1934) 47 Harvard Law Review 425.

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De Bracton declared the beaches to be res communes and therefore ‘common to all’ and ‘inalienable’: see H de Bracton, On the Laws and Customs of England, S Thorne (trans), Belknap Press, London, 1968, pp 39–40. Ownership of the shore up to the high tide mark vested in the Crown in the absence of a prior owner and the Crown bore the responsibility of looking after the res communes for the benefit and good of the general public. Similarly, the right to running water was regarded as res communes because traditionally it was difficult to control, being highly volatile in nature and also a fundamental life-giving resource. The common law approach to water ownership was outlined by J Gray in, ‘Legal Approaches to the Ownership, Management and Regulation of Water from Riparian Rights to Commodification’ (2006) Vol 1 No 2 Transforming Cultures ejournal : The common law of England found that water in flow was not the subject of property. The idea that something was not susceptible to the characterisation of property was not unfamiliar to English law. Other things had also escaped the proprietary classification. For example, at common law, there was no property in a wild animal. It was only when the captor of the animal was able to demonstrate possession of it that he or she could protect his or her right in the animal against the rest of the world. Put another way, it was only then that the captor had a proprietary right. Cases such as these often turned on the question of what acts demonstrated possession. … In keeping with these cases it would seem that the reason water in flow was found not to be the subject of property was that one of the key legal aspects of ownership, that is, possession, observed through an ability to control the object in question, could not be demonstrated. While moving water is transitory and unstable, the requisite ability to control it cannot readily be legally demonstrated. … Further it is perhaps the case that social policy and cultural reasons … Picked up on the view that one had to treat one’s neighbours fairly by sharing the resource with them. Water was, after all, necessary for the maintenance of life … It followed from this that there is no property interest, at common law, in the water of a free flowing river.

One of the difficulties with the concept of public ownership of natural resource interests lies in the potential for resource exploitation that may be generated by an absence of individual rights of excludability. Public ownership of natural resources can produce what has been classically described as a ‘tragedy of the commons’ scenario. According to Hardin, a tragedy of the commons arises in circumstances where uncontrolled personal rights exist in shared natural resources. In his article, ‘The Tragedy of the Commons’ (1968) Science  162, Hardin argued that resources upon which the community depends must be carefully regulated because without such regulation, individuals will not promote the public interest. When many people maximise their personal use of a shared natural resource, thereby exploiting and depleting it, a tragedy of the commons occurs. Hardin argued that controlled ownership of commons resources is a more effective approach to commons resources because it combats the overconsumption and collective degradation that can flow from an open access regime where unmitigated self-interest can take over. Hardin did not consider in any detail how private ownership regimes might themselves degrade common resources. English common law has, however, consistently sustained the concept of a public ownership over vital natural resources, such as water and air, such that these resources are vested in the State for the benefit of the public. Statutory regulation regulates public ownership decisions and mandates compliance with environmental assessment processes. For a discussion of the different elements of public resource ownership see: C Rose, ‘Custom, Commerce and Public Property’ (1986) 63 University of Chicago Law Review 711; A Sinden, ‘The Tragedy of the Commons and the Myth of Private Property Solution’ (2007) 78 University of Colorado Law Review 533, where the authors discuss the fact that privatisation has replaced government intervention as the 49

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solution to the grim logic of the tragedy of the commons and, in this vein, water markets, emission trading schemes, and privatisation are touted as the new panacea. It has also been argued that the tragedy of the commons does not adequately capture the gravity of harm, particularly in the age of the Anthropocene, caused by the mismanagement of common pool resources. Resources that are vital to human existence, such as the earth’s atmosphere and groundwater aquifers, are becoming so vital that private property rights need to be removed: see Alexander M Pearl, ‘The Tragedy of the Vital Commons’ (2015) 45 Environmental Law 1021 at 1060. Vital resources must be managed by public resource frameworks; however, these frameworks must adopt a broader approach to the concept of public interest: see S Hepburn, ‘Public Resource Ownership and Community Engagement in a Modern Energy Landscape’ (2017) 34 Pace Environmental Law Review 379, where the author argues that where public resource frameworks exist the State must ensure that all autonomous entitlements are managed in accordance with communitarian responsibilities.

Boundaries of Ownership: Resources Incapable of Ownership Rights to a spectacle 1.26  A resource or object may not be propertised because it has no tangible presence

and is not clearly identifiable. This is the case with a view or a spectacle. Australian courts have consistently held that a spectacle or a view is not a resource capable of being owned. There are a range of rationales that underpin this conclusion. The primary one, however, is that the parameters of a spectacle are unclear and ambiguous and to allow an owner the right to exclude the rest of the world from a spectacle or a view interferes with the scope of the property rights held by neighbouring landowners; such owners are unable to properly use and enjoy their own land because of the uncertainty concerning the scope of a view. The inability to draw up a precise boundary and clearly identify what is and what is not owned is one of the primary reasons why the courts have refused to propertise a view or  a spectacle. These concerns were discussed by the Australian High  Court in Victoria Park Racing and Recreation Grounds Company Ltd v Taylor (1937) 58 Cambridge Law Review 479 and reinforced by K Gray in ‘Property in Thin Air’ (1991) 52 Cambridge Law Review 252 at 268: 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.

See also J P Blais, ‘Protection of Exclusive Television Events Held in Public Venues: An Overview of the Law in Australia and Canada’ (1992) 18 Melbourne University Law Review 503. 1.27  The decision in Victoria Park Racing and Recreation Grounds Company Ltd v Taylor is extracted below.

  Victoria Park Racing and Recreation Grounds Company Ltd v Taylor  (1937) 58 CLR 479 Facts: The plaintiff conducted races on a racecourse in Victoria Park. The defendant, Taylor, owned land near the racecourse. Taylor placed an elevated platform on his land so that he could view the races from his property. He then read the information from the notice boards on 50

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the course concerning starters, scratchings and winners etc. This information was then called through to the radio station 2UW who then broadcast this information. Victoria Park wanted to stop the broadcasting of this information because evidence was given that some people preferred to listen to the radio than attend the races. The plaintiff brought a case for nuisance on the basis that the broadcasting was an unlawful interference with the use and enjoyment of the Victoria Park racecourse. During the course of the judgment the High Court considered whether the plaintiff owned the spectacle that they created on their land. Latham CJ: … 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, break a contract, or wrongfully reveal confidential information. The defendants did not infringe the law in any of these respects. The plaintiff further contended that there was an unnatural user of land by the defendant Taylor and that all the defendants were liable for resulting damage to the plaintiff’s land or to the plaintiff’s business. In my opinion, this contention cannot be supported. ‘Prima facie, it is lawful to erect what one pleases on one’s own land’ (Rogers v Rajendro Dutt). It is not suggested that Taylor has broken any building regulation. If he had done so the remedy would be found under the relevant building regulations, and not in an action of the present kind. In truth, the plaintiff’s complaint would be the same in all material particulars if Taylor had a two-storey house from the upper storey of which Angles made his broadcast. In my opinion it would be impossible to contend that there was an unnatural user of the land and house because they were used for that purpose. If Taylor complies with any relevant provision under the Federal Post and Telegraph Act or the Wireless Telegraphy Act, he is entitled to have a telephone and to use his premises as an originating point for broadcasting. So also the Commonwealth Broadcasting Co is entitled to broadcast under the licence granted in pursuance of the Federal regulations. I am not prepared to assent to what I regard as the surprising argument that the use of land for broadcasting is an unnatural user of land within the principle of Rylands v Fletcher. Broadcasting of races could doubtless be prevented, either altogether or without the consent of the persons who undertake the trouble and expense of organising race meetings, by a regulation dealing with the conditions of broadcasting licences; but no such regulation has yet been made. In reality there is no particular connection between the use of the defendant Taylor’s land as land and the wrong which the plaintiff alleges that it suffers. The position in all material particulars would be exactly the same if the broadcasting were done from a motor car on a road from which the racecourse could be seen or by a man standing on high land of which he was not the owner or the occupier. Reference to Taylor’s land in the argument is introduced only for the purpose of relying upon an alleged unnatural user of that land. As I have already said, in my opinion, there is no such user. The claim under the head of nuisance has also been supported by an argument that the law recognises a right of privacy which has been infringed by the defendant. However desirable some limitation upon invasions of privacy might be, no authority was cited which shows that 51

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any general right of privacy exists. The contention is answered, in my opinion, by the case of Chandler v Thompson; see also Turner v Spoone: ‘With regard to the question of privacy, no  doubt the owner of a house would prefer that a neighbour should not have the right of looking into his windows or yard, but neither this court nor a court of law will interfere on the mere ground of invasion of privacy; and a party has a right even to open new windows, although he is thereby enabled to overlook his neighbour’s premises, and so interfering, perhaps, with his comfort’; see also Tapling v Jones. 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 appropriateness 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. … I agree with the judgment of Nicholas J and with the reasons which he gave for it. In my opinion the appeal should be dismissed. Rich J: … 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 classification of torts and that the plaintiff’s remedy lay either in self-defence, eg, 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 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, 1st Eng ed (1884), sec 959 (b), 52

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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 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 shows that an adjoining owner may not 53

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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. The steward of a court leet in charging the jury was wont to charge them: ‘You shall inquire of and present … (among other evil members and persons of ill behaviour) … the eavesdropper, ie, he that doth hearken under windows and the like, to heare and then tell newes to breed debate between neighbours … all these may be amerced, and be bound to the good behaviour by a justice of peace’ (Sheppard, The Court-Keepers’ Guide, (1649), pp 47–49; see also Blackstone, Commentaries, 4th ed, Bk 4, c 13, p 169). There can be no right to extend the normal use of his land by the adjoining owner indefinitely. He may within limits make fires, create smoke and use vibratory machinery. He may consume all the water he finds on his land, but he has no absolute right to dirty it. Defendants’ rights are related to plaintiffs’ rights and each owner’s rights may be limited by the rights of the other. Sic utere tuo is not the premise in a syllogism but does indicate the fact that damnum may spring from injuria even though the defendant can say: ‘I am an owner.’ All the nuisance cases, including in that category Rylands v Fletcher, are mere illustrations of a very general principle ‘that law grows and … Though the principles of law remain unchanged, yet (and it is one of the advantages of the common law) their application is to be changed with the changing circumstances of the times. Some persons may call this retrogression, I call it progression of human opinion’ (R v Ramsay and Foote). I adapt Lord Macmillan’s words and say: ‘The categories of nuisance are not closed’ (Donoghue v Stevenson). 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. The unreported case of the Balham dentist mentioned by Professor Kenny in his Cases on the Law of Tort, 4th ed (1926), p 367, would, if correctly decided, be discreditable to English law. This is what Professor Winfield, in an article on ‘Privacy’, Law Quarterly Review, vol 47, at p 27, says: ‘A curious invasion of privacy, recorded by the late Professor Kenny, was a case of 1904 in which a family in Balham, by placing in their garden an arrangement of large mirrors, were enabled to observe all that passed in the study and operating room of a neighbouring dentist, who sought in vain for legal protection against the annoyance and indignity to which he was thus subjected. This is all that is given of the case, and, as there is no further reference, it  is worthless as an authority. Why should it not have been actionable as a nuisance? It was something very like watching and besetting the dentist’s house so as to compel him to do or not to do something which he was lawfully entitled not to do or to do; and this was held to be a common law nuisance in Lyons & Sons v Wilkins [1899] 1 Ch 255. Subsequent trade union legislation may have affected the decision in that case, but not the principle underlying it, which is that such conduct seriously interferes with the ordinary comfort of human existence and the ordinary enjoyment of the house beset. Indeed, the Balham family behaved worse than the defendants in Lyons’ Case [1899] 1 Ch 255. for there was some economic excuse for the acts of the trade union officials there, while none whatever existed in the Balham case.’ In 1904 the unneighbourly neighbours of Balham were forced to adopt an elaborate system of mirrors to vent their ill feeling. But it is easy to believe that half a century later they would be able to do all they desired by means of television. 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 54

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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 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. In Chandler v Thompson, Le Blanc J said that, although an action for opening a window to disturb the plaintiff’s privacy was to be read of in the books, he had never known such an action maintained, and when he was in the common pleas he had heard it laid down by Eyre LCJ that such an action did not lie and that the only remedy was to build on the adjoining land opposite to the offensive window. After that date there is, I think, no trace in the authorities of any doctrine to the contrary. In Johnson v Wyatt, Turner LJ said: ‘That the windows of the house may be overlooked, and its comparative privacy destroyed, and its value thus diminished by the proposed erection … are matters with which, as I apprehend, we have nothing to do,’ that is, they afforded no ground for an injunction. In In re Penny and the South Eastern Railway Co the Court of Queen’s Bench set aside an award of compensation to a landowner for injurious affection by the construction of a railway because in the compensation awarded there was included the depreciation of the land owing to its now being overlooked. Erle J said: ‘The comfort and value of the property may have been diminished but no action would have lain for the injury before the statutory authority was conferred on the company’. This principle formed one of the subsidiary reasons upon which the decision of the House of Lords was based in Tapling v Jones, Lord Chelmsford said:— ‘the  owner of a house has a right at all times … to open as many windows in his own house as he pleases. By the exercise of the right he may materially interfere with the comfort and enjoyment of his neighbour; but of this species of injury the law takes no cognizance. It leaves everyone to his self-defence against an annoyance of this description; and the only remedy in the power of the adjoining owner is to build on his own ground, and so to shut out the offensive windows’. When this principle is applied to the plaintiff’s case it means, I think, that the essential element upon which it depends is lacking. So far as freedom from view or inspection is a natural or acquired physical characteristic of the site, giving it value for the purpose of the 55

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business or pursuit which the plaintiff conducts, it is a characteristic which is not a legally protected interest. It is not a natural right for breach of which a legal remedy is given, either by an action in the nature of nuisance or otherwise. The fact is that the substance of the plaintiff’s complaint goes to interference, not with its enjoyment of the land, but with the profitable conduct of its business. 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, organisation 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 organisation 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 generalisation. 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). 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. Brandeis J cites with approval Sports and General Press Agency Ltd v Our Dogs Publishing Co Ltd, a decision of Horridge J (affirmed by the Court of Appeal), which he describes as follows — ‘The plaintiff, the assignee of the right to photograph the exhibits at a dog show, was refused an injunction against the defendant, who had also taken pictures of the show and was publishing them. The court said that, except in so far as the possession of the land occupied by the show enabled the proprietors to exclude people or permit them on condition that they agree not to take photographs (which condition was not imposed in that case), the proprietors had no exclusive right to photograph the show and could therefore grant no such right. And, it was further stated that, at any rate, no matter what conditions might be imposed upon those entering the grounds, if the defendant had been on top of a house or in some position where he could photograph the show without interfering with the physical property of the plaintiff, the plaintiff would have no right to stop him’. 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 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. Apart from the matters with which I have dealt, the plaintiff claimed that the defendants or some of them had been guilty of infringement of copyright. Copyright in two forms of production was set up. One was the board affording information of the scratchings and places at the barrier. The other was the race book. It may at once be conceded that copyright subsisted in the latter. Perhaps from the facts a presumption arises that the plaintiff company is the owner of the copyright but, as corporations must enlist human agencies to compose literary, dramatic, musical and artistic works, it cannot found its title on authorship. No proof was offered that the 56

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author or authors was or were in the employment of the company under a contract of service and that the book was compiled or written in the course of such employment. (See sec 5 (2) of the British Copyright Act 1911, scheduled to the Commonwealth Act of 1912.) Perhaps these facts are to be presumed. But the reason for the absence of proof of ownership is that the book was not relied upon at the hearing of the suit in support of the claim for infringement of copyright. In my opinion, the plaintiff was right in not relying upon it. For to establish infringement it would be necessary to show that the broadcast included such a use of the contents of the book as to amount to a ‘performance’ of a substantial part of the ‘work’ which it constitutes. No doubt the defendant Angles made much use of the information contained in the race book to enable him to give an account of the proceedings upon the course. But it is not information that is protected in the case of literary works but the manner in which ideas and information are expressed or used. ‘Performance’ is defined to mean any acoustic representation of a work and any visual representation of any dramatic work, including such a representation made by means of any mechanical instrument. I do not think that any ‘acoustic representation’ of a substantial part of the race book was given through the microphone. The board contained a list of positions at the barrier which was, in effect, repeated, but I should not have thought that, if the list was the subject of copyright, to repeat the order of positions actually assigned to the horses amounted to an infringement. I am, however, quite unable to suppose that, when the names of the starters, their positions, jockeys and so on are exhibited before a race, doing so amounts to publishing a literary work which becomes the subject of copyright. No doubt the expression ‘literary work’ includes compilation. The definition section says so (sec 35 (1)). But some original result must be produced. This does not mean that new or inventive ideas must be contributed. The work need show no literary or other skill or judgment. But it must originate with the author and be more than a copy of other material. The material for the board consists in the actual allotment of places and other arrangements made by the plaintiff company’s officers in respect of the horses. To fit in on the notice board the names and figures which will display this information for a short time does not appear to me to make an original literary work. In my opinion the judgment of Nicholas J is right and the appeal should be dismissed. Evatt J: It is quite unnecessary to cite or discuss authorities which repeat or illustrate the wellknown principle that the plaintiff must affirmatively establish that the defendants have been guilty of a tort, and that the damage which they have caused to be inflicted upon the plaintiff may be damnum absque injuria. At the same time, it is practically conceded that, if a legal wrong has been committed, the case is one for the application of the remedy of injunction. The defendants have argued that the damage and loss of the plaintiff have been sustained by it rather in its character as racing entrepreneur than as occupier of land. But the plaintiff’s profitable conduct of its business cannot be dissociated from its occupation of the land, and damage to the plaintiff’s business is necessarily reflected by some diminution in the value of the land of the plaintiff. It has been said with accuracy that nuisance does not convey the idea of injury to the realty itself. It means rather an interference with some right incident to the ownership or possession of realty. The law of nuisance is an extension of the idea of trespass into the field that fringes property. It is associated with those rights of enjoyment which are, or may become, attached to realty. Ownership or rightful possession necessarily involves the right to the full and free enjoyment of the property occupied (Street, Foundations of Legal Liability (Tort), vol 1, p 211). The defendants have not been content with a mere denial that a tort has been committed. They have ventured upon general reasoning in defence of their conduct, and Mr Watt in his able argument said that the broadcasting company was a competitor of the plaintiff in the business of entertainment and was equally ‘entitled to be protected in the legitimate exercise of their trade.’ This phrase is taken from the well-known judgment of Bowen LJ in Mogul Steamship Co Ltd v McGregor, Gow & Co, a case which has occupied some prominence in the 57

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judgment of Nicholas J. In the Mogul Case, shipowners, in order to force a rival shipowner out of business, combined for that purpose, but employed no unlawful means. But, in the present case, what the broadcasting company does is, by means of broadcasting, to incorporate in its own entertainment, simultaneously with the plaintiff’s entertainment, precisely so much of the latter as an expert verbal representation can give, the plaintiff having to expend capital and labour in providing its entertainment, and the company contributing nothing and taking everything. I cannot imagine a case which is further removed from the facts of the Mogul Case or other cases where individuals or groups, being in the same field of commercial enterprise, choose to engage in fierce competition for custom by making special offers or concessions in return for promises to give exclusive custom. The implied basis of all such competition is that each competitor is providing goods or services to the customer which are entirely the result of its own efforts, and that there is no ‘appropriation’ or ‘borrowing’ of the goods or services of the other. In the Mogul Case, Bowen LJ gave some illustrations of the type of conduct which is not permissible as between trade rivals. It is a profound mistake to suppose that the list was intended to be exhaustive. The classical example of the setting up of a new school the competition of which causes loss and damage to an old school in the neighbourhood only illustrates the principle that mere trade competition does not give rise to liability for tort. The facts of the present case might be analogous to the illustration of the rival schools if it were shown that, by means of broadcasting, television and the like, those conducting the new school listened in to the lessons or lectures delivered at the old school, and, by reproducing them as near as may be, caused damage to those conducting the old school. The attempt of the defendants to justify their conduct by reference to the cases on trade competition breaks down. It is not enough for the plaintiff to destroy the argument that the defendants are only engaged in normal trade competition with the plaintiff. The plaintiff must establish his cause of action. But in analysing the validity of the plaintiff’s attempt to establish his cause of action, we must recognise certain fundamental principles recently summarised by the House of Lords in Donoghue v Stevenson. There, Lord Atkin said: I venture to say that in the branch of the law which deals with civil wrongs, dependent in England at any rate entirely upon the application by judges of general principles also formulated by judges, it is of particular importance to guard against the danger of stating propositions of law in wider terms than is necessary, lest essential factors be omitted in the wider survey and the inherent adaptability of English law be unduly restricted. For this reason it is very necessary in considering reported cases in the law of torts that the actual decision alone should carry authority, proper weight, of course, being given to the dicta of the judges. In the same case, Lord Macmillan said in particular reference to the tort of negligence:— ‘The grounds of action may be as various and manifold as human errancy; and the conception of legal responsibility may develop in adaptation to altering social conditions and standards. The criterion of judgment must adjust and adapt itself to the changing circumstances of life. The categories of negligence are never closed’. Here the plaintiff contends that the defendants are guilty of the tort of nuisance. It cannot point at once to a decisive precedent in its favour, but the statements of general principle in Donoghue v Stevenson are equally applicable to the tort of nuisance. A definition of the tort of nuisance was attempted by Sir Pollock, who said:— Private nuisance is the using or authorising the use of one’s property, or of anything under one’s control, so as to injuriously affect an owner or occupier of property — (a) by diminishing the value of that property; (b) by continuously interfering with his power of control or enjoyment of that property; (c) by causing material disturbance or annoyance to him in his use or occupation of that property. What amounts to material disturbance or annoyance is a question of fact to be decided with regard to the character of the 58

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neighbourhood, the ordinary habits of life and reasonable expectations of persons there dwelling, and other relevant circumstances (Indian Civil Wrongs Bill, c VII, sec 55). At an earlier date, Pollock CB had indicated the danger of too rigid a definition of nuisance. He said:— ‘I do not think that the nuisance for which an action will lie is capable of any legal definition which will be applicable to all cases and useful in deciding them. The question so entirely depends on the surrounding circumstances — the place where, the time when, the alleged nuisance, what, the mode of committing it, how, and the duration of it, whether temporary or permanent’ (Bamford v Turnley). 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 on his neighbour’s land, does not make the former’s action unlawful. But it is equally erroneous to assume that under no circumstances can systematic watching amount to a civil wrong, for an analysis of the cases of J Lyons & Sons v Wilkins and Ward Locke & Co (Ltd) v Operative Printers’ Assistants’ Society indicates that, under some circumstances, the common law regards ‘watching and besetting’ as a private nuisance, although no trespass to land has been committed. The defendants relied strongly upon the decision in Sports and General Press Agency Ltd v Our Dogs Publishing Co Ltd. That case decides that, if an exhibition of animals is conducted at a sports ground, the occupier cannot, by purporting to confer upon A the exclusive right of taking photographs, prevent B, who is also a spectator lawfully in attendance, from taking photographs. The court considered that the occupier should have protected himself by regulating the terms of the contract of admission and so preventing the use of photographs by unauthorised persons. In one judgment there was an obiter dictum as to the right of taking a 59

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photograph from outside the ground. But the case does not anywhere suggest that there exists an absolute and unqualified right to photograph from outside a ground the spectacle which is being conducted inside. In the United States, in the case of International News Service v Associated Press, Brandeis J regarded the Our Dogs Case as illustrating a principle that ‘news’ is not property in the strict sense, and that a person who creates an event or spectacle does not thereby entitle himself to the exclusive right of first publishing the ‘news’ or photograph of the event or spectacle. But it is an extreme application of the English cases to say that because some overlooking is permissible, all overlooking is necessarily lawful. In my opinion, the decision in the International News Service Case evidences an appreciation of the function of law under modern conditions, and I believe that the judgments of the majority and of Holmes J commend themselves as expositions of principles which are not alien to English law. 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’. 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, the conduct of the defendants 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). 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. In the United States, no such practice has ever been commenced. The only case which can be regarded as comparable is Detroit Baseball Club v Deppert, decided by the Supreme Court of Michigan. There, the defendant resided upon his own land, which was situated near the recreation ground of the plaintiff company, which conducted baseball games for profit as a member of the National Baseball League. A high fence enclosed the ground, but the defendant, who had a barn on his land, erected a stand on the roof of his barn solely for the accommodation of persons who wished to view the games played on the plaintiff’s ground. The  defendant charged less for the accommodation provided by him than was ordinarily charged for admission to the recreation ground. Apparently the plaintiff failed to establish the fact that persons who visited the defendant’s stand would otherwise have paid the admission fee to the plaintiff’s ground. The court refused an injunction, but upon the ground that the plaintiff’s remedy at law was ‘entirely adequate.’ Campbell CJ dissented, stating that ‘the law has never defined nuisance in such a way as to be exhaustive, for the plain reason that perverse ingenuity can readily devise new means of harm’. He added:— All the rules of law made to redress offensive invasions of private property and rights, short of trespass, go upon the theory that conduct tending to great provocation, unless 60

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checked by civil remedies, may lead to disturbance. The present case does not differ in principle from any other where exhibitions are profitable and the profits are secured to the owners. This nuisance is one which is chiefly obnoxious from its repetition and continuance, and I think should be restrained by injunction. So far as it goes, the decision supports the claim of the present plaintiff, for the reasoning of the majority of the court was that the plaintiff possessed an adequate remedy at law for the private nuisance of which he complained. In the present case, damage to the plaintiff has been established and found. I can see no difference in principle between the present defendants’ broadcasting of the races observed from their specially erected observation tower and the special erection outside the plaintiff’s racecourse of a grandstand solely for the purpose of charging the public for the right to overlook the plaintiff’s entertainment. In each case, the price charged, or the absence of any charge, may be shown to have caused or induced persons who would otherwise attend the ground to stay away, but at the same time enabled them to observe or listen to a running description of the race. It should be appreciated that the plaintiff does not question the general principle that it is a legitimate use of property to erect and extend homes for the purpose of obtaining or improving favourable prospects or ‘views.’ A number of cases bearing upon such question have been collected and discussed by Professor Winfield in a learned article on ‘Privacy,’ published in the Law Quarterly Review, vol 47, p 23. The Balham Case there discussed illustrates not only what Paley called the ‘competition of opposite analogies,’ but also, in my opinion, how the competition might fairly be resolved. It appeared that, by an arrangement of large mirrors, ‘neighbours’ succeeded in observing all that went on in the surgery of a nearby dentist. Professor Winfield rightly asks: ‘Why should it not have been actionable as a nuisance?’ In my opinion, such conduct certainly amounted to a private nuisance and should have been restrained by injunction, although the sole object of the ‘peeping Toms’ of Balham was to satisfy their own degraded curiosity and not to interfere with the dentist’s liberty of action. In truth, no normally sensitive human being could have pursued his profession or business under so intolerable an espionage, and the result would have been to render the business premises practically uninhabitable. The motive of the wrongdoers at Balham was to satisfy their curiously perverted instincts. But let us suppose that, by such devices as broadcasting and television, the operating theatre of a private hospital was made inspectable, so that a room outside the hospital could be hired in order that the public might view the operations on payment of a fee. It would not be any the less a nuisance because in such a case the interference with the normal rights of using and enjoying property was accentuated and aggravated by the wrongdoers making a profit out of their exhibition. Let it be also supposed that medical students, who would otherwise pay a fee to the hospital in order to witness the operations, stayed away because they were able to see them performed elsewhere but simultaneously for a smaller fee, the result being that damage is sustained by the hospital. My opinion is that an action would lie, not only in the Balham Case but in the instances I have suggested and that a court of equity would grant the additional remedy of an injunction. If this conclusion is right, the following propositions may be suggested:— (a) Although there is no general right of privacy recognised by the common law, neither is there an absolute and unrestricted right to spy on or to overlook the property of another person. (b) A person who creates or uses devices for the purpose of enabling the public generally to overlook or spy upon the premises of another person will generally become liable to an action of nuisance, providing appreciable damage, discomfort or annoyance is caused. (c) As in all cases of private nuisance, all the surrounding circumstances will require examination. (d) The fact that in such cases the defendant’s conduct is openly pursued, or that his motive is merely that of profit making, or that he makes no direct charge for the privilege of overlooking or spying will provide no answer to an action. 61

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The above-suggested statement of principle may require either extension or qualification, but in essence I think that it is in accordance with the principles of the common law of England, the ‘inherent adaptability’ of which is as essential to-day as ever it was, having regard to our ‘altering social conditions and standards.’ These phrases of Lord Atkin and Lord Macmillan, though applied to another branch of the common law, are equally applicable to the problem which has arisen in this case. I can see nothing in the statement of principle to which reasonable objection would be taken in practice. Indeed, no one who recognises the existence of any duties towards his neighbour could ever think of acting in contravention of the principles. Only an insufficiently disciplined desire for business profit and an almost reckless disregard, not so much of the legal rights as of the ordinary decencies and conventions which must be observed as between neighbours, could have induced the broadcasting company to cause the loss to the plaintiff which has been proved in this case. The argument that the plaintiff might have protected itself from intrusion and loss by increasing the height of its boundary fence comes with ill grace from the defendants, whose reply would probably have been to disfigure further the Taylor bungalow by increasing the height of the broadcasting tower. In such a way, reprisals might go on indefinitely. However, in the circumstances proved, I am of opinion that the plaintiff should not be remitted either to self-help or to legislative aid, but that he is entitled to redress from the law by the application of the principles which I have suggested are embodied in the common law. Thus the plaintiff is entitled to maintain an action for damages for private nuisance, and, if so, it is indisputable that he is also entitled to an injunction against all three defendants. In my opinion the appeal should be allowed. [McTiernan J dismissed the appeal.]

Commentary 1.28  The decision of the Australian High Court in Victoria Park Racing makes it clear

that English common law does not accept that a spectacle or view is capable of being owned. An owner is at liberty to exclude his or her neighbours’ view by any physical means legally possible; however, in the absence of any such impediment, there is no legal restriction that an owner can place upon the right of a neighbouring owner to view activities being conducted on adjoining land. Overlooking land from a natural vantage point is an ordinary aspect of ownership and it is not possible to exclude such a perspective by claiming exclusive ownership over it. This does not mean that tort actions will not be available. Rich J argued (and Evatt J agreed) that on the facts, the unusual character of the broadcasting went beyond mere observance and constituted an act that came within the application of nuisance. On the issue of property, however, the court was unanimous in its acceptance that the right of a neighbour to look over the fence and watch an unimpeded spectacle was well established. The creator of the spectacle could not claim ownership over what Latham CJ described as ‘metaphorical’ ownership. In this respect, K Gray, in ‘Property in Thin Air’ (1991) 52 Cambridge Law Review 252 at 268 noted that the majority judgment in Victoria Park focused upon the importance of keeping non-excludable resources beyond the domain of private property and within the domain of the commons. In this respect, Gray suggested that non-excludable resources could potentially arise in three different contexts: physical, legal and moral. A resource is physically non-excludable where the boundaries cannot be determined. A resource is legally non-excludable where this has arisen as a consequence of a legal act and a resource is morally non-excludable where a resource is so central or intrinsic to constructive human coexistence that it would be ‘severely anti-social’ that these resources be removed from the commons. See also G Taylor, ‘Why there is No Common Law Right of Privacy’ (2000) 26(2) Monash University Law Review 235.

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Resources incapable of ownership: moral boundaries 1.29  Some resources may not be propertised because to do so would be contrary to

fundamental moral assumptions and human freedoms. In setting a moral boundary on ownership, the courts recognise that property interests may be effectively ‘overridden’ by the greater social good. The meaning of social good in this context is broad but basically connects to fundamental human rights that are associated with decent, moral living. Determining the nature and scope of these concepts is, however, deceptive as they are constantly changing and this, in itself, illustrates the core ambiguity of the common law framework. As outlined by K Gray and S Gray in ‘The Idea of Property in Land’ in S Bright and J Dewar (eds) Land Law: Themes and Perspectives, Oxford University Press, Oxford, 1998, p 18, there is a: … deep structural indeterminacy, in that [t]he common law world has never really resolved whether property in land is to be understood in terms of empirical facts, artificially defined rights, or duty-laden allocations of social utility … In short, the idea of property in land oscillates ambivalently between the behavioural, the conceptual, and the obligational, between competing models of property as a fact, property as a right, and property as a responsibility …

See also A Grear, ‘A Tale of the Land, the Insider, the Outsider and Human Rights (An  Exploration of Some Problems and Possibilities in the Relationship between the English Common Law Property Concept, Human Rights Law and Discourses on Exclusion and Inclusion)’ (2003) 23 Legal Studies 33. Ownership of human life is generally regarded as impossible because of the unacceptable moral and ethical implications such rights may generate. To allow a person to assert a proprietary title or interest over another human life would be to justify the exploitation of that person and the denial of their basic human rights to life and liberty and this is an affront to human dignity. Margaret Radin has argued that certain things ought to be fully or partially inalienable because to allow some things to be dealt with in a market indicates a connection between personhood and  money, which reduces human flourishing: see Margaret Jane Radin, ‘Market Inalienability’ (1987) 100 Harvard law Review 1849. The existence of inalienable property and the fact that markets can arise in things such as human embryos and body parts indicates that there is a difference between a property and commodities that are assigned a value. Arguably, laws that restrict commodification, with appropriate enforcement mechanisms, may be more effective in preventing inappropriate commodification than a blanket refusal to treat something as property because of commodification concerns: see: L M Bennett, ‘The Applicability of Property Law in New Contexts: From Cells to Cyberspace’ (2008) 30 Sydney Law Review 639. Ownership over a body, however, may be acceptable in some circumstances. In Doodeward v Spence [1908] 6 CLR 406, the Australian High Court held that a preserved, two-headed stillborn baby could be regarded as the property of the doctor who had preserved it. The court approved the general principle that a body cannot be owned, yet held that this rule may be set aside where a person has applied work or skill to the body. This entitlement is, however, subject to the right over the body held by an administrator for the purpose of burial or cremation. Generally speaking, therefore, it is not legally possible to own another life. However, each individual does have ownership in their individual body parts. Where the part is regenerative — for example, blood, urine, sperm etc — it may be transferred to a third party who can then claim property over it. Alternatively, where the part is non-regenerative, for example, a vital organ, it is generally the case that a third party cannot claim ownership 63

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over it unless the owner has donated it during their life or after death. In Roblin v The Public Trustee for the Australian Capital Territory, [2015] ACTSC 100, Mossop M held that cryogenically stored semen obtained from a person at his request and prior to his death did constitute personal property and therefore formed a part of his intestacy estate for the purposes of the Administration and Probate Act 1929 (ACT). His Honour made the following comments at [23]–[28]: It is proper to hold that the human tissue is property. In reaching that conclusion I am mindful of what was said by Griffith CJ about the need to apply the principles of law in line with reason and good sense. In the wider sense, it defies reason to not regard tissue samples as property. Such samples have a real physical presence. They exist and will continue to exist until some step is taken to effect destruction. There is no purpose to be served in ignoring physical reality. To deny that the tissue samples are property, in contrast to the paraffin in which the samples are kept or the jar in which both the paraffin and the samples are stored, would be in my view to create a legal fiction. There is no rational or logical justification for such a result … The mere fact that the semen was formerly part of a human body is not sufficient to deny that it is property. The fact that the sperm constitutes human gametes is not sufficient at common law to take it out of the conception of property. There has been no legislative intervention that requires it to be treated differently to other material that might constitute property because it was formerly part of a human body, or because of its particular status as being human gametes.’

In James v Seltsam Pty Ltd [2017] VSC 506, Zammit J concluded that an explanted lung was property within the meaning of rule 37.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic). Her Honour stated that the ruling was confined to the context in which it was made, noting that Griffith CJ in Doodeward foreshadowed that whether something is property may vary between different legal settings. In Re Cresswell [2018] QSC 142, Brown J concluded that sperm that had been lawfully removed from a deceased person was capable of constituting property, but that the common law did not recognise sperm as property until it is separated from the human body, and this separation could only occur where the person was deceased, pursuant to legislative provision. His Honour noted at [144] that ‘the principle that a human body cannot be the object of a property right does not apply in relation to tissue or body parts once they are removed from a human body. Things which are removed and separated from the living human body, such as human tissue, can sometimes be the object of property rights.’ See also the discussion by Justice James Edelman ‘Property Rights to Our Bodies and Their Products’ (2015) University of Western Australia Law Review 39(2), 47. There are, of course, significant regulations attached to donor transplants that seek to prevent unlawful trading in human organs. Sometimes, however, human parts or tissues may be needed for medical research. The issue of whether human tissue removed from the body of a patient and then used for successful medical research could be reclaimed by the owner was considered in the landmark Californian decision of Moore v Regents of University of California (51 University of California 3d 120; 271 Californian Reporter 146; 793 P.2d 479)(1990). In that case, a medical research group removed a patient’s spleen, blood, cells, skin and semen during the course of treatment for leukaemia without his knowledge or consent and, from it, developed a product with enormous therapeutic value that was extremely lucrative. The Californian Supreme Court concluded that the patient could not claim these tissues back because societal policy arguments favouring the proper development of effective medical research and treatment outweighed the importance of individual property claims. 64

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The court concluded that ‘the extension of personal property rights to interfere with proper and effective development of medical research would be socially unacceptable and unjustified’. The Moore decision has been the subject of much academic debate. Consider the comments from D Mortimer, ‘Proprietary Rights in Body Parts: The Relevance of Moore’s Case in Australia’ (1993) 19 Monash University Law Review 217 at 226–7 on the conclusions of the Supreme Court in Moore v Regents of University of California: The theme which runs through each of the majority’s concern is that the law should protect and enhance the development of medical research because of its social utility, rather than pursuing a course which prefers the protection of individual rights. Such individual rights are, the majority argued, well enough protected by the doctrines of fiduciary duty and informed consent … No evidence was provided to support the majority’s clear assumption that less human tissue would be available if that human tissue were treated as the property of the patient. In reality all that the granting of such property rights would involve, in the case of removing and using human tissue, is the obtaining of appropriate consent from the patient. It is a jaundiced view of patients faced with such requests to suggest that significant numbers of them would withhold consent out of a meanness of spirit. Nor is there any evidence to suggest that even if there were a significant reduction in the amount of human tissue available, this would adversely affect the supplies for medical research.

From a statutory perspective, the ownership of human tissue is now regulated in some Australian states. For example, in Victoria, ss 38–39 of the Human Tissue Act 1982 prohibits the selling and buying of human tissue and making it unlikely that Australian courts would recognise the claim for conversion brought about by a patient in similar circumstances to those in the Moore’s decision. See also M Massar ‘Restricting Human Embryonic Stem Cell Research: Creating Life or Destroying Freedom’ (2008) 10 Scholar 43 where the author notes that the monetary value of bodily tissue has dramatically increased during the current biotech era. See also F J Morales, ‘The Property Matrix: An Analytical Tool to Answer the Question: Is This Property?’ (2013) 161 University of Pennsylvania Law Review 1125; Persons, Parts and Property: How We Should Regulate Human Tissue in the 21st Century, I Goold, K Greasley, J Herring and L Skene (eds), Hart Publishing, UK, 2016.

Resources incapable of ownership: common heritage of humanity 1.30  The common heritage principle, or as it is sometimes referred to, the ‘global

commons’ is sourced in the res communes principle, which originated in Roman law. In a modern context, res communes resources are distinguished by two primary characteristics: they may not be appropriated and the use of them belongs equally to all the people. See B Larschan and B C Brennan, ‘The Common Heritage of Mankind Principle in International Law’ (1983) 21 Columbia Journal of Transnational Law 305; W A Qureshi, ‘Protecting the Common Heritage of Mankind Beyond National Jurisdiction’ (2019) 36 Arizona Journal of International and Comparative Law 79. These authors discuss the fact that while the common heritage principle recommends that resources of the common area be shared equitably among States, the principle provides no quantitative framework for determining or distributing the equitable share of a resource and this has created uncertainty). This means, for example, that natural resources in the high seas may not be owned or apportioned otherwise than in accordance with rules promoting the common interest of all nations. The high seas, which lie beyond state maritime boundaries, are regarded as international highways that are incapable of being appropriated or subjected to exclusive state sovereignty. See Northern Territory v Arnhem Land Aboriginal Trust (2008) 236 CLR 65

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24 esp at [21] per Gleeson CJ, Gummow, Hayne, and Crennan JJ. Advances in technology have made deep sea mining possible. Any request to mine resources within the deep sea must be evaluated by the International Sea-bed Authority, which was set up under the United Nations Law of the Sea Convention, 1983, Part XI, Section 4. Australian ratified the Convention in 1994 as have many other developed countries. Resources and minerals located within this area may only be alienated in accordance with the rules set out under Part XI of the Convention. The International Sea-Bed Authority has also established a further body known as the ‘Enterprise’ to control mining activities in this area and it is recognised under Annex IV to the Convention. The Convention will only apply, however, to those countries that have ratified it. This is exemplified by the dispute that has arisen in the South China Sea where China has claimed territorial sovereignty over a range of interspersed islands. The Philippines has objected, bringing a claim to the United Nations Permanent Court of Arbitration arguing, for example, that these territorial claims interfere with fishing rights guaranteed under the Convention, as well as the environmental damage alleged to have occurred following island reclamation and most significantly, the scope of China’s maritime territorial claims. See R Mitchell, ‘An International Commission of Inquiry for the South China Sea: Defining the Law of Sovereignty to Determine the Chance of Peace’ (2016) 49 Vanderbilt Journal of Transnational Law 749. One of the most interesting common heritage issues lies in the question of whether and how outer space may be owned or controlled. This issue is gaining increasing relevance with the development of advanced satellite technology and the expansion of space exploration programs. One of the primary concerns with endorsing private ownership in outer space is the potential for conflict that such claims may create. To date, space initiatives have assumed that activities are only authorised in order to promote the ‘common heritage of mankind’ (CHM). This stems from the 1967 United Nations Outer Space Treaty where Art I sets out that space is the ‘province of all mankind’ and is not subject to sovereignty claims by individual states. This treaty was ratified by 98 countries including the United States. This effectively means that for those countries privy to the treaty, outer space cannot be appropriated privately and its use belongs equally to all people. However, despite the existence of the treaty, countries with developed satellite and space technology have attempted to assert private property rights in these areas. Consider the comments in the following extract (E Husby, ‘Sovereignty and Property Rights in Outer Space’ (1994) 3 Journal of International Law and Practice 359 at 360): From the beginning of the space age, man has known that space would sustain a wide array of activities and uses. Ostensibly to assure that activities and interests in space might serve the values, needs and wants of all humankind, as well as individual persons and nations, a principle arose that no state should be allowed to have exclusive control of outer space, or of its components including the natural resources of the moon and other celestial bodies. It is clear that if space is to be used for peaceful purposes we must have free, open and orderly conduct on the part of space-faring states. Early in the development of space law, it was recognised that international cooperation with respect to the uses of space is essential to the future of mankind. Thus a state practice emerged that outer space should be used for peaceful purposes. This principle may have initiated the recognition or establishment of a generally accepted rule to the effect that in principle, outer space is, on principles of equality, freely available for all in exploration and use in accordance with existing or future international law or agreements. These are laudable principles, but what do they mean exactly? How far do they go? Do they exclude any or all claims of sovereignty over the space environment? If so, how can any governmental organisation including the United Nations, be permitted to exercise possession and control over outer space? Do these 66

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principles prohibit private ownership over space? If so, what of our cherished right to liberty and property? Do they not exist in outer space? Many problems are likely to arise if one state, individual or organisation asserts exclusive rights over celestial bodies. The obvious concern is, of course, conflicting claims to the same property. These problems inevitably lead to political tension, and increase the possibility of armed conflict. This is the antithesis of the policy behind space law. The underlying thesis of the major treaties making up the framework of space law is the idea of a single human race moving outward from our tiny sphere to explore the vast regions of space, the common heritage of mankind. It is within this thesis that the principles prohibiting exclusive control over the cosmos and requiring equal access originate. But in a world of divided nations, without a political synthesis, how can we move forward as one?

In 1984, the Moon Treaty was implemented with the aim of regulating access, control and ownership over the moon. The treaty promotes a safe and rational division of lunar resources and an equitable division of benefits. As with other natural resources, it implements the common heritage principles under Art II. Despite this, the Moon Treaty does not provide a definitive allocation of property rights, as it only commits signatories to undertake the establishment of an international regime. Private ownership is not explicitly prohibited. The Moon Treaty has not achieved significant success as many countries are not signatories. Non-signatories include countries like the United States, which have the technology to explore and exploit outer space and which also has a developed satellite technology program. The United States did, however, participate in negotiations (International Space Activities 1979: Hearings Before the Science Committee on Space Science and Applications of the Committee on Science and Technology 96th Congress 82 (1979). For such countries, property rights on the moon may be asserted on the grounds of discovery and settlement through the development of a space exploratory station and other acts of exploration. Interest in the exploitation of natural resources on the moon has steadily increased as technology has developed. For a further discussion on this see: K M Zullo, ‘The Need to Clarify the Status of Property Rights in International Space Law’ (2002) 90 Georgetown Law Journal 2413 at 2424, where the author notes that the United States’ interpretation of the Moon Treaty has involved the construction of the common heritage of mankind language so ‘that access to outer space and celestial bodies is available to all without imposing substantive obligations upon states or establishing a regulatory regime. Thus, the United States’ interpretation of the CHM principle is similar to and consistent with its interpretation of the province of mankind principle in the Outer Space Treaty; both are considered general guidelines rather than imperatives to action.’ Neither the Outer Space Treaty nor the Moon Treaty deals with the difficult issue of space debris, which is becoming a greater concern with continued space use and collisions among existing space debris. Eventually, space debris may become so dense and cluttered that it will make space missions impossible. Regulation on this issue is desperately needed and is probably going to have to come from the United Nations. For a further and more detailed discussion on this problem see: G Hollingsworth, ‘Space Junk: Why the United Nations Must Step in to Save Access to Space’ (2013) 53 Santa Clara Law Review 239. See also A D  Pershing, ‘Interpreting the Outer Space Treaty’s Non Appropriation Principle: Customary International Law from 1967 to Today’ (2019) 44 Yale Journal of International Law 149 (where the author argues that the appropriation principle in the treaty was intended to prevent both private individuals and corporations from appropriating any part of outer space, including the moon and celestial bodies, but that in modern times, States have increasingly carved out an exception, allowing the expropriation of extracted space resources including space debris). 67

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1.31  Revision Questions 1. What is the difference between natural and positive rights and how do you think private property should be justified and regulated? 2. Can private property be ‘justified’ and what are the challenges presented by the age of the Anthropocene? 3. What are the alternatives, if any, to a private property regime? 4. What is the basis of the common heritage of mankind principle and how has it been applied to (i) natural resources interests and (ii) outer space? 5. What are some of the problems with the suggestion that human life cannot be owned? To what extent is it possible to ‘own’ human body cells? 6. Why is it not possible to own a ‘spectacle’? What were some of the difficulties that the High Court outlined in Victoria Park Racing and Recreation Grounds Ltd v Taylor that precluded a spectacle or view from being owned?

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1.32  Overview — Categorisation of Property Objects

Categorisation of Property Objects

Real Property (Land)

Corporeal Forms 1. Land 2. Fixtures 3. Native title 4. Territorial sea and sea-bed

Incorporeal Forms 1. Easements (incorporeal rights over land) 2. Profits à prendre 3. Security interests/ charges 4. Carbon sequestration rights ...

Chattels Real (Lease)

Types of Leasehold Interests 1. Fixed term 2. Periodic 3. Tenancy at will 4. Tenancy at sufferance

Personal Property (Goods/...)

Corporeal Forms 1. Goods/ Chattels/ Choses in possession

Incorporeal Forms 1. Chose in action — legally enforceable right against personal property; eg, – debt – shares – bank account

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Possession, Title and Personal Property The Meaning of Possession: Land and Goods 2.1 Finders Keepers Rule 2.2 The Scope of Possessory Title 2.3 Case: Doodeward v Spence 2.3 Commentary 2.4 Case: GLS v Russell Weisz 2.5 Commentary 2.6 Case: The Natural Law Duty to Recognize Private Property Ownership: Kant’s Theory of Property in His Doctrine of Right 2.6 Revision Questions 2.7 Enforceability of Possessory Title 2.8 Case: Asher v Whitlock 2.8 Commentary 2.9 Case: Perry v Clissold 2.9 Commentary 2.10 Possession and Crown Title: Toohey J in Mabo v Queensland (No 2) 2.11 Commentary 2.12 Revision Questions 2.13 The Finders Keepers Rule 2.14 Case: Waverley Borough Council v Fletcher 2.14 Commentary 2.15 Bailment: Consensual Acquisition of Possession 2.16 Possession of Goods: The Jus Tertii Defence 2.17 Case: Costello v Chief Constable of Derbyshire Constabulary 2.17 Commentary 2.18 Revision Questions 2.19 The PPSA 2.20 Revision Questions 2.21 70

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Possession and Seisin 2.22 Case: Seisin and Possession as the Basis of Legal Title 2.22 Remedies for Real and Personal Property 2.23 Revision Questions 2.24

The Meaning of Possession: Land and Goods 2.1  Possession is essentially a physical concept referring to occupation, control or dominion over corporeal objects such as land, goods or resources. If the appropriate level of control can be established, the holder may acquire possession. The threshold physical requirement for possession is complete and absolute dominion rather than a temporary or fleeting control. In the words of Pollock and Wright, ‘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’: An Essay on Possession in the Common Law, Clarendon Press, Oxford, 2000, p 21. Physical possession will arise where an individual has a high level of control over land or an object or resource because that control gives them the power of exclusion: To possess is to have absolute power of dealing with the thing oneself and absolute power of excluding the action of everybody else … Possession is limited of course to the thing possessed, but in other respects the idea of possession is the intoxicating one of absolute and unlimited dominion. A S Thayer, ‘Possession’ (1905) 18(3) Harvard Law Review 196 at 213.

The nature or character of the control, occupation or dominion that must be proven before physical possession can be established depends upon the nature of the land, object or resource in issue. When dealing with land that includes a residential dwelling, physical possession will generally arise where it can be established that the dwelling is substantively occupied in a permanent rather than a temporary manner. By contrast, when dealing with vacant land, physical possession will generally exist where acts of physical control such as fencing or gate-locking can be established. Chattels or personal property are far easier to physically possess because of their inherently movable nature. A person may take control and therefore possess a chattel by the simple act of holding it in a private capacity. For example, a person will possess a motor vehicle where it is locked in his or her garage. The relative ease with which physical possession can be established over personal property makes contextual evaluation important. Possession of personal property can arise in a range of consensual and non-consensual circumstances. Consensual possession will arise where physical possession is consented to by the owner or previous possessor of the goods. This type of possession is often limited or temporal in nature because it is conferred for a specific purpose and is accompanied by legally enforceable rights to reclaim the goods. By contrast, non-consensual possession that is not the product of an illegal act may arise where physical possession has been acquired without the consent of the owner or previous possessor of the goods. This may occur where the owner cannot be found or because there has been no previous owner as the goods have been ‘discovered’ for the first time. Non-consensual possession is more likely to confer an enduring possessory title on the holder because of the limited availability of legal rights in third parties to reclaim the property. 71

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Where a holder acquires physical possession, that possession will also have legal consequences. Physical possession confers a legal title upon the holder that gives that holder an enforceable legal title in the property. This possessory title may, however, be defeated by other legal rights. The basic rule is that possessory title is enforceable against all the world except for the true owner. The true owner will always have a superior claim to that of the possessor because proprietary title is stronger than possessory title. Further, if the title that physical possession confers is the product of consensual possession, that title may be subject to additional contractual or tortious obligations. For example, a tenant may acquire exclusive possession of land and the possession will be regulated by the terms of the lease contract as well as any relevant statutory provisions. Alternatively, where the physical possession of goods are consensually transferred by the owner, the tortious principles of bailment may arise, requiring the possessor to exercise a reasonable standard of care over the goods and obliging the possessor to return the goods into the owner’s possession when requested. While possession of land is generally the consequence of either physical occupation or other acts of control such as fencing, or gate-locking, which may be consensual or nonconsensual, a broad range of circumstances exist in which physical possession of personal goods may arise. Consider the following: • A person may find goods that have been misplaced by the true owner (finder). • A person may discover goods that were never previously possessed (discovery). • A person may steal goods from the true owner (non-consensual, illegal theft). • A person may be given consensual possession of goods by the true owner — whether by sale, lease, gift, bequest, or simply for temporary safe-keeping (consensual transfer).

Finders Keepers Rule 2.2  The legal inchoate possessory title that arises upon establishing physical possession is a particularly important protective device for personal property holders. Where goods have been found or discovered, the true owner may be absent and the legal title that physical possession confers allows the holder to retain an interest in those goods that is almost as powerful as full ownership. This is because the holder can enforce that title against all the world apart from the true owner. This is known as the finders keepers rule. In Hannah v Peel [1945] 1 KB 509, the finder of an old, valuable brooch was held to be in possession of it simply because it was held in a private capacity and, in the absence of the true owner, the ‘finder’ acquired a good title that was enforceable against the rest of the world because the true owner could not be located. In some situations, however, taking control of the object and acquiring possessory title is difficult because of the context in which the object exists. In the case of the shipwreck, The Tubantia [1924] P 78; [1924] All ER 615, it was held that the finders of a shipwreck were in possession of the wreck because they had done everything that a true owner could reasonably be expected to do in watching over and investigating the wreck. Despite the difficulty of maintaining a constant surveillance of an area located in the middle of the sea, the court noted that the divers had explored the wreck, removed obstructions, increased the accessibility of the wreck, worked upon the cargo of the wreck, and consistently brought up different structural pieces of the wreck throughout the diving period. In light of this the court concluded that the divers were in effective control of the wreck because they were in 72

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a position to prevent any similar work being carried out by other divers and were therefore able to preclude anybody else from exercising a similar level of control.

The Scope of Possessory Title 2.3  It is important to understand the nature of possessory title. The importance lies in the fact that it confers a title that is good against all the world except for the true owner. While physical possession is a factual concept, focused upon corporeal control, possessory title is an inchoate concept. The enforceability of possessory title is founded on the right that it confers upon the holder to seek possession. Hence, even a dispossessed holder can maintain an action against the dispossessor (disseisor), because the inchoate legal right retained by the prior possessor is enforceable against the subsequent physical possessor. In this sense, possession is properly acknowledged as the ‘root of title’: see Asher v Whitlock (1865) LR 1 QB 1; Perry v Clissold [1907] AC 73; F Pollock and R S Wright, An Essay on Possession in the Common Law, 2000, pp 94–5. As outlined by Isaacs and Rich JJ in Russell v Wilson (1923) 33 CLR 538: Possession in the relevant sense, is not merely evidence of absolute title; it confers a title of its own, which is sometimes called a ‘possessory title’. This possessory title is as good as the absolute title as against, it is usually said, every person except the absolute owner. LEGAL PROBLEM Bob finds a wallet on a park bench. The wallet contains a large amount of money. Morally, Bob might feel compelled to take the wallet to the local police station. Legally, however, once Bob puts the wallet into his pocket, he acquires a possessory title. Bob may lose physical control when he hands the wallet over to the police; however, he will retain his inchoate legal possessory title that will remain enforceable. Where the owner cannot be located, Bob, as the finder, retains a better title than other possessors and the law will protect that title.

Possessory title confers a present, enforceable right upon the possessor in physical control as well as a legal right to enforce possession in circumstances where the holder is dispossessed of factual possession. The distinction between the physical and inchoate nature of possessory title has been discussed in a number of different contexts. Two examples are extracted below. The first is an extract from the judgment of Higgins J in Doodeward v Spence (1908) 6 CLR 406 that, while concluding that ownership over a human corpse was unlawful, discusses the concept of a ‘special property’ interest which a ‘mere possessor’ acquires as against one who takes goods from him. The second is an extract from an article outlining a different philosophical approach to the concept of possession. This extract examines what the philosopher Emmanuel Kant described as ‘intelligible, legal possession’ over an object, based upon reason on the one hand and ‘factual physical possession’ on the other hand, based upon corporeal control and factual dominion. The philosophical extract provides a useful analysis for understanding how possessory title functions. Once we understand, as outlined by Lord Kenyon CJ, that ‘any possession is legal possession’ (Graham v Peat (1801) 1 East 244 at 246 — quoted by Pollock and Wright, An Essay on Possession in the Common Law, 2000, Pt 1), the connection between factual control and legal enforceability becomes clearer. 73

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  Doodeward v Spence  (1908) 6 CLR 406 Higgins J: … This action is for conversion and detinue of the corpse of a still-born two-headed child. The birth took place in 1868, in New Zealand. The medical man in attendance took the body away, and kept it in a bottle till his death in 1870. His effects were sold by auction; and at the auction the father of the plaintiff bought the bottle and the contents for about £36. The plaintiff exhibited the bottle and contents for gain; was prosecuted and arrested; and the defendant, a Sub-Inspector of Police, seized them under warrant. The plaintiff has demanded the return of what was seized; but the defendant, although he has returned to the plaintiff the bottle and the spirits, still retains the corpse at the University museum. No skill or labour has been exercised on it; and there has been no change in its character. Under these circumstances, I cannot see any reason for doubting that, if this corpse can be the property of any one, it is the property of the plaintiff as against the defendant. It is enough that the plaintiff was in possession of the corpse, and that the defendant took it having no better title to it than the plaintiff. But, in my opinion, there can be no right to recover in trover or in detinue in respect of a thing which is incapable of being property. The action of trover and the action of detinue are actions for wrongfully converting or wrongfully detaining the plaintiff’s property. The foundation of the action is property. In pleadings, the goods converted or detained are stated to be the plaintiff’s goods. It is true that a mere possessor is treated by the law as having the property in goods as against one who takes them from him wrongfully; and at first I thought that, even if there could be no property in this corpse, there could be a right of possession as against the defendant, who took it from the plaintiff. The law treats the right of the mere possessor as against one who takes the thing from him as ‘special property.’ But if there can be no property, there can be no ‘special property;’ and there is no instance that I know of an action of trover or detinue lying for a thing which cannot be the subject of property. But in Fines v Spencer it was held that the possessor of a hawk — a bird not the subject of property until reclaimed or tame — could not succeed in trover against one who took possession of it as it was not ‘reclaimed or tame’; and see Lord Raymond; Grimes v Stacke. The same rule applies to deer: Fines v Spencer. Property involves a right of exclusive and permanent possession. Trover lay for negroes, at the time when the British law recognised property in negroes: Chambers v Warkhouse. They were then merchandise — property. But no one ever heard of an action of trover or detinue for a human being whether alive or dead unless in the case of a slave. No one has heard, I think, of a guardian, entitled to the custody of his ward, bringing an action of trover for the ward. He has to proceed for a habeas corpus, or in equity. Perhaps the true basis of ‘special property,’ the right of a mere possessor to recover from a wrongdoer, is that possession furnishes an irrebuttable presumption as against the wrongdoer that the possessor is the owner; and that is the reason why a plaintiff, if a mere possessor, recovers the full value of the chattel from the defendant. The wrongdoer is estopped from disputing the plaintiff’s title — if there can be a title …

Commentary 2.4 In Doodeward v Spence the High Court concluded that property confers the right of

exclusive and permanent possession; however, if the particular resource or object is ‘special’ in that it cannot be treated as property, because, for example, it is a human life, then it is not possible to acquire a possessory title. Possessory title cannot arise over something that is incapable of being owned. This decision upholds the established principle that a human corpse cannot be owned, although it may be subject to burial rights. It also highlights the non-physical nature of legal, possessory title that is sourced in the enforceability of that

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title against a wrongdoer who acquires possession. In a separate judgment, Griffiths CJ in Doodeward v Spence further suggested that a human corpse may, in some circumstances, be treated as property which then allows a holder to acquire possessory title. His Honour stated: ‘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’: at 414.1 The decision in Doodeward v Spence was approved by Mossop J in Roblin v Public Trustee for the Australian Capital Territory [2015] ACTSC 100. In that case, the issue was whether cryogenically stored semen constituted personal property such that upon the death of the young man who had stored the semen, it could pass on under intestacy, to his surviving wife. Mossop J approved of the conclusions of the High Court in Doodeward v Spence; however, noted that given the technological developments, a rigid application of the ‘no property’ rule to validly donated human tissue would ‘open up a cavernous regulatory vacuum which will rapidly widen as umbilical cords, frozen blood vessels, bones, joints and freeze-dried nerves (to name just a few) join blood and blood products as items of storage in tissue banks.’2 As such, Mossop J concluded that human tissue could constitute property, but cases should be determined in accordance with the principles of reason and sense. 2.5  This was further explored by Martin CJ in the Supreme Court of Western Australia in GLS v Russell Weisz (2018) 52 WAR 413, which is extracted below, where it was held that a woman did have property in the sperm of her deceased partner that had been stored at a clinic.

  GLS v Russell Weisz  (2018) 52 WAR 413 Facts: The plaintiff was in a de facto relationship with her partner. They decided to store sperm with a clinic for the future. The partner of the plaintiff subsequently died. The plaintiff was unable to use the sperm in order to conceive a child in Western Australia. However, there is no equivalent prohibition upon the posthumous use of sperm in the Australian Capital Territory (ACT), and a clinic in that jurisdiction was prepared to use the sperm in IVF procedures conducted in the ACT in an endeavour to impregnate the plaintiff after the death of her partner. The plaintiff sought declaratory relief to give effect to the following propositions: 1. she has the right to direct the clinic storing the sperm extracted from Gary’s body to transfer that sperm from Western Australia to the ACT; 2. on the proper construction of the Directions, the approval of the RTC (Reproductive Technology Council of Western Australia) is not required to export the sperm from Western Australia; 3. if, on their proper construction, the Directions do require the approval of the RTC before the sperm may be exported from Western Australia, the Directions are, to that extent, invalid or should be read down so that they do not require the approval of the RTC. (Discussion regarding Question 1 is extracted below.) 1. See also Williams v Williams [1881] Ch D 659; R Magnusson, ‘The Recognition of Proprietary Rights in Human Tissue in Common Law Jurisdictions’ (1992) 18 Melbourne University Law Review 601; P Matthews, ‘Whose Body? People As Property’ (1983) Current Legal Problems 193; D Mortimer, ‘Property Rights in Body Parts: The Relevance of Moore’s Case in Australia’ (1993) 19 Monash University Law Review 217. 2. Quoted from N Palmer and E McKendrick, Interests in Goods, 2nd ed, LLP, London, 1998, at p 44. See also the discussion by Master Sanderson in Roche v Douglas [2000] WASC 146; (2000) 22 WAR 331. 75

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Martin CJ: Question 1 is limited to the question of whether the plaintiff has the right to direct the clinic storing the sperm to transfer the sperm to another clinic in the ACT. The Question does not, in its terms, require the court to determine whether or to what extent the plaintiff has rights of property in the sperm stored by the clinic. I infer that the Question was deliberately crafted in this way. Nevertheless, the plaintiff submits that she does have rights of property in the sperm as the foundation for submissions put in respect of Question 2, to the effect that the word ‘donation’ in cl 6.5 and cl 6.6 of the Directions bears the narrowed legal meaning of transfer of property from one person to another without consideration. In that context the plaintiff submits that she acquired property in the sperm upon its extraction, and retains that property, with the consequence that no ‘donation’ has occurred. For the reasons which I give below, I do not accept the plaintiff’s contentions with respect to the meaning properly given to the word ‘donation’ and its variants in the Directions and, in particular, do not consider that the transfer of proprietary interests or rights has any bearing upon its meaning and application. The question of whether the plaintiff’s rights with respect to the sperm held in storage can be characterised as proprietary in nature involves complex and vexed questions of principle. Because of my assessment that the resolution of that question is not determinative of the outcome of this case, my views on that topic can be expressed with relative brevity. It should first be acknowledged that the concept of ‘property’ may be ‘elusive’.  In a broad sense, ‘property’ may be used to describe a legal relationship between a person and a thing. The relevant legal relationship will generally involve ‘a degree of power that is recognised in law as power permissibly exercised over a thing’.  The nature of the powers recognised in law in relation to a thing may vary significantly, depending upon the context in which the term ‘property’ is used. As the plurality observed in Yanner v Eaton: ‘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’ … 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 plurality illustrated this proposition by reference to the topic under consideration in this case, when they observed that the question of ‘whether, or to what extent, there can be … property in human tissue may illustrate some of the difficulties in deciding what is meant by “property” in a subject matter’. So, in the present case the answer to the question of whether the plaintiff has ‘property’ in the sperm extracted from Gary’s body might turn upon the nature of the power sought to be exercised in relation to the straws in which the sperm are being stored. If the question were, for example, whether the plaintiff has the power, recognised by law, to transfer to another person the full and unrestricted right to use or direct the disposition of the sperm, the answer might well be in the negative, because such a power would be inconsistent with the purpose for which the sperm were extracted in accordance with s 22 of the HTT Act. On the other hand, if the question was whether the plaintiff has the power to direct that the straws be transferred to another clinic for storage pending their use, the answer might be quite different. Question 1 has been formulated in such a way as to pose a question of the latter kind, rather than a question of the former kind.

No property in a corpse It is often said that there is a common law principle to the effect that there is no property in a human corpse. As Dr Hardcastle points out, this principle may have evolved as a consequence of misinterpretation by Blackstone, and mistranslation by Sir Edward Coke. Despite its dubious origins, the principle is now too well established to be doubted. 76

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Body parts As Edelman J has pointed out, writing extra curially, it does not follow from the principle that there is no property in a corpse that there can be no property in a part of a body. So, for example, if a person uses hair cut from their head to create a wig, there is no apparent reason why the wig as a whole, including the hair, could not be the subject of conventional property rights. Following severance the hair becomes a thing quite separate and distinct from the body from which the hair was severed, in the same way as grain harvested from a crop becomes property separate and distinct from the crop, by reason of the act of harvest, or fruit harvested from a tree becomes property separate and distinct from the tree when it is picked. However, at least in the case of body parts or tissue removed from a corpse, the English and Australian cases rely upon a narrower principle than mere severance to sustain the proposition that, in some cases, tissue removed from a body can be ‘property’. The line of cases establishing that, in some circumstances, tissue or part of a human body removed from a corpse can be the subject of property rights are generally described as falling within the ‘work or skill’ exception to the ‘no property’ principle, by reference to the words used by Griffith CJ in the case generally regarded as the source of this principle: Doodeward v Spence. In that case, Griffiths CJ observed: [A] human body, or a portion of a human body, is capable by law of becoming the subject of property. It is not necessary to give an exhaustive enumeration of the circumstances under which such a right may be acquired, but I entertain no doubt that, when a person has by the lawful exercise of work or skill so dealt with a human body or 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 Roche v Douglas Master Sanderson incorporated a significant portion of the reasons given by Griffith CJ in Doodeward v Spence in his reasons for concluding that tissue samples taken from a corpse were property in respect of which orders could be made by the court pursuant to O 52 r 3(1) of the Rules of the Supreme Court 1971 (WA). In that case the plaintiff sought an order to the effect that the tissue be tested in order to extract the DNA of the deceased, which could then be used for the purpose of assessing whether or not the plaintiff was the biological daughter of the deceased. It is not clear from the reasons whether the Master relied upon the work or skill required to remove the tissue samples from the body of the deceased in such a way as to render them amenable to DNA testing — the reasons rather suggest some broader approach based upon the fact that the samples had been severed from the body and had a separate and real physical presence. In Yearworth v North Bristol NHS Trust the English Court of Appeal relied upon the work and skill exception, along with other factors particular to the circumstances of that case, to conclude that men who were claiming damages for negligent storage of their sperm were the owners of that sperm. In Australia there have been a number of cases in which it has been held, generally in reliance upon the work and skill exception, that frozen sperm samples can be ‘property’ in the sense that a person or persons may have rights recognised by law in respect of such samples. In Bazley v Wesley Monash IVF Pty Ltd the widow of a man who had arranged for samples of his sperm to be stored by an IVF clinic prior to his undergoing chemotherapy obtained a court order restraining the clinic from destroying the samples after his death on the basis that the sperm samples were property. In Edwards; Re Estate of Edwards the widower and administrator of the estate of a man from whom sperm had been extracted posthumously sought a declaration that she was entitled to possession of the sperm (even though she was not entitled, under the law of New South Wales, to use the sperm for the purposes of artificial reproduction). R A Hulme J applied the work and skill exception enunciated by Griffith CJ in Doodeward v Spence to conclude that the sperm removed from the deceased was property, acknowledging both the imprecision of the concept of ‘property’ in such a context  and the fact that any right or power encompassed within the relevant notion of ‘property’ could be subject to statutory constraint as a result of the legislation relating to artificial reproduction. 77

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R A Hulme J also addressed the question of the identification of the person who had proprietary rights in the sperm. He immediately excluded the deceased, on the basis that as he could not hold any proprietary right in his semen while he was alive, it could not form part of the assets of his estate upon his death. He also excluded the possibility that the property might be held by the doctors and technicians who exercised the work and skill required to extract the sperm from the body of the deceased, on the basis that they were not doing so for their own purposes, but performed those functions on behalf of the widow as her agents. R A Hulme J also excluded the prospect that the widow could have a proprietary right in the sperm samples as an incident of her rights as administrator of the deceased’s estate, on the basis that her rights in that capacity were limited to the duty to decently inter the corpse of the deceased. However, R A Hulme J acknowledged that the views of the administrator of the estate of the deceased would be relevant to the exercise of the discretion with respect to the grant of declaratory relief, and the fact that the widow was also the administrator of the estate was relevant in that respect. In the result, R A Hulme J concluded that such property as existed in the sperm lay with the widow on the basis that the sperm was removed on her behalf and for her purposes and that no-one else in the world had any interest in them. Having concluded, after reviewing the relevant statutory provisions, that they did not preclude the relief sought, R A Hulme J declared that the widow was entitled to possession of the sperm recovered from the body of her late husband. In Re H, AE (No 2), in similar factual circumstances, the Supreme Court of South Australia arrived at the same conclusion as the Supreme Court of New South Wales in Edwards. Gray J relied upon the work or skill exception to conclude that sperm extracted posthumously from the deceased was property and that the widow who had caused the sperm to be removed was the person entitled to such proprietary rights as existed in relation to the sperm, including a prima facie entitlement to possession of the sperm. There are, therefore, three decisions at first instance in the Supreme Courts of Queensland, New South Wales and South Australia in factual circumstances very similar to the present case in which the binding authority of  Doodeward v Spence has been applied to produce the conclusion that rights of property can exist in relation to samples of sperm removed posthumously and that such rights will generally be enjoyed by the person who caused the sperm to be extracted rather than the deceased, or the relevant medical personnel, or the administrator of the deceased estate. As the reasoning in those cases appears to me to be correct and consistent with binding authority, there is no reason why I should not follow those decisions and conclude that the plaintiff has rights with respect to the sperm samples currently in storage which can be categorised as proprietary in nature. The terms in which Question 1 has been cast do not require me to determine the entire ambit or content of the plaintiff’s rights with respect to the sperm samples taken from Gary. As I have already noted, those rights may well be constrained by the operation of, for example, s 22 of the HTT Act, such that the plaintiff could not direct any use of the sperm which is inconsistent with the purpose for which it was removed, in accordance with the authority conferred by that section. The only right which I am required to assess for the purposes of Question 1 is the plaintiff’s right to direct the clinic currently storing the sperm samples to transfer them to another clinic in the ACT. As the exercise of that right would be entirely consistent with the purpose for which the sperm was removed pursuant to the authority conferred by s 22 of the HTT Act, there is no reason, consistently with the authorities to which I have referred, why the plaintiff should not be held to enjoy that right. Before leaving the topic of the plaintiff’s rights with respect to the stored sperm samples, it is necessary to address submissions advanced on behalf of the defendants based on s 25(a) of the HRT Act. I have set out that section above. The defendants rely on the provision for two propositions: (a) because the section refers to rights ‘as though personal property’ the HRT Act impliedly excludes the existence of proprietary rights in human gametes; and 78

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(b) the effect of the section is to vest all relevant rights in the ‘gamete provider’, who in this case was Gary, not the plaintiff. Each proposition must be rejected. For the reasons I have given, the existence of property rights in human tissue remains contentious and, apart from cases like this, the precise circumstances in which proprietary rights in human tissue will be recognised at law remain to be elucidated by decisions of the courts. The HRT Act was enacted well before the Australian decisions recognising the existence of proprietary rights in stored sperm samples to which I have referred. Given this legal uncertainty, the fact that the legislation is expressed in terms of analogy to personal property rights cannot support the inference that the legislature intended to exclude the existence of any rights other than those expressly recognised by the statute. Turning to the second proposition, it may be accepted that, in the ordinary course, the expression ‘gamete provider’ would be taken to refer to the person from whom the gametes are obtained. That is because, in all but the most exceptional circumstances, such as this case, the person from whom the gametes are obtained will be alive at the time they are taken and capable of enjoying rights of control over the gametes, being the rights expressly recognised by s 25(a). However, the circumstances of this case are far from usual. There is no evidence which establishes the point in time at which technology developed to enable posthumous extraction of sperm, thereby establishing whether or not the legislature might be taken to have known of such a possibility at the time the HRT Act was passed in 1991. It can, however, be reasonably inferred that the legislation has been cast in terms apt to the infinitely more common circumstance in which gametes will be obtained from a person who is alive at the time, rather than posthumously. Although the legislature has turned its mind to the question of posthumous use of gametes, by reference to the specification of that topic in s 18(1)(f), legislative contemplation of the prospect that a gamete provider might die before the gametes have been used is quite different to legislative contemplation of posthumous extraction of gametes. At all events, if the expression ‘gamete provider’ in s 25(a) is construed as a reference to Gary, in the circumstances of this case, the section can have no meaningful operation, as Gary was of course dead by the time the rights to which the section refers could be vested in him by its operation. There are at least two ways in which the section could be given a sensible operation in the circumstances of this case. One would be to construe it as only applying to a circumstance in which the person from whom the gametes were obtained is alive and capable of exercising the rights vested by the section. Another means of achieving a sensible operation for this section would be to construe the expression ‘gamete provider’ as applying, in the circumstances of this case, to the person who caused the gametes to be provided to the relevant licence holder - in this case, the plaintiff. On either construction, the section does not support the defendants’ argument. So, in summary, with respect to the defendants’ second proposition based on s 25(a), if the section is construed in the manner for which the defendants contend, it has no meaningful or sensible application to the circumstances of this case. Alternatively, if the section is given a construction which renders it applicable to the circumstances of this case, it does not support the defendants’ proposition. For these reasons, I agree with the parties that Question 1 should be answered affirmatively. Although it is not necessary to determine precisely what rights the plaintiff enjoys with respect to the stored samples of Gary’s sperm, those rights at least include the right to direct the clinic currently storing the samples to transfer them to another clinic in the Australian Capital Territory. Those rights derive from the plaintiff’s status as senior available next of kin within the meaning of s 22 of the HTT Act, the constraints upon the use to which the samples can be put by the operation of that section, and the fact that the plaintiff caused the samples to be extracted, and has paid, and continues to pay, the costs associated with their storage. …

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Commentary 2.6  The decision in GLS v Russell Weisz is an important one because it illustrates an increasing judicial cognisance of the importance of property in the context of IVF technology. C J Martin was prepared to follow the argument of Griffith CJ in Doodeward v Spence to hold that body parts could become property where they had been subject to the ‘work and skill’ rule — that being that where a person has by the lawful exercise of work or skill so dealt with a human body or part of a human body in their lawful possession that it has acquired some attributes differentiating it from a mere corpse awaiting burial, they acquire a right to retain possession of it. The act of giving sperm to a clinic for storage was, Martin CJ held, sufficient to activate this rule, thereby conferring property upon the widow who had caused the sperm to be stored. This effectively means that in the event of the death of the donor of the sperm, their partner can claim property entitlements and exercise relevant statutory powers in accordance with those entitlements. See also L Skene, ‘Property Rights in Human Bodily Materials: Recent Developments’ [2016] University of Otago Festschrifts 8; A Ho, ‘Taking Bodily Parts to the Cashier: Are the Courts Too Slow to Register?’ (2015) 40(1) University of Western Australia Law Review 387; J Edelman, ‘Property Rights to Our Bodies and Their Products’ (2015) 39(2) University of Western Australia Law Review 47.

  The Natural Law Duty to Recognize Private Property Ownership: Kant’s Theory of Property in His Doctrine of Right  Sharon Byrd and Joachim Hruschka (2006) University of Toronto Law Journal 217 … Kant states that the subjective condition of the possibility to use an external object of choice is possession. Although Kant will continue to consider different types of possession, he never gives us a definition of the basic concept itself. Again, Achenwall sheds light on Kant’s concepts and terminology. For Achenwall, possession is the physical capacity (facultas physica) to use a thing to the exclusion of others over time. Achenwall distinguishes between ‘natural possession’ and ‘juridical possession.’ Someone possesses a thing ‘naturally’ when he has control (potestas) over the use of the thing to the exclusion of other persons: he holds, for example, an apple firmly in his hand, or otherwise has control over the apple, and excludes others from taking it for an unspecified period of time. A person possesses a thing ‘juridically’ when she has control over the use of the thing to the exclusion of others and, in addition, has the intent to possess the thing as her own. She holds, for example, an apple firmly in her hand, or otherwise has control over the apple, excludes others from taking it for an unspecified period of time, and, in addition, has the intent to keep the apple in her possession as her own apple. Juridical possession, however, is not ownership. A person can take someone else’s apple and keep it as his own, but he is nonetheless not the real owner of the apple. In contrast, someone can possess a thing (naturally) not as her own but as someone else’s. If one person borrows something from another and intends to return it, then that person possesses the thing borrowed not as her own but as someone else’s. Furthermore, someone can possess a thing (naturally) not as his own and not as someone else’s but, rather, as no one’s thing, which he does not intend to possess as his own either. A person can pick up an apple lying on the road and exclude others from taking it for a certain period of time without the intent to possess it either as his own or as someone else’s but, instead, with the intent to discard it after looking at it.

B Kant’s concepts of physical and intelligible possession With Achenwall’s definitions in mind, let us consider the distinctions Kant draws between different types of possession. Kant distinguishes between ‘sensible’ and ‘intelligible possession.’ 80

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The former is ‘physical possession’; the latter is ‘merely legal possession.’ Kant calls sensible possession ‘physical possession’ in obvious reliance on the physical capacity so central to Achenwall’s theory of possession. We assume that Kant simply relies on Achenwall’s definitions ‘and concepts’ being generally known to his own readers and that, for Kant, possession also means ‘to the exclusion of other persons for an unspecified period of time.’ The decisive factor is the exclusion of third-party use. Without excluding others from the use of the thing at least for some period of time, one cannot physically possess an object. Physical possession is first of all empirical possession. Kant speaks of empirical possession mainly when focusing on the ‘empirical envisaging of possession’ and the ‘empirical concept of possession,’ both of which ‘depend on conditions of space and time.’ It is possession ‘in  appearance (possessio phanomenon).’ In this sense, I possess the place on which I am standing, the apple in my hand, the clothes I am wearing. One must distinguish this empirical envisaging of possession from possession as a ‘pure concept of the understanding,’ which abstracts from all conditions of space and time. Accordingly, possession as a pure concept of the understanding is an abstraction from the empirical concept of possession. The physical aspect of possession is preserved, however, because the possessor has the thing under his control. Kant, like Achenwall, uses the expression potestas for physical control. Such possession is, in other words, factual dominion over a thing. In this sense I (physically) possess my house even when I am not inside it. Kant uses the example of a field, which I can have under my control even when I am in a totally different place. Kant contrasts empirical possession and possession as a pure concept of the understanding by contrasting ‘holding’ (Inhabung) and ‘having’ (Haben) and explains the concept of ‘holding’ with the Roman law concept detentio. The German words Inhabung and Haben have the same root — hab — and even today the modern German expression Innehaben (‘holding,’ eg, a position) designates more concretely a situation of possession than the word Haben, for example, in the expression Habe und Gut (‘belongings and goods’). Although possession as a pure concept of the understanding (‘having’) abstracts from empirical conditions of space and time, this having is, in light of the ‘control’ (potestas) I exercise over my house when I am not present in the house, for example by locking the door, still sensible (physical) possession. In contrast, intelligible possession is ‘merely’ legal possession, meaning purely legal possession. Intelligible possession is ‘non-physical possession’ or ‘non-empirical possession.’ It is not the same as Achenwall’s juridical possession. I can be the intelligible possessor of a thing even without having the physical capacity to use the thing or control its use, which is not true of Achenwall’s juridical possession. Intelligible possession of a thing is also called ‘ownership.’ Intelligible possession is possession as a concept of reason (Vernunftbegriff), as opposed to physical possession of a thing under my control as a pure concept of the understanding (reiner Verstandesbegriff). Intelligible possession is legal dominion over the thing, possessio noumenon, in contrast to physical possession as factual dominion over a thing. Kant’s central question in his theory of possession is this: How is intelligible possession possible?

C The permissive law of practical reason To understand how Kant answers this question in § 2 of the Doctrine of Right, let us again consider the use of things. As we have noted above, and as Kant himself emphasizes several times, the concept of use is connected to the concept of (physical) possession. (Physical) possession of a thing is ‘the subjective condition of the possibility of any use [of it],’ which means that using a thing presupposes possessing it. Accordingly, ‘use’ of a thing means using it over an unspecified period of time to the exclusion of other persons, because one can speak of ‘(physical) possession’ of a thing only when third persons are excluded from using that thing over a certain period of time. In Kant’s discussion in § 2, the concept of an ‘object of my choice’ also plays a role. Kant defines ‘object of my choice’ as ‘something I physically have in my power (potentia) to use in 81

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any way whatsoever.’ Kant draws an important distinction between having something under my control (Gewalt or potestas) and having something in my power (Macht or potentia). I have something under my control when I physically possess the object, either because I am holding it in my hand (empirical physical possession) or because I otherwise have dominion over it in fact (non-empirical physical possession as a pure concept of the understanding). I have an object of my choice (a thing) in my power when I physically possess it or when I can take the object into my physical possession. The distinction, Kant notes, lies in the fact that control over an object (a thing) ‘presupposes’ ‘an act of choice,’ or, as we would say today, requires a taking of the object into my control with the will (intent) to possess it. Having something in my power refers to a simple capacity. For Kant’s discussion in § 2, a person need not actually have the object of her choice (the thing) in her possession. In order to conceive of an object as an object of choice, it is sufficient to think that she has it in her power, either because she physically possesses it or because she could acquire physical possession of it. Kant then reasons as follows: a thing is an object of my choice when I have it within my physical power (I possess it or could gain possession of it). I am thus physically capable of using the object of choice (the thing) to the exclusion of others, meaning that I can take the apple into my hand (empirical possession) and eat it, and I can take the field under my control (possession as a pure concept of understanding) and can sow and reap on it to the exclusion of others. The question then arises whether there can be an ‘absolute prohibition against using’ the object of my choice that I intend to use. Kant emphasizes the absolute nature of the prohibition and asks, Can it always be ‘wrong’ to use the thing (to the exclusion of others)? Of course it is prohibited to eat an apple or to use a field that belongs to someone else. Still, there are situations in which a thing is within my range of (physical) power that is not someone else’s. Can it be prohibited for me to use this thing (to the exclusion of others)? Kant’s answer is negative. ‘Pure practical reason’ can ‘in regard to’ such a thing contain ‘no absolute prohibition of [its] use.’ Consequently, if I violate no one else’s rights, then it cannot be (legally) prohibited to use an object of my choice for an unspecified period of time, to the exclusion of others, if I am physically capable of doing so. Kant’s reasoning is that such a prohibition ‘would be a contradiction of external freedom with itself.’ If use of a thing to the exclusion of others were wrong, ‘freedom would rob itself of the use of its choice in regard to an object by placing all usable objects beyond any possibility of using them, ie, it would destroy them in a practical sense and make them into res nullius.’ Kant is not simply speaking metaphorically. Usable things would become legally unusable. Such a prohibition would mean that I could not legally acquire control or have control over a (masterless — herrenlos — or unowned) field, whose ploughing, sowing and reaping presuppose my physical control over the field to the exclusion of others’ use over a longer period of time. Under such a law, I could not take and eat an (unowned) apple legally. No one would be permitted to do so. The field and the apple would be unusable by force of ‘law.’ As a consequence, the entire land and the things upon it could not be used by force of law. We cannot conceive of such a law as a law of reason and thus as a law of freedom. Accordingly, we must assume that acts of taking possession and using objects of choice for an unspecified period of time to the exclusion of others are legally permitted. Legally, I am permitted to take the unclaimed field under my control and keep it under my control. I am permitted to take and eat the unclaimed apple. In each case, I am permitted to exclude others from using the field and the apple. ‘I am permitted …’ means, in each case, that I am free to acquire and keep control of the field and the apple, or not to do so. In this context, the permission extends farther than it may seem to do at first blush. In his argument, Kant presupposes something as self-evident that may not be immediately clear to his readers. Persons who first acquire physical possession of (unowned) things and use them do so with precisely one of three possible intentions: they acquire them as their own, as someone else’s, or as no one’s. Kant’s argument covers all three cases, because the argument is not 82

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limited by the actor’s permissible intent in taking possession. For Kant, it is thus allowed to take an unowned thing into possession as one’s own; it is allowed to take it into possession as someone else’s; it is allowed to take it into possession as no one’s. Whatever the taker’s mental state may be, taking the thing into possession is permitted. Hence, it is allowed to take unowned things into physical possession for an unspecified period of time to the exclusion of others with the intent that they be one’s own, as Achenwall phrases it for his concept of juridical possession. If I am permitted to take an unowned thing into possession to the exclusion of others, then I am permitted to take it into possession as mine. If so, then the institution of ownership is established. Possession as one’s own becomes one’s own property if possession as one’s own is permitted. Thus Kant can say, at the end of his argument, ‘Therefore it is an a priori prerequisite of practical reason to assume that any object of my choice is an objectively possible mine and thine and to treat it accordingly.’ The subjective mine and thine (possession as one’s own) becomes the objective mine and thine (property ownership) if the subjective mine and thine is permitted. It is important at this stage to be clear on what Kant has established with his arguments. He has established that it is legally possible to have an external object of choice as mine to use. To be able to use an external object of choice, I must possess it. To possess an external object of choice, I must exclude others from possessing it for however long I choose to use it. I thus am legally permitted to possess an external object of choice to the exclusion of others over an unspecified period of time in order to use it. Kant indicates several times that ‘use’ means ‘any use whatsoever’ (beliebiger Gebrauch). ‘Use’ can mean, for example, in the case of a porcelain cup, that I drink out of it, put it on my shelf to admire as a work of art, wear it as an unusual hat, hide it to keep it for the next time I drink coffee, smash it at a wild party for fun, give it to my neighbour as a gift, sell it or rent it out through contract to another person, or pass it over to my child on my deathbed. ‘Use’ thus covers any conceivable use. It excludes any other person’s evaluation of whether what I am doing with the object is ‘appropriate’ use or not, as no one else has a right to pass judgement on potentially desirable and thus permissible forms of use — at least, not in the state of nature in which I find myself at this stage of Kant’s argumentation. The bottom line of § 2 of the Doctrine of Right is the postulate of private law, namely, that it is possible to have any external object of choice as mine. … Kant gets this originality from the right to physical possession of a piece of land, which everyone originally has. We are all in physical possession of a piece of land, which we have merely because we are located on this earth. This physical possession of a piece of land is connected with a right each of us has. We all have with respect to all others — each person against each and every other person — a right ‘to be where nature or fate placed us (without our will).’ Admittedly, this right is not an ownership right, but it is a right that each of us has through the original right to freedom. No one may throw another person into the ocean or rocket that person into outer space against his will, because that act would violate his original innate right to freedom. Because the right to physical possession of a piece of land is derived from the original right to freedom, it is also original. The place on this earth that each of us rightfully possesses is not a fixed place but, rather, some unspecified place. Each of us has a right to a place to stand somewhere. In the Preparatory Work, Kant calls this right to possession ‘disjunctively universal’ (disjunctiv allgemein). ‘Disjunctively’ means that ‘each person can possess this or that place on the earth.’ ‘Universal’ is in contrast to ‘particular.’ The universal possession each person has to a piece of land is not possession of a particularizable, and certainly not of a particularized, part of the earth’s surface but, rather, possession removed from all particularity, or an unparticularized ‘universal’ possession. Original possession is common possession because individual possession, at this point in the argument, is still disjunctively universal, or not yet particularized, and the earth’s surface is limited. Kant emphasizes the spherical nature of the earth. The earth is not an ‘infinite plane’; instead, we are all together ‘enclosed within certain borders,’ which by natural necessity results 83

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in a ‘community’ of human beings. Here ‘community’ means that (over the long run) human beings will necessarily meet. They hold the land of the earth’s surface in common possession because, added together, their individual rights to stand somewhere extend to anywhere on the available land. Individually, no one has a right to stand anywhere and everywhere, because others within the ‘community’ of interacting human beings are already standing in some of the places on the earth’s surface. Added together, however, their individual rights extend to anywhere on the inhabitable land. Thus common possession does not mean that together they have one right to possess the earth’s surface as a community or society, because if the community includes everyone, then there is no one left against whom this right can be had. Common possession simply means the sum total of their individual rights to stand somewhere taken as a whole and in relation to the land available on the surface of the earth. For whole nations, Kant describes the original community of the land as possible physical interaction, which he also calls commercium. This ‘community’ and common possession are original, because they are derived from original (disjunctively universal) individual possession.

D Acquisition of a right in rem The right to acquire ownership of concrete pieces of land is based on the disjunctively universal right to possess a piece of land. Kant writes in the Preparatory Work, ‘The acquirer can take possession of land through his private choice in order to have the land as his,’ ‘because he is originally (prior to any act with legal effect) in possession of it.’ Similarly, he states in § 11 of the Doctrine of Right, ‘The right to a thing is a right to use a thing privately which I have in common possession with all others.’ The emphasis here should be placed not on the common nature of this possession but, rather, on the fact that I am already in possession of the thing that is to be acquired. Kant’s idea is that I have always had (disjunctively universal) physical possession of a piece of land, that this possession has legal relevance, and that this legally relevant physical possession is the reason that I can acquire a piece of land through an act with legal effect (particularly through taking it). The question is why that should be so. The answer can only be that I have a right to a place on this earth and by taking an (unowned) piece of land I am particularizing my right. This particularization, or the transition from disjunctively universal possession to physical possession of a particular concrete piece of land, is the decisive move …

2.7  Revision Questions 1. In what circumstances might it be said that a block of vacant land has been possessed? 2. Why is possessory title important for personal, movable property? 3. What is the difference between physical possession and legal possession and why is this difference relevant? 4. What does ‘inchoate legal title’ mean? 5. What is the foundation of the legal right to possess land (an intelligible right) according to Kant? What is the connection, according to Kant, between physical, universal possession and legal, reasoned possessions (see extract above)? 6. What is the relevance of ‘particularizing’ a right over a piece of land? Why do you think that Byrd and Hruschka in the above extract felt that ‘particularization’ was the ‘decisive’ move in the acquisition of a right in rem? 7. Why do you think that prior possessory title will defeat subsequent possessory title? 8. What is the basis for recognising property in body parts that have been removed from the body? 84

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Enforceability of Possessory Title 2.8  Possessory title is fundamentally different to proprietary title. The primary difference lies in the scope of enforceability. Under what is known as the ‘relativity of title’ principle, possessory title, while conferring valid title upon the possessor, is not an in rem title because it is not enforceable against the rest of the world: the title of the true owner will, even where that owner does not have current possession, defeat the title of a possessor. The true owner holds proprietary title, which is an in rem title and, because it is enforceable against all the world, is stronger than possessory title. This means, as outlined above, the title of the true owner will always defeat the title of a possessor. The only real exception to this principle lies in the principle of adverse possession. Adverse possession may arise where the title of a possessor has endured for such a period of time that it is coupled with a statutory limitation of actions defence that prevents a documentary titleholder from defeating the rights of the adverse possessor: adverse possession is discussed in detail in Chapter 4. LEGAL PROBLEM X holds a freehold estate in land but does not live there. Y comes onto the land and occupies the land for three years. Y has occupied the land and is in complete control. After three years, X discovers Y’s occupation and seeks to have Y removed. Y’s possessory title in the land will be defeated by X’s proprietary title. Y has not occupied the land for long enough to claim adverse possession and defend the claim by X, and the possessory title alone is insufficient to defeat the in rem claim of the true owner.

However, the position is different where the dispute is between a prior and a current possessory titleholder. Where there is a dispute between a prior possessor who has been dispossessed and a subsequent possessor who remains in possession, under the ‘relativity of title’ principle, the title of the prior possessor is stronger. This means that the title of a prior possessor will defeat that of the subsequent possessor. One of the reasons for the strength of a prior possessory title lies in the fact that it confers upon the holder rights to transfer, bequest or devise that title. If the holder of a possessory title devises that title by will, it would be unfair if the interest acquired by a beneficiary to that will could be defeated by the possessory interest acquired by a subsequent possessor. To allow this would effectively prevent possessory titleholders from exercising the rights that attach to their title. The issue was set out in the important English decision of Asher v Whitlock (1865) LR 1 QB 1, which is extracted below.

  Asher v Whitlock  (1865) LR 1 QB 1 Facts: Thomas Williamson held possession over a cottage which he built on waste land within a manor. When he died he passed this title on to his wife, Lucy, until she remarried or died and then to his daughter, Maryanne Williamson, absolutely. When he died, the possessory title passed on to his wife. She subsequently remarried the defendant who then moved into the cottage. The interest of the wife had ceased at the point when she remarried and it passed to Maryanne Williamson. The wife and daughter subsequently died and the defendant stayed on in the house. The heir at law to Maryanne’s possessory title, the plaintiff, argued that 85

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he had a better possessory right to the land than that of the defendant who was in actual, physical possession. Cockburn CJ: … 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, 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 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 concurred.]

Commentary 2.9  Cockburn CJ concluded that the holder of the prior possessory title had a better title than the person in actual physical possession. The heir at law inherited this ‘prior possessory title’ when Thomas Williamson died. His Honour made it clear that possessory title is capable of being passed on. Hence, the ‘inherited’ right that the heir at law acquired defeated the subsequent possessory title of the defendant. This case illustrates the rule that a prior possessory title will defeat a subsequent possessory title. Proof that a third party may have a better title (ie the title of the true owner) will not affect the enforceability of the prior possessory title — as on the facts, the land upon which the cottage was built was actually owned by the lord of the manor. Title held by a third party will only be relevant in circumstances where it can be shown that the interest held by that third party demonstrates a lack of possessory title; for example, where the title held by a third party proves that the prior possessor has abandoned the land or leased it to another. The  fundamental principle underlying the decision in Asher v Whitlock lies in the fact that possession is, in itself, a good title against anyone who cannot show a prior and therefore better right to possession. This decision was subsequently confirmed by the Privy Council in Perry v Clissold [1907] AC 73, which is extracted below. 86

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  Perry v Clissold  [1907] AC 73 Facts: This was an appeal from the Australian High Court. It considered the issue of whether lands which were compulsorily acquired under the Lands for Public Purposes Acquisition Act 1880 (44 Vict No 16) (now covered under the Public Works Act 1900) included possessory title and which entitled the holder to claim appropriate compensation. Lord Macnaghten: … 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 plaintiff’s 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 1, QB 1, Lush J having been 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 324n. 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 circumstance 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 87

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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 Minister 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 fit to 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.

Commentary 2.10 In Perry v Clissold the Privy Council concluded that a possessory titleholder of land

which had been compulsorily acquired was entitled to obtain compensation. In line with the conclusions of the court in Asher v Whitlock, the Privy Council held that just compensation was a right that was available to support possessory title where the land was resumed by the Crown. Possessory title confers an interest that is capable of being alienated and, if land to which such a title relates is compulsorily acquired, there is no reason why the holder should not be compensated. As Lord Macnaghten stated (at 79): ‘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 except the rightful owner’. If possession confers a good title, which is enforceable against all the world except for the rightful owner, where such a title is resumed by the Crown, compensation should be available. See also NRMA Insurance Ltd v B & B Shipping & Marine Salvage Co Pty Ltd (1947) 47 SR (NSW) 273, 276; 64 WN 58 at 61 where Jordan CJ stated: ‘de facto possession is prima facie evidence of seisin in fee and right to possession’; Doe d Hall v Penfold [1838] EngR 489; 8 C & P 536 at 537; 173 ER 607 at 608; Allen v Roughey (1955) 94 CLR 98 at [26] per Fullagar J; Clissold v Perry (1904) 1 CLR 363 at 366 per Griffith CJ stating that ‘possession is a good title against all the world except the real owner. It is a saleable and devisable interest’; Shaw v Garbutt (1996) 7 BPR 14816 at 14832; Nolan v Nolan (2003) 10 VR 626 at [126] per Dodds-Streeton J; Russell v Wilson (1923) 33 CLR 538 at 546 per Isaacs and Rich JJ; Planning Commission (WA) v Temwood Holdings Pty Ltd (2004) 221 CLR 30 at [43] and [98] per McHugh J, noting that ‘the title against all the world but the rightful owner of a person in possession in the assumed character of an owner and exercising peaceably the ordinary rights of ownership was conferred by the common law, although by operation of limitation statutes the possessory owner might then acquire an absolute title’; and J M Lightwood, A Time Limit on Actions, Butterworths, London, 1909, esp at p 120.

Possession and Crown Title: Toohey J in Mabo v Queensland (No 2) 2.11  The nature, scope and entitlements attached to possessory title were explored in detail in the judgment of Toohey J in Mabo v Queensland (No 2) (1992) 175 CLR 1 in the context of examining the history of Crown sovereignty and the relevance of prior Indigenous possession. An extract of the judgment of Toohey J (at 161–5) is set out below: 88

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… The plaintiffs’ submissions with respect to possessory title may be summarised 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, AttorneyGeneral 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 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  Melbourne University Law Review 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 89

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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) LR 1 QB 1; Perry v Clissold (1907) AC 73; Calder (1973) SCR, at p 368; (1973) 34 DLR (3d), at p 185; Megarry and Wade, The 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, at pp 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, at p 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 cumbersomeness 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 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) LR 1 QB 1, at p 5, 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 p 2487 (98 ER 302, at p 304); Goodtitle d Parker v Baldwin (1809) 11 East 488, at p 495 (103 ER 1092, at p 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; 90

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Rosenberg v Cook (1881) 8 QBD. 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, at pp 631–633; Elvis v Archbishop of York (1619) Hob 315, at p 322 (80 ER 458, at p 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, at p 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 and 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 (NSW) 1087; Allen v Roughley; Wheeler v Baldwin (1934) 52 CLR, at pp 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, at p 17 (128 ER 232, at p 232); Wheeler v Baldwin (1934) 52 CLR, at p 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) LR 1 QB 1, at p 6; Allen v Roughley (1955) 94 CLR, at p 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, at p 111 (85 ER, at p 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. 91

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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.

Commentary 2.12  Consistent with established common law orthodoxy, Toohey J suggested that prior

possessory titleholders, including Indigenous occupants, could defend their title against subsequent possessory titleholders. His Honour argued that the law presumes, from proof of possession, that a possessory holder is seised of a freehold and that this presumption is not displaced by any subsequent dispossession. This ‘fictional’ presumption forms the foundation of English common law. Hence, a prior possessor will hold a valid title against all but the true owner, or a valid adverse possession claim. It is this possessory title that can be alienated (Asher v Whitlock) or compensated where compulsorily acquired (Perry v Clissold). By parity of reasoning, Toohey J argued, inter alia, that when the Meriam people became British subjects upon colonisation, the law presumed, from the proof of their physical occupation of the land, that they were seised of a fee simple over that land. Thus, their subsequent physical dispossession could not displace the legal validity of their prior possessory title. According to Toohey J, this prior possessory title protected Indigenous inhabitants against the Crown’s assumption of ownership. Toohey J adopted a theory based upon the writing of K McNeil, who concluded that Indigenous inhabitants: … could prove that they had real property rights under their own customary laws prior to the Crown’s acquisition of sovereignty, and rely on the presumption that those rights continued; or … they could prove that they were in exclusive occupation (either severally, jointly, or collectively) of specific lands at the time of the acquisition, and claim title thereto by virtue of the common law that would have applied in the settlement from that moment on: Common Law Aboriginal Title, Clarendon Press, Oxford, 1989, p 241.

The conclusions of Toohey J were not, however, accepted by a majority of the High Court who refused to endorse the validity of Indigenous possessory title. Arguably, the refusal of the majority to uphold the primacy of Indigenous possessory title exemplifies a deeper reluctance to acknowledge the importance of difference within the common law framework. In the words of one commentator, the majority of the court in the Mabo decision: … could not comprehend or respect that these people, so different from themselves, had an ancient and valuable civilisation of their own with its own law, its own political economy, and its own permeating sense of spirituality. This blindness has endured and remains to this day the most fundamental barrier to developing a decolonised relationship with Indigenous peoples in Australia: P H Russell, Recognising Aboriginal Title: The Mabo Case and Indigenous Resistance to English-Settler Colonialism, UNSW Press, Sydney, 2006, pp 75–6.

In Jones v State of Queensland [2000] QSC 267 at [15], [16] Muir J followed Toohey J in Mabo. In that case, Indigenous claimants sought possessory title over large areas of land alleged to have been in the possession of their ancestors at and after European settlement. Muir J struck out the statement of claim because it failed to plead necessary material fact; however, his Honour held that the plaintiffs may have been able to articulate claims meeting the requisite tests. In the Canadian decision of Afton Band of Indians v Attorney General Nova Scotia (1978) 85 DLR (3rd) 454, a large Indian band sought title on the basis of adverse possession over land its members had occupied for over 100 years. The Supreme 92

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Court of Nova Scotia found that various members of the band had for well in excess of 60 years performed acts of adverse possession, and that title vested at some stage in individual members of the band as tenants in common. The court ultimately dismissed the claim, however, because, on the evidence it was unable to ascertain who those individuals were. The court further held that the band had no standing to sue because the relevant statute provided that only a ‘person’ could bring such an action, and a band of Indians is not a ‘person’. Subsequently, in Lawson v South Australian Minister for Water and the River Murray [No 2] [2014] NSWLEC 189, Biscoe J in the New South Wales Land and Environment court acknowledged the ‘recent, nascent recognition of possessory title’ by the courts in land title claims by Indigenous people. His Honour noted the weighty evidential difficulties associated with an adverse possession claim that ripened in 1848, but felt that the court should take account of the context of the Aboriginal land claim and the fact that it ‘includes the history of indigenous dispossession and disadvantage, including suppression and deprivation, in this country since European settlement’, and the fact that Aboriginal people ‘have suffered substantial injustice and loss consequent upon the deprivation of the loss of their land following the settlement of Australia’. Per Kirby P, Minister for Natural Resources v New South Wales Aboriginal Land Council (1987) 9 NSWLR 154  at 157. See also B Pohle, ‘Possessory Title in the Context of Aboriginal Claimants’ (1995) 11 Queensland University of Technology Law Journal 200.

2.13  Revision Questions 1. Why did Cockburn CJ in Asher v Whitlock conclude that there was 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’? Explain what this means. 2. In Perry v Clissold the Privy Council makes it clear that compensation is payable to every person deprived of land resumed for public purposes. Should this include possessory title where the possessor is no longer in physical possession at the point when the land is compulsorily acquired? 3. What did Toohey J in Mabo v Queensland (No 2) mean when he referred to the old quote: ‘Possession is prima facie evidence of seisin in fee simple’? 4. If the Meriam people became British subjects upon annexation, do you think that their possession should constitute a ‘fictional’ fee simple title or does it simply constitute evidence of the continuing validity of their own, unique cultural association with the land?

The Finders Keepers Rule 2.14  It is important to distinguish between the enforceability issues that relate to

possessory title over land and those relevant to possessory title over goods. Physical possession of goods is primary evidence of title but it can often be difficult to establish physical possession, particularly where the goods are found either upon or within land. The basic rules relating to the enforceability of possessory title were outlined by W S Holdsworth, A History of English Law, 5th ed, Sweet & Maxwell, London, 1942, p 449: The law as thus developed can be grouped under the following three propositions: (i) The person in possession is treated as the owner save as against him who can show a better right to possession. As against all the world, except the man with the better right, he has all 93

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the powers of an owner. … (ii) [p 455] The owner out of possession has nothing save a right to recover his chattel from the possessor. … (iii) [p 458] The owner out of possession, who seeks to recover his possession, must show an absolute right; so that, if the defendant in possession can show that some third person has a better right than either, the plaintiff cannot recover.

The first proposition of Holdsworth is that where a person acquires physical possession of goods, they retain a title that is good against all the world except a person with a better right. In Armory v Delamirie (1722) 1 Strange 505; 93 ER 664; [1558–1774] All ER Rep 121 (the Chimney Sweep’s case), Sir John Pratt CJ (KB) ruled: 1. That the finder of a jewel, though he does not by such finding acquire an absolute property or ownership, yet he has such a property as will enable him to keep it against all but the rightful owner, and consequently may maintain trover.

The finders keepers rule is an established common law principle whereby the finder of lost property supersedes all claims except those of a prior possessor or the true owner. The law of finding lost chattels developed out of the common law trover action. Trover is now incorporated into the tort of conversion, but, originally, was the historical remedy to determine the rights of owners against finders. Trover was abolished in England in 1852 by the Common Law Procedure Act. In order to fully understand the finders keepers principle it is important to understand the concept of ‘lost’ property and to distinguish it from ‘mislaid’ property. Property can be abandoned by the owner, and when a finder locates it and takes possession, ‘lost’ property is found. Alternatively, property may be intentionally placed by the owner in a particular place with the intention to retake it at a subsequent stage. A finder in this instance can still say that the lost property is ‘found’. Property may be inadvertently lost by the owner and be ‘found’. Abandoned property returns to a state of nature or the ‘common mass’ and belongs to the first finder, occupier or taker. The finder of mislaid property will be entitled to the possession of that property against everyone but the true owner unless it is shown that the property is not lost but rather, that the owner cannot recall where it is placed. Hence, there is a distinction between ‘lost’ property and ‘mislaid’ property. Mislaid property occurs where the owner of the goods intentionally places those goods in a place and then forgets where they are. Lost property arises where the owner or other possessor has involuntarily parted with the property through inadvertence, negligence or carelessness. If mislaid property is found in a place where the general public is not ordinarily admitted, the interests of the owner must be protected and the occupier of the premises comes under a duty to care for the goods mislaid by those who are entitled to use the private or semiprivate place. If lost property is found, however, the finder will acquire a title and this has been the established law for centuries. As outlined in Armory v Delamirie (1722) 93 ER 664, the case involving the chimney sweeper’s boy who found a jewel in a chimney and was cheated by an avaricious goldsmith, the finder of a chattel acquires a title that enables the finder to keep it against all the world except its rightful owner, and to defend it against all others with every remedy that is available to a bailee. Where, however, the object has become a part of the realty, the owner of the realty should be awarded the object over the finder as he not only owns the realty but has possession prior to the finder. In Elwes v Brigg Gas Company (1886) 33 Ch D 562 (UK) the plaintiff leased a portion of his land to the Brigg Gas Company and, in the course of certain excavations by the Gas Company, they discovered, embedded six feet below the surface, an ancient prehistoric ship or boat hollowed out of a large oak tree that measured about 45 feet in length. The court decided that the plaintiff, as owner of the land at the time of the lease agreement, was entitled to the boat and this was the case even if the boat could be characterised as a chattel rather than 94

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a fixture. Where lost property is ‘found’, possession is title against the whole world except the real owner and the finder may acquire the value of the property. Significantly, Armory and the finding cases do not deal with the situation between the owner of the article after the finder or bailee has sued for and recovers the actual value of the article and a judgment is satisfied. Once the finder has recovered the actual value of the property from another party, the owner is barred from maintaining a separate action against that other party. For cases following the Armory principle see: British American Tobacco Ltd v Cowell (2002) 7 VR 524, 584 [168]; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388, 416 [74]. In Smith v Gould [2014] VSCA 138 at [54], Warren CJ, Osborn and Beach JJA held that fundamentally, the decision in Armory ‘discloses a permissible path of reasoning that may be engaged in in an appropriate case’. Where property is discovered on land that belongs to a third party, the finder may only acquire possession, and therefore title, in circumstances where it is clear that the owner of the land did not manifest a clear intention to control all goods discovered upon that land. The general principle established by the courts is that personal property that is found upon land rather than attached to that land may, where the land is open to public access, come into the possession of the finder, unless the owner of the land indicates a clear intention to control all objects existing on that land. This principle is founded upon the comments in Pollock and Wright’s ‘Essay on Possession in the Common Law’, p 41, which reads as follows: The possession of land carries with it in general, by our law, possession of everything which is attached to or under that land, and, in the absence of a better title elsewhere, the right to possess it also. And it makes no difference that the possessor is not aware of the thing’s existence … It is free to any one who requires a specific intention as part of a de facto possession to treat this as a positive rule of law. But it seems preferable to say that the legal possession rests on a real de facto possession constituted by the occupier’s general power and intent to exclude unauthorised interference.

See also Bridges v Hawkesworth (1851) 21 LJQB 75; South Staffordshire Water Company v Sharman [1896] 2 QB 44; Parker v British Airways Board [1982] 2 WLR 503 per  Donaldson  LJ at 514–15; Flack v Chairperson, National Crime Authority [1997] FCA 1331 at 1360 per Hill J who stated: ‘… where chattels have been embedded in the land, so as to form part of the land, the owner of the land has a right superior to a finder, and notwithstanding that the owner is unaware of the existence of the chattel embedded in the land’. See also Big Top Hereford Pty Ltd v Gavin Thomas as Trustee of the Bankrupt Estate of Douglas Keith Tyler [2006] NSWSC 1159, where Brereton J noted at [40] that a person who obtains possession of land upon which stock is agisted pursuant to a valid licence will not obtain lawful possession of that stock. These principles were discussed in some detail by the English Court of Appeal in Waverley Borough Council v Fletcher [1996] QB 334. The decision is extracted below.

  Waverley Borough Council v Fletcher  [1996] QB 334 Facts: A park to which members of the public had free access had been conveyed to the council as freehold owners subject to covenants that it would only be used for purposes ‘of or incidental to a pleasure or recreation ground for the use of the public’, and at all times as an open space or recreation ground within the meaning of the Open Spaces Act 1906 and the Public Health Acts respectively, and that it would not be used for any ‘sports, pastimes or recreations’ other 95

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than specified ball games, skating and pursuits ‘of a like nature.’ The council’s declared policy of prohibiting the use of metal detectors within the park was not the subject of a by-law but of notices, which at the material time had been torn down. The defendant was in the park but unaware of the council’s policy and used his metal detector to locate a medieval gold brooch buried in the ground. By excavating the soil to a depth of nine inches he recovered the brooch and reported the find. The brooch was returned to him at the conclusion of a coroner’s inquisition in which it was found not to be treasure trove. The defendant resisted the claim by the council to ownership of the brooch on the ground that, since he was lawfully on the property and they were not in actual occupation of the park, he, as finder, was entitled as against them to retain the brooch. The trial judge found in favour of the defendant and the council appealed. The Court of Appeal upheld the appeal, concluding that where an object was found unattached on land, the owner of the land had a better title to that object than the finder in circumstances where the owner had manifest such control over the land so as to indicate an intention to control anything found on it. 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 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. The council then issued proceedings against Mr Fletcher, claiming a declaration that the brooch was its property and delivery up of it or damages. Mr Fletcher, by his defence, relied on the argument of ‘finders keepers’. He maintained that the council’s claim to ownership of the brooch required it to prove not only ownership, but also occupation, of the park. He admitted that it owned the park, but asserted that it did not occupy it because it was bound to allow the public to use it for pleasure and recreation. He said that he found the brooch whilst he was a lawful visitor there, and that, therefore, because the true owner of it had not been found, he was entitled, as finder, to keep it. The judge, Judge Fawcus, sitting as a judge of the High Court, found for Mr Fletcher. After reviewing the authorities he held that the rule that an owner of land owns everything in his land applies only to things that are naturally there, not to lost or abandoned objects; that the crucial factor is the control that he intends and is able to exercise over lawful visitors in relation to any objects that might be on or in the land; that Mr Fletcher was a lawful visitor and did not become a trespasser by digging and removing the brooch; but that it was not necessary to decide the question of control because the council had not established a paramount claim so as to displace the maxim ‘finders keepers’. On this appeal, Mr Croxford, for the council, argued that an owner or lawful possessor of land is entitled by virtue of that ownership or possession without more, as against a finder with no interest in the land, to any object, other than treasure trove, found in the land. He acknowledged that a different rule applies to unattached objects found on the land. Mr Munby, for Mr Fletcher, maintained that a common principle applies to objects in or unattached on land, namely, that to overcome a finder’s claim the owner or lawful possessor of land must demonstrate an intention to exercise control over the land and things found in 96

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or on it. By ‘control’ he meant a power and intent to ‘exclude unauthorised interference.’ That is effectively the English law concept of possession: see Holmes, The Common Law (1881), pp 220–221; Pollock and Wright, An Essay on Possession in the Common Law (1888), and for a modern judicial example of its expression in Parker v British Airways Board [1982] QB 1004, 1019E, per Eveleigh LJ. Mr Munby said that the application of the principle may differ evidentially according to whether the object in dispute is found in or unattached on the land. The starting point in considering those rival contentions is the firm principle established as long ago as 1722 in Armory v Delamirie (1722) 1 Str 505, that the finder of an object is entitled to possess it against all but the rightful owner. There was no claim in that case by the landowner; the dispute was between a chimney sweep’s boy who found a jewel and a jeweller to whom he had offered it for sale. The boy won. The same principle applies as between the owner or lawful possessor of land and the finder in relation to unattached objects on land unless the former has made plain his intention to control the land and anything that might be found on it. As Pollock and Wright put it in their Essay, at p 40, ‘The finder’s right starts from the absence of any de facto control at the moment of finding’: see Bridges v Hawkesworth (1851) 21 LJQB 75, in which Patteson and Wightman JJ, sitting as a Divisional Court on appeal from a county court, held that the finder of bank notes dropped by someone unknown accidentally on the floor of a shop had a better claim to them than the shop-owner who, until the finder drew his attention to them, did not know they were there. A more recent example is Parker’s case [1982] QB 1004 where the finder of a gold bracelet dropped by an unknown traveller in an airline company’s lounge at an airport was held to be entitled to it as against the airline company. In that case Donaldson LJ, giving the leading judgment, held, at p 1014, that for the landowner’s claim to prevail in such a case, he had to have both a right and a manifest intention to exercise control over anything which might be on his land. As to articles found in or attached to land, the foundation of the modern rule is Elwes v Brigg Gas Co (1886) 33 Ch D 562, in which Chitty J clearly regarded ownership or lawful possession of the land as determinative and the legal status of the object in dispute as immaterial. He held that a tenant for life as lessor of land was entitled against its lessee to ownership of a prehistoric boat embedded six feet below the surface in the demised land. In so holding, he said, at pp 568–569, that it was unnecessary to determine whether the boat was a mineral, part of the soil in which it was embedded or a chattel because: ‘he was in possession of the ground, not merely of the surface, but of everything that lay beneath the surface down to the centre of the earth, and consequently in possession of the boat. … The plaintiff then, being thus in possession of the chattel, it follows that the property in the chattel was vested in him. Obviously the right of the original owner could not be established; it had for centuries been lost or barred … The plaintiff, then, had a lawful possession, good against all the world, and therefore the property in the boat. In my opinion it makes no difference, in the circumstances, that the plaintiff was not aware of the existence of the boat.’ Earlier in his judgment, at p 567, he identified the breadth of that principle: In support of the contention that it ought to be deemed in law as part of the soil in which it was embedded, reference was made to the principle embodied in the maxim, ‘Quicquid plantatur,’ or as it is sometimes stated (see Broom’s Legal Maxims, 6th ed, p 376n and the judgment in Climie v Wood (1868) LR 3 Ex 257, 260) ‘fixatur solo, solo  cedit.’ This principle is an absolute rule of law, not depending on intention; for instance, if a man digs in the land of another, and permanently fixes in the soil stones or bricks, or the like, as the foundation of a house, the stones or bricks become the property of the owner of the soil, whatever may have been the intention of the person who so placed them there, and even against his declared intention that they should remain his property. Nor does it appear to me to be material that the things should 97

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have been placed there by the hand of man; it would seem to be sufficient if they have become permanently fixed in the soil by the operation of natural causes. As A L Goodhart concluded in his celebrated article, ‘Three Cases on Possession’ (1929) 3 CLJ 195, 204, the lessor ‘was the possessor of the boat because he was in possession of the ground,’ to which I add what is implicit in that conclusion, because the boat had become permanently fixed in the ground. Chitty J did not, therefore, need to consider Bridges v Hawkesworth, 21 LJQB 75 which was cited to him, and the quite different principle governing unattached articles on land. … Those words extended the Pollock and Wright principle about objects in or attached to land to unattached objects found on it, subject to an additional requirement of a manifest intention to exercise control: see Hannah v Peel [1945] KB 509, 519–520, per Birkett J; Grafstein v Holme and Freeman (1958) 12 DLR (2d) 727, 734, per LeBel JA; and Parker v British Airways Board [1982] QB 1004, 1014, 1018, per Donaldson LJ. To that extent they were obiter. They are also capable of being read as applying that additional requirement of ‘a manifest intention to exercise control’ to articles found in or attached to land. Mr Munby submitted that the latter qualification was a faithful application of the Pollock and Wright test, and he drew attention to the words in it ‘in general’ and ‘general power and intent.’ He suggested that their effect was simply to apply the concept of possession, namely, control and intent to control, to objects in, as well as to those unattached and on, land. Mr Croxford agreed that the test was one of possession. But he submitted that in this context that simply means that the possessor of land intends to possess it and whatever is in it, as distinct from any object which for a transitory period may be found on it. The test of possession, in its most abstract form, may have a constant meaning whether applied to objects in or unattached and on land. But it is clear from Pollock and Wright’s statement, citing Elwes v Brigg Gas  Co., 33 Ch D 562, that they regarded its application to objects in land to be free from the uncertainties inherent in disputes about entitlement to unattached objects found on land. Their proposition was that in practice possession of land should generally be taken as carrying with it an intent to possession of objects in or attached to it. To the extent that Lord Russell of Killowen CJ’s words in the Sharman case [1896] 2 QB 44 may be construed as ignoring that distinction, they go beyond Pollock and Wright’s test for objects in or attached to land and beyond what was necessary for the decision. That is certainly how A L Goodhart viewed it in his article in 3 CLJ 195, 206–207. He wrote, at p 206, referring to Pollock and Wright’s statement of the principle: It is important to note the … words ‘attached to or under that land.’ These are sufficient to cover the Sharman case, and, therefore, are the basis of the ratio decidendi, as the rings were in the mud and were also covered by a pool of water. They were not on the surface of the land, and were not visible to the casual passer-by. These facts must qualify Lord Russell’s final statement, in which he departs from the principle stated in the quotation from Pollock and Wright. Later, at p 207, he suggested that the authorities supported the following, among other, principles: A man possesses everything which is attached to or under the land which he possesses. As Chitty J said in the Elwes case, a man who is in possession of the ground is in possession ‘not merely of the surface, but of everything that lies beneath the surface down to the centre of the earth.’ It is true that in the Sharman case Lord Russell of Killowen described this rule as being merely a ‘presumption,’ but he did not give any reasons for such a limitation. … It is difficult to conceive of any set of circumstances under which this rule or presumption would not be applicable. A L Goodhart’s analysis of the Sharman case [1896] 2 QB 44 and of the principle has powerful judicial support. In City of London Corporation v Appleyard [1963] 1 WLR 982, a dispute about 98

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entitlement to bank notes found in a wall safe on a building site, McNair J commented on Lord Russell of Killowen CJ’s words, at p 987: ‘I do not regard this passage as being intended to qualify or extend the principle stated in Pollock and Wright, though in terms the words “upon or” used by the Chief Justice are wider than the words “attached to or under” appearing in Pollock and Wright.’ Donaldson LJ in his review of the authorities and statement of the principles that he derived from them in Parker v British Airways Board [1982] QB 1004, appears to have been of the same view. As to objects found in or attached to land, he said, at p 1010: In the interests of clearing the ground and identifying the problem, let me now turn to another situation in respect of which the law is reasonably clear. This is that of chattels which are attached to realty (land or buildings) when they are found. If the finder is not a wrongdoer, he may have some rights, but the occupier of the land or building will have a better title. The rationale of this rule is probably either that the chattel is to be treated as an integral part of the realty as against all but the true owner and so incapable of being lost or that the ‘finder’ has to do something to the realty in order to get at or detach the chattel and, if he is not thereby to become a trespasser, will have to justify his actions by reference to some form of licence from the occupier. In all likely circumstances that licence will give the occupier a superior right to that of the finder. Authority for this view of the law is to be found in South Staffordshire Water Co v Sharman [1896] 2 QB 44 … As to articles found unattached and on land, he said at p 1014: … I would accept Lord Russell of Killowen CJ’s statement of the general principle … provided that the occupier’s intention to exercise control over anything which might be on the premises was manifest. But it is impossible to go further and to hold that the mere right of an occupier to exercise such control is sufficient to give him rights in relation to lost property on his premises without overruling Bridges v Hawkesworth, 21 LJQB 75. Mr Hawkesworth undoubtedly had a right to exercise such control, but his defence failed. He then set out a number of ‘general principles or rules of law’ that he derived from the authorities including, at pp 1017–1018, the following two, in the context mainly of objects found in a building: 1. An occupier of land has rights superior to those of a finder over chattels in or attached to that land and an occupier of a building has similar rights in respect of chattels attached to that building, whether in either case the occupier is aware of the presence of the chattel. 2. An occupier of a building has rights superior to those of a finder over chattels upon or in, but not attached to, that building if, but only if, before the chattel is found, he has manifested an intention to exercise control over the building and the things which may be upon it or in it. 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 of the Elwes case, 33 Ch D 562 by reference to the particular proprietary 99

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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 Ch D 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, 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 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 Ch D 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.’ Section 9(b) of the Open Spaces Act 1906 empowered the council to undertake the ‘management and control’ of the park. Section 10 empowered it (a) to ‘hold and administer’ the park ‘with a view to the enjoyment thereof by the public as an open space within the meaning of this Act and under proper control and regulation,’ and (b) to ‘maintain and keep’ it ‘in a good and decent state.’ Section 10 also empowered it to enclose the park and to do various works 100

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of improvement to it for the benefit of the public. Section 15 empowered it to make byelaws subject to the approval of the Home Office for the ‘regulation’ of the park, of the days and times of admission and for the ‘preservation of order and prevention of nuisances.’ As to the Public Health Acts, section 164 of the Public Health Act 1875 (38 & 39 Vict c 55) and section 76 of the Public Health Acts Amendment Act 1907 give local authorities wide powers to provide and equip places of public recreation. But neither they nor the many other statutory provisions on the subject (see the helpful summary in Halsbury’s Statutes, 4th ed reissue, vol 35 (1993), p 11) assist on the question whether metal detecting is a recreation for this purpose. Members of the public have access to the park at all times, save for part of it given over to a golf course and the ranger’s house and garden. The council employed a ranger who, with other part-time voluntary rangers, regularly patrolled and managed the maintenance of the park and supervised the use of it by the public. The council’s declared policy was not to permit the use of metal detectors in the park. But, though it had made approved byelaws forbidding certain activities, it had not been able to persuade the Home Office to approve a byelaw prohibiting the use of metal detectors. There had been notices prohibiting the use of metal detectors in the park, but they had been pulled down, and there was none at the material time. Despite the absence of such notices, the ranger had on two or three occasions stopped people using them. Mr Fletcher was unaware of the council’s policy and had regularly used his metal detector there. The judge held, on those facts: first, that metal detecting was a ‘recreation’ which the council was obliged to permit under the terms on which it held the land; second, that ‘digging in response to the metal detector’s signal, provided it is within reasonable bounds, is incidental to such recreational activity;’ third, that the council had not made plain to Mr Fletcher its policy to prohibit metal detecting; and, fourth, that, in any event, in the absence of any applicable byelaws, the council had no authority to stop him. 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. … 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 101

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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 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 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 the 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.

Commentary 2.15  The conclusions of Auld LJ in Waverley Borough Council v Fletcher make it clear

that it will only be where the object is found on the land, rather than in or attached to land, that a finder may claim possession. Further, where an object is found on the land, the possession claimed by the finder may be defeated by the title of the landowner if the landowner has manifested an intention to exercise full control over the land and anything found on it. On the facts, the Court of Appeal concluded that neither Mr Fletcher’s metal detecting nor his digging or removal of the brooch was within any of the purposes for

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which the council was permitted to, or did, allow as authorised public park activities. Further, 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. In this capacity, the council retained 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 the brooch as such activity was unauthorised. Consequently, Mr Fletcher did not derive a superior right to the brooch simply because he was entitled as a member of the public to engage in recreational pursuits in the park. During the course of his judgment, Auld LJ made it clear that two general principles regulate this area: 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; and 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 or she exercised such manifest control over the land as to indicate an intention to control the land and anything that might be found on it. These presumptions have been applied to Australian cases. In Stockland (Constructors Pty Ltd) v Allan Richard Carriage (2002) 56 NSWLR 636, Bergin J in the New South Wales Supreme Court examined a statutory provision that purported to exclude the common law presumption that an object in the land is deemed to belong to the land owner. Section 33D(2) of the Wildlife Act 1976 provided that the owner of the land ‘shall not be deemed to have had possession of a relic that was not originally real property only by reason of the fact that it was in or on the land’. His Honour concluded at [50] that a distinction needed to be drawn between relics that were made from part of the land, such as the rocks that were, on the facts of the case, made into cutting implements, and a relic that was itself originally real property or part of the land, such as a cave painting. Bergin J held that the latter type of relic came within the application of s 33D(2) because this could be treated as ‘originally real property’ as the intention behind the drafters of the act to refer to relics that were real property, rather than real property, such as part of the rock, that was subsequently used to create relics. As such, the common law principle was not excluded from relics made from rock that were found in the ground.

Bailment: Consensual Acquisition of Possession 2.16  A possessor who acquires possession of goods with the express consent of the owner

will generally acquire a possessory title that is regulated by either a contractual relationship or the tortious principle of bailment. Where an owner of personal property delivers that property to a possessor for a limited duration of time, the possessor will acquire bailment in the property. Bailment is a tortious principle that only arises over personal property and gives the bailee (possessor/transferee) a legally enforceable right to retain the goods and the bailor (owner/transferor) a legally enforceable right to regain possession. The possession of the bailee is and must be distinguished from the possession of the owner and that of the thief by the fact that the bailee makes no accompanying claim to or assertion of dominium, but accepts a continuing interest of a previous owner or possessor.3 The bailee

3. See the discussion by A Erh-Soon Tay, ‘Essence of Bailment: Contract, Agreement or Possession’ (1965) 5 Sydney Law Review 239. 103

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must exercise a reasonable standard of care in looking after the goods. Bailment can arise where the owner of goods delivers possession to a third party, or where the possessor of goods delivers them to a third party. Bailment and the duties of the bailee arise from the bailee’s entrance into a relation to a thing, rather than his relation to a bailor. Entering into the relation with the thing must be intended although knowledge and consent may be implied from the situation. Once established, and the bailment relationship has been entered into, consent cannot be withdrawn on the pretence of repudiating the bailment. A bailment will only be determined by any act of the bailee that is wholly repugnant to the holding as bailee, and where this occurs the bailor acquires an immediate right to possession: Donald v Suckling (1866) LR 1 QB 585 at 615. The decision of the English Court of Appeal in The Winkfield [1902] P 42 provides a good illustration of the operation of bailment. On the facts, two ships, The Winkfield and The  Mexican, collided off the Cape of Good Hope resulting in the loss of mail. The Postmaster-General (PMG) sued the owners of The Winkfield in negligence for the loss of mail. The PMG was merely the bailee and carrier of the mail; the actual items lost were the property of other persons. The PMG was found not to be contractually liable to the bailors for the loss of their mail and it was argued that, as the bailee did not have to account to the bailor for the loss of the goods, the bailee could not sue for damages under the bill of lading. The English Court of Appeal rejected this claim and followed Armory v Delamirie in concluding that the PMG had a good title against every stranger and that, consequently, he was entitled to sue for the full amount of the value of the goods under the bill of lading and to account for that value to his bailor. This decision makes it clear that, during the term of a bailment, a bailee retains possessory title in the goods and this title will enable the bailee to bring an action to recover the value of the chattels. As outlined in The Winkfield by Collins MR at 60: ‘As between bailee and stranger possession gives title — that is not a limited interest but absolute and complete ownership, and he is entitled to receive back a complete equivalent for the whole loss or deterioration of the thing itself’. This has also been summarised by N E Palmer, Bailment, 2nd ed, Sweet & Maxwell, London, 1991, p 308: At common law, a bailee’s possession entitles him to exercise any of the remedies to which possession is a prerequisite, or to which it is one of several grounds of potential qualification. His lack of full ownership does not preclude him, moreover, from recovering the full value of the chattel or the full cost of its impairment; the rule in such circumstances is that ‘as against a wrongdoer, possession is title’. Thus, if the goods are wrongfully taken from him or are damaged while in his possession, he may sue the wrongdoer in trespass, conversion or detinue just as if he were the bailor under a revocable bailment or an owner whose goods had never, before the wrongdoing, left his possession.

See also Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107; [1558–1774] All ER Rep 1; HSBC Rail (UK) Ltd v Network Rail Infrastructure Ltd [2006] 1 All ER (Comm) 345 at [29] per L J Longmore; and Clambake Pty Ltd v Tipperary Projects Pty Ltd (No 3) [2009] WASC 52 at 218. In modern times, the terms of a bailment within a contract should be checked because the contract may modify the consequences that would otherwise follow if there were no agreement and common law bailment applied. As noted by Swinfen Eady MR in Whiteley Ltd v Hilt [1918] 2 KB 808 at 819: A bailment may be determined by doing any act entirely inconsistent with the terms of bailment: … but it does not follow from that that if the bailee has any further interest in 104

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the chattel of a proprietary kind he forfeits that interest by any dealing with the chattel not warranted by the terms of the bailment. There is no foundation for such a notion …

The right to claim in conversion is a right that survives the passing of the Personal Property Securities Act 2010 (Cth) (PPSA) and therefore may be a useful resource in circumstances where an owner loses secured goods under its provisions. Further, the PPSA allows a person who is not the owner of an asset to grant a security interest over that asset. Under ss 19(1) and 20(1)(a) of the PPSA, a security interest will only be enforceable against a grantor or a third party if, inter alia, the security interest is ‘attached’ to the collateral. Under section 19(2), a security interest can only attach to collateral if the grantor ‘has rights in the collateral, or has the power to transfer rights in the collateral to the secured party’. One interesting issue is whether the possessor of personal property has ‘rights in the collateral’ and is therefore capable of granting a security interest over that property pursuant to the PPSA. The PPSA does not define the expression ‘rights in the collateral’. Section 19(5) sets out, however, that the ‘grantor has rights in goods that are leased or bailed to the grantor under a PPS lease, consigned to the grantor, or sold to the grantor under a conditional sale agreement (including an agreement to sell subject to retention of title) when the grantor obtains possession of the goods’. In ‘The Scope of Rights in the Collateral in s 19(2) of the PPSA: Can Bare Possession Support Attachment of a Security Interest?’, the author raises this issue and makes the following conclusions: 1. A person in possession of collateral can grant a security interest over the collateral back to the owner in the circumstances described in section 19(5). 2. A person can only grant a security interest over collateral if either: a) the person has an ownership interest in the collateral; or b) the person is treated by the PPSA as if it were the owner of the collateral, by virtue of being the grantor of another security interest over it. 3. A person who is in possession of property, but who does not have an ownership interest in it and cannot rely on proposition 2, can only grant a security interest over the rights that flow from the fact of their possession, not over the property itself. It is their ownership of those possessory rights, not the fact that they are in possession of the underlying asset, that enables the security interest to attach (to those rights, not to the asset as a whole).4

Possession of Goods: The Jus Tertii Defence 2.17  The holder of a possessory title over goods may raise the jus tertii defence where a

prior possessory titleholder seeks possession of those goods. This defence may be raised to say that a defendant who is out of possession cannot defeat an actual possessor if the actual possessor acquired possession from a third party who has a better right. Literally, jus tertii means the right of a third person. The orthodox application of the jus tertii principle was outlined by Henchman J in Henry Berry & Co Pty Limited v Rushton [1937] SR (Qld) 109, who said at 119: When the plaintiff was not in actual possession, but relies upon his right to possession, he must recover on the strength of his title, and the defendant may, under a plea of not guilty or not possessed, show that the plaintiff has no right to immediate possession because that right is in some other person.

4. B Whittaker, ‘The Scope of Rights in the Collateral in s 19(2) of the PPSA — Can Bare Possession Support Attachment of a Security Interest’ (2011) 34(2) New South Wales Law Journal 524 at 545. 105

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In evaluating the availability of a jus tertii defence, it is important to assess the conduct of the defendant and to consider whether there is anything in that conduct that justifies the preclusion of the defence and, in effect, prevents the defendant from defeating the actual possessory title of the plaintiff on the basis of the better title of a third party. In Esanda v Gibbons [1999] NSWSC 1094, Austin J at [24] held that it was arguable that the principle underlying the jus tertii cases may, in fact, be a broad application of equitable estoppel principles. It is not possible to claim a jus tertii as a defence in an action for possession of land and defeat the claim of the prior possessor. As noted by the court in Armory v Delamirie (1722) 1 Strange 505: ‘In a pure system of relativity of titles there can be no room for a jus tertii’. Consider also the views of P S Atiyah, ‘A Re-Examination of the Jus Tertii in Conversion’ (1955) 18 MLR 97 at 102 who concluded that the jus tertii defence is: … best redefined as traverses of the possessory title of the plaintiff, which title may have been destroyed or extinguished in the manner in which his factual possession was lost. Loss of factual possession of itself has no impact on the strength and resilience of the defendant’s title; even if it is clear that there is a third party somewhere with a superior right, that jus tertii is of no moment in the possessory battle between plaintiff and defendant.

A possessor of land must show that his or her right is superior to the right of the person claiming possession. This can be proven where the person can establish documentary title or a prior possessory claim. A third party’s right to possession will be relevant in such a dispute only if it demonstrates that the claimant has no right to possess the land. Thus, in a land dispute, it is not sufficient to argue that a third party has a stronger claim than the holder or that the holder does not have the best title to the land. It must be established that the title of the person seeking to oust the holder is itself a superior title. Authority for this proposition stems from the decision in Asher v Whitlock (1865) LR 1 QB 1, where the defence was not raised by the defendant and was impliedly rejected by Mellor J. Subsequent courts have concluded that the court’s emphasis on the strength and enforceability of a prior possessory title indicated that the jus tertii defence was not available for possessory title disputes over land. Subsequently, in Perry v Clissold [1907] AC 73, the Privy Council explicitly rejected the use of jus tertii, noting that the jus tertii defence was not available to the Crown to argue that an owner of land has a better title. If it was available, it would effectively ‘defeat the rights of prior possessory holders against actual possessors’ and this is contrary to the common law orthodoxy. The defence may, however, be raised in possessory title disputes that relate to personal property but only if the possessory titleholder has committed no civil or criminal wrong. Jus tertii is not available in conversion where the defendant has derived the goods from the plaintiff: see, for example, Jeffries v The Great Western Railway Co [1856] EngR 81; 119 ER 680; Russell v Wilson [1923] HCA 60; 33 CLR 538 at 547 per Isaacs and Rich JJ; The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (2006) 65 NSWLR 400 at 413 per Young CJ in Eq. Further, a bailee is not entitled to dispute the bailor’s title and therefore cannot plead the jus tertii against the bailor: Butler v Hobson [1838] EngR 401; 4 Bing (NC) 290; 132 ER 800; Leake v Loveday [1842] EngR 1063; 4 Man & G 972; 133 ER 399; Woods v Mason Bros Ltd (1892) 8 WN (NSW) 114. This qualification is, itself, subject to three exceptions. As outlined by Herron J in Edwards v Amos (1945) 62 WN (NSW) 204 at 206: … the defendant, although a bailee, can plead the jus tertii in three cases, (a) where he defends the action on behalf of and by the authority of the true owner, (b) where he committed the act 106

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of conversion complained of on the authority of the true owner, and (c) where he has already made satisfaction to the true owner by returning the property to him.

The effect of a denial of jus tertii is to permit adjudication of disputes as to the better titleholder between the two contesting parties without any reference to other potential rights holders. Such rights holders are, instead, required to bring their own action to establish their greater right. Consider the following example as an illustration of the operation of the jus tertii defence. See also C D Baker, ‘The Jus Tertii: A Restatement’ (1990) 16(1) University of Queensland Law Journal 46. LEGAL PROBLEM A leases equipment from LP Pty Ltd for two years. A acquires possessory title for the duration of the lease contract and LP Pty Ltd is required to provide full and adequate notification of any intention to reclaim the property pursuant to a breach of contract. If  A goes into bankruptcy and the trustee in bankruptcy claims the possessory title over the equipment for the purpose of distributing assets to A’s creditors, LP Pty Ltd may claim a superior proprietary title and reclaim the property. However, in such a scenario, if LP Pty Ltd does not give full and adequate notification of its intention to reacquire the property in accordance with their contractual obligations, the trustee T may raise a jus tertii defence against the title claimed by LP Pty Ltd arguing that the strongest title lies with A, because A is entitled to retain possession until LP Pty Ltd complies with the notification requirements set out in the original lease contract.

It has been suggested that the jus tertii defence is not available to support the statutory possession that police acquire when seizing property suspected of being the proceeds of, or involved in the commission of, a crime. Consider the following case.

  Costello v Chief Constable of Derbyshire Constabulary  [2001] 1 WLR 1437 Facts: A police officer seized and detained from the plaintiff, Costello, a car bearing telltale signs of theft, acting under statutory powers. There had been a number of registered keepers of the car before it had been registered with Costello. It was never made clear whether Costello himself was suspected of stealing or handling stolen goods. The police could not trace the third party who was the true owner; all that could be said was that one of the prior registered keepers was probably the true owner. When it was clear that no criminal proceedings would be brought against Costello and that the car could not immediately be restored to its true owner, the police’s legal powers to detain the car ceased. Costello then brought an action to assert his prior possession and recover his car from the police together with damages for wrongful detention. The police resisted the claim and raised jus tertii to state that a third party, the owner, held a better title. The Court of Appeal was invited to apply a jus tertii defence to the possessory title held by the police. This was rejected. Lightman J, in giving the reasons of the court, contributed to the jurisprudence relating to personal property and jus tertii. Lightman J: Since the claimant in this case was in possession of the car when it was seized by the police, it might be expected to follow from the principles which I have stated that when the right of the police to detain it expired, the police were in this case obliged to return the car to the claimant. But the police seek to establish and rely on two exceptions or qualifications to these principles, to each of which I must refer in turn. 107

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Possession of stolen goods The first suggested exception or qualification is that no possessory (or other) title in stolen property vests in the thief or a subsequent receiver of stolen property and that accordingly on seizure of stolen property the police become possessory owners and have no obligation to restore the stolen property to the person from whom they seized it: their obligation is limited to restoring to the true owner if ascertained. The question has long been regarded as open whether there is such an exception or qualification and it continues to be raised eg in Winfield & Jolowicz on Tort 10th ed p 603 and Salmond & Heuston The Law of Torts 21st ed pp 109–110. Indeed there is a note of a decision of Milmo J in Solomon v Metropolitan Police Commissioner [1982] Crim LR 606 (‘Solomon’) that public policy and the doctrine of ‘ex turpi culpa non oritur actio’ preclude a thief from recovery. This is the view adopted by Feldman on Entry, Search and Seizure para 11.41. The decision in Webb is distinguishable on the ground that the purchaser of the drugs (or other person who made payment for them) in that case clearly intended the claimant to obtain full possession (and accordingly full possessory rights) to the monies paid over. There could be no suggestion that the proceeds were stolen and that by reason of this fact some lesser form of possession or possessory right arose. The authorities relied on by Feldman and the police in this case are twofold, namely Buckley v Gross (1863) 3B & S556 (‘Buckley’) and Field v Sullivan [1923] VLR 70 (‘Field’). In Buckley the issue related to the ownership of certain tallow. The tallow had been kept at warehouses which caught fire; it melted and flowed down the sewers into the river where part of it was collected by a man with no right to it; and he sold it to the claimant. The police stopped the claimant and took him before a magistrate. The magistrate discharged the claimant. Under section 29 of the Metropolitan Police Act 2&3 Vict c 71 (‘the 1839 Act’) the magistrate had power, where the real owner was known, to make an order for the detention and subsequent delivery of goods ‘charged to be stolen or fraudulently obtained’ to the rightful owner, and where the owner was unknown to order delivery to the receiver of the Metropolitan Police Force who was authorised, in the absence of a claim made by the real owner within 12 months, to sell them. Pursuant to these statutory provisions the magistrate made an order for the detention of the goods. The tallow became a nuisance and the police sold the tallow to the defendant before the 12 month period expired. The claimant then sued the defendant to recover it. Blackburn J at the trial directed a verdict for the defendant with leave to the claimant to move to enter judgment if the Court of Queen’s Bench should be of the opinion that he could maintain his action. The court held that he could not. Cockburn CJ said: Under these circumstances it appears to me plain that, by virtue of the authority vested in him by the statute, an order was made by the justice, within the scope of his authority and jurisdiction, with respect to dealing with this tallow, and whether the police were or were not warranted in selling it within twelve months is immaterial. The plaintiff, who had nothing but bare naked possession (which would have been sufficient against a wrong doer) had it taken out of him by virtue of this enactment. As against the plaintiff, therefore, the defendant derives title, not from a wrong doer, but from a person selling under authority of the justice, whether rightly or not is of no consequence. I wholly disagree with the doctrine of the plaintiff’s counsel, that if the policeman did anything ultra vires, that would revest the possession of this tallow in the plaintiff. He had no title beyond what mere possession gave, and, so soon as the goods were taken from him by force of law, there was a break in the chain of that possession. Crompton J said: This action must be founded on possession; here the possession was divested out of the plaintiff, and he cannot revert to a right of property to re-establish it. I agree with my Lord Chief Justice that, where possession is lawfully divested out of a man, and the 108

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property is ultimately converted by a person who does not claim through an original wrong doer, the party whose possession was so divested had no property at the time of the conversion. Here, in my mind, the plaintiff’s possession was gone. The goods were properly taken from him … Blackburn J said: I do not wish to question the doctrine laid down in several cases, that possession of personal property is sufficient title against a wrong doer; nor that it is no answer to the plaintiff in such a case to say that there is a third person who could lawfully take the chattel from him; and I do not know that it makes any difference whether the goods had been feloniously taken or not. But, assuming that to be the law, the plaintiff has not brought himself within it. … I draw the inference of fact that the justice was satisfied that this tallow had come from the warehouses, and I hold that, as matter of law, the police were bound to keep it for the true owner, because they had ascertained that there was a true owner, and who he was. Their possession was the possession of the true owner and not of the wrong doer, whose possession was terminated by their taking possession. It is therefore not necessary to consider whether the sale of the tallow to the defendants by the police was right or wrong. If wrong, the true owner may complain against them; if not, no one else can, but at all events, not the plaintiff, who was himself a wrong doer. All three judgments support the proposition that a thief obtains a good possessory title as against a wrong-doer against him, but that, if possession is lawfully divested from him and vested in another, his prior possession will not avail him to recover possession. Cockburn CJ held that the lawful divesting of the claimant and vesting in the defendant in that case was effected by the sale by the police to the defendant in exercise of the statutory power of sale vested in them by the order of the magistrate. Blackburn J decided that the police held the tallow for and on behalf of the warehousemen. Crompton J may have taken (and according to the report of this case in 32 LJQB 129 did take) the view that irrespective of any order of the magistrate the vesting by the police of possession in the defendant was sufficient to divest the claimant of possession. Later authorities to which I will refer attach critical importance to  the existence of the magistrate’s order in a contest such as existed between the claimant and defendant in Buckley. It should be said that the variations in the reports of the judgments in this case (referred to in the judgment of Macfarlan J in Field at p 83) raise questions as to the reliability of various reports. I have selected the report in 36 B&S 556 because it is the report used and quoted by the Court of Appeal in the later case of Irving v National Provincial Bank [1962] 2 QB 73 (‘Irving’) to which I will subsequently refer. The provisions of the 1839 Act fell for consideration again in the case of The Queen v D’Eyncourt (1888) 21 QBD 109 (‘D’Eyncourt’). The question arose whether the magistrate had jurisdiction under that Act to direct the delivery of goods which were seized by the police but were not the subject of any charge to the person (a Mary Ryan) from whom they were seized. In that case some £108 was seized as money obtained by false pretences, but the charges were confined to £8 alone. The magistrate directed that the balance of £100 be delivered up to her. The court quashed the decision holding that the Act conferred no jurisdiction to make any order save in respect of goods the subject of a charge. Wills J however added: As to £8 odd, the defendant appears to have admitted that the sums of which it consisted were property to be returned to the [identified] persons from whom she concedes that she had received them. As to the rest of the sum [of £100 odd] now in the hands of the police authorities, it seems clear, upon the facts stated to us, that it ought to be given to Mary Ryan: and it is clear that the possession she once had would give her the right to recover the money from anyone who could not show a better title. This would be

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so, even if the money had been obtained by false pretences from persons who with knowledge of the facts advisedly abstained from making any claim or if nothing could be shown as to whom was really entitled. The possessory right may perhaps go further. It is not necessary to express any opinion upon this point. We have no reason to suppose that the police authorities will not do what is right in the matter. The judgments in Buckley and D’Eyncourt were considered by the Supreme Court of Victoria in the case of Field. In that case the claimant claimed in return of goods seized by the police believing them to be stolen. The theft was not established and the claimant as the party in possession at the time of the seizure was held entitled to their return. Macfarlan J (with whom Cullen J agreed) said (at p 84) as follows: If A is in possession of goods, he is prima facie in lawful possession of them and prima facie has the right to that possession; in the absence of any evidence to the contrary, in any proceedings that possession is proof of ownership; but that possession may be divested out of him lawfully or unlawfully. If unlawfully, his right of possession remains. As against the person who unlawfully deprived him of possession (B) or those claiming through him, A’s possession (even if wrongful) up to the time of seizure, is sufficient evidence to establish his right to possession: nor can those persons set up that the goods were A’s possession, but were really the property of X, though, of course, if B took possession on behalf of and with the authority of X, who is shown to be the true owner, that might be set up to show that B’s seizure was not unlawful. If the divesting is lawful, A’s right of possession may be destroyed entirely or may be merely suspended or temporarily divested … So where the law permits them to be seized or detained for a certain time or for a certain purpose or until a certain event, A’s possession is suspended or temporarily divested and the right of possession is vested in, or A’s right to possession is displaced by, the right of possession in the person authorised to seize them or detain them for the period during which he is authorised. In other words, A’s property and right to possession are made subject to the right of the police or other person seizing under the authority of the law to detain them during the period during which the detention is authorised; when that time expires, and no lawful order has been made for the disposition, his right to possession, if nothing more appears, again operates. I say ‘if nothing more appears’, for if it may appear by evidence that A never had a right of possession, as in [Buckley], and that therefore there was no suspended right of possession to revive or again operate … He went on to quote the passage from the judgment of Wills J in D’Eyncourt to the effect that the obligation even extended to monies obtained by false pretences and concluded: Whether the last quoted passage is consistent with the dicta in [Buckley] it is unnecessary to consider here, as plaintiff’s possession has not been shown to be wrongful. In Betts v Receiver of Metropolitan Police District and Carter Paterson & Co Ltd [1932] 2 KB 595 (‘Betts’) the police seized from the claimant certain cloth believing it to be stolen from Carter Paterson and delivered it to Carter Paterson, without any order under the Police (Property) Act 1897 (‘the 1897 Act’) which was in substantially the same terms as the 1839 Act. The claimant sued the receiver and Carter Paterson and du Parcq J held that, since the theft could not be established and the delivery had been made without any order under the Act, the claimant in right of his possession at the time of seizure (subject only in case of the receiver to a limitation defence) was entitled to succeed in conversion against both defendants.

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The judgment of Cockburn CJ in Buckley was referred to and approved and applied by the Court of Appeal in Irving. In that case the dispute arose as to certain goods seized by the police when in the possession of the claimant in which neither the claimant nor the defendant could establish that they were the true owners. Pursuant to the provisions of section 1 of the 1897 Act the court of summary jurisdiction directed that goods should be delivered to the defendant as the person who appeared to be the lawful owner. The claimant sued the defendant claiming ownership of the goods. The Court of Appeal rejected the claim. Holroyd Pearce LJ (at p 78) said: [The 1897] Act was passed in substitution for an earlier Act, the Metropolitan Police Act, 1839, which by section 29 made similar provisions. It provides practical machinery to deal with a practical situation. Although the Act does not, until the expiration of six  months, affect the right of any person to take proceedings, it does alter the fact of possession. When an order has been made by a tribunal under the Act for delivery of property to a claimant, the Act cannot have intended the claimant to remain a bailee for the former possessor. The claimant has, by due process of law, after inquiry, had physical possession transferred to him. It is still open to anyone during the ensuing six  months to claim the goods from him, provided that the claimant can establish his right to do so. Had the Act intended, it could have preserved the prior rights of possession in the former possessor. But it has not done so, and previous possession of goods now in the hands of another does not raise a presumption of present title in the previous owner, unless the person who has received them from him has done so as a wrongdoer or as agent of bailee of the previous owner … This view of the matter is in accordance with the dictum of Cockburn CJ in [Buckley]. After setting out the passage which I have quoted, he continued: Those observations of the Chief Justice make it clear, in my view, that under this Act of 1897, as under the earlier Act of 1839, the plaintiff can no longer rely on a presumption from his previous possession. Therefore the burden is on the plaintiff to prove that he is entitled to the notes or to damages for their conversion. If he cannot discharge that burden he fails in the action. The judge rightly held that his story on that matter was not to be believed, and that he failed to discharge the onus of proof. I entirely agree with the judgment of the judge. Willmer LJ said (at p 82): ‘I come to the same conclusion as the county court judge, namely that the effect of the magistrates’ order was to shift the burden of proof.’ Davies LJ said (at p 82): I entirely agree. … It seems to me plain on the wording of the statute that the effect of the magistrates’ order made in this case was to vest the possession of these notes in the defendants, and of course, naturally and consequently, to divest the plaintiff of any possessory title that he might have had, not merely before the police seized the notes, but up to the time when the magistrates made the order. … The only other thing I would say is this. I agree entirely with what my Lords have said about the dictum of Cockburn CJ in [Buckley]; and with regard to the other authority which was cited to us, namely Betts … the facts of that case, so far as a relevant comparison can be made, are as different from the present case as they possibly can be. In Betts’s case no order under the statute had been made, and it was for that reason, of course, that du Parcq J directed the jury and gave judgment as he did. It is, I think, implicit in the judgment in Betts’s case that, if an order under the Police (Property) Act 1897 had been made in that case, then the position would have been, not as it was there, but as, in the opinion of this court, it is in the present case.

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Donaldson LJ in Parker v BA Board [1982] QB 1004 at 1010 (‘Parker’) explained the balancing exercise required of the law in the situation under consideration and how the balance should be struck: [In Armory v Delamirie (1722) 1 Stra [505]] Pratt CJ ruled: ‘That the finder of a jewel, though he does not by such finding acquire an absolute property or ownership, yet he has such a property as will enable him to keep it against all but the rightful owner, and consequently may maintain trover? … The rule as stated by Pratt CJ must be right as a general proposition, for otherwise lost property would be subject to a free-for-all in which the physically weakest would go to the wall …’ One might have expected there to be decisions clearly qualifying the general rule where the circumstances are that someone finds a chattel and thereupon forms the dishonest intention of keeping it regardless of the rights of the true owner or of anyone else. But that is not the case. There could be a number of reasons. Dishonest finders will often be trespassers. They are unlikely to risk invoking the law, particularly against another dishonest taker, and a subsequent honest taker is likely to have a superior title: see eg [Buckley]. However he probably has some title, albeit a frail one, because of the need to avoid a free for all. That seems to be the law in Ontario, Canada: see Bird v Fort Frances [1949] 2 DLR 791 [‘Bird’]. In fact in the case of Bird the court expressly reserved the question whether such a title was obtained if the wrongful taker had a felonious intent and the taking was felonious: pp 798–799. In the case of Webb, May LJ referred to the decision in Field: Possession As to entitlement to possession, there is an instructive analysis in the decision of the Supreme Court of Victoria in [Field]. The essence of an extended passage in the judgment of Macfarlan J, at pp 84–87, is that if goods are in the possession of a person, on the face of it he has the right to that possession. His right to possession may be suspended or temporarily divested if the goods are seized by the police under lawful authority. If the police right to retain the goods comes to an end, the right to possession of the person from whom they were seized revives. In the absence of any evidence that anybody else is the true owner, once the police right of retention comes to an end, the person from whom they were compulsorily taken is entitled to possession. The reference cannot be treated as any form of approval of the reservations expressed by Macfarlan J where possession has been unlawfully obtained. In my view on a review of the authorities (save so far as legislation otherwise provides) as a matter of principle and authority possession means the same thing and is entitled to the same legal protection whether or not it has been obtained lawfully or by theft or by other unlawful means. It vests in the possessor a possessory title which is good against the world save as against anyone setting up or claiming under a better title. In the case of a theft the title is frail, and of likely limited value (see eg Rowland v Divall [1923] 2 KB 500), but nonetheless remains a title to which the law affords protection. Support for this proposition can be found in the dicta of Wills J in D’Eyncourt and Donaldson LJ in Parker. The decision in Buckley and the dicta of all three judges that a wrong-doer is entitled to protection against a wrong-doer accords with the proposition; Blackburn J inclined to agree that possession was protected even if obtained by a felonious taking; and in view of the differences in the reports of the judgment of Crompton J (and the later decision on the significance of a magistrate’s order in Betts) I do not think that his judgment takes the matter further. If Buckley is no obstacle in the way of acceptance of the proposition, then Field cannot be an obstacle either, for it merely leaves open the effect of Buckley. The frailty of the protection is reflected 112

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in the decisions in Buckley and Irving that, if  the stolen property in the possession of the thief or a receiver is seized by the police and pursuant to statutory authority possession is transferred to someone else (but not otherwise), the transferee obtains the possessory title in defeasance of that of the thief or receiver. There are authorities (eg Bird) which reveal a natural moral disinclination (on occasion expressed in terms of public policy) to recognise the entitlement of a thief, receiver or other wrong-doer to the protection by the law of his possession, and one decision (namely Solomon) refusing such protection. But it is clear from Webb that such a disinclination and public policy do not afford a sufficient ground to deprive a possessor of such recognition and protection. This conclusion is in accord with that long ago reached by the courts that even a thief is entitled to the protection of the criminal law against the theft from him of that which he has himself stolen: see eg Smith & Hogan, Criminal Law, 9th ed p 522. I accordingly reject the first suggested exception or qualification.

Commentary 2.18  The court in Costello emphasised the primacy of possessory title. Lightman J made it clear that, historically, even a thief has enjoyed a title to possession, albeit a frail one. The court went on to restate the common law jus tertii doctrine with respect to possessory title in goods, as first enunciated in Buckley v Gross (1863) 3 B & S 556 at 559: ‘a thief obtains a good possessory title as against a wrong-doer against him, but that, if possession is lawfully divested from him and vested in another, his prior possession will not avail him to recover possession’. On the facts of Costello, Lightman J concluded that extinguishment of the prior possession could only take place where the police had transferred possession of the seized goods to a successor. This would usually occur through the operation of a statutory power of sale. His Honour made the following comments at 1442: If the stolen property in the possession of the thief or a receiver is seized by the police and pursuant to statutory authority possession is transferred to someone else, the transferee obtains the possessory title in defeasance of that of the thief or receiver.

In the absence of such a transfer, the prior possessory title of Costello remained enforceable against the police and the jus tertii defence could not be raised. See also A Steel, ‘Taking Possession: The Defining Element of Theft’ (2008) Melbourne University Law Review 32. Young CJ, Santow and Basten JJA in the New South Wales Court of Appeal in Anderson Group Pty Ltd v Tynan Motors Pty Ltd [2006] NSWCA 22 at [93] held that from the time of Elizabeth I, jus tertii ‘appears to be grounded in common law estoppel by representation, that is, that as the defendant took title from the plaintiff he is as much estopped from denying the plaintiff’s title as a tenant of real property is estopped from denying the landlord’s title’.

2.19  Revision Questions 1. Explain the different rights and actions available to a dispossessed land holder and those available to a person dispossessed of goods or personal property. 2. Where the finder of personal property acquires possession, in what circumstances can the owner of the land upon which the goods are found assert a superior claim to the goods? 3. Is it possible for a finder to claim possession over goods that are attached to the land? 113

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4. What is a bailment and how does it regulate the possession of personal property? 5. Can a bailee claim damages in tort against a third party despite not being in breach of the terms and conditions of the bailment? What rights does a possessory title give a bailee? 6. Why is the jus tertii defence not available with respect to disputes involving possessory title over land? How does Asher v Whitlock and Perry v Clissold support this conclusion? 7. Explain why it was that the police were unable to raise a jus tertii defence over the suspected stolen car that they seized in Costello v Chief Constable of Derbyshire Constabulary.

The PPSA 2.20  The PPSA is an important legislative development for the creation and enforcement

of security interests in personal property. It fundamentally alters the way in which some of the core personal property principles operate with respect to security interests. The PPSA was introduced with the aim of providing greater certainty and consistency and drew extensively from similar developments in New Zealand, Canadian provinces and the United States. The PPSA constructs a new registration and priority framework for security interests in personal property that come within its application. The PPSA is partly based upon Article 9 of the Commercial Code in the United States, which is reflected in s 12(1) of the PPSA and which defines the nature of a security interest. Section 12(1) provides as follows: 12(1) A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or of the identity of the person who has title to the property).

This is a highly functional definition of a security interest in personal property that is not based upon the conferral of title or the character of the security documentation. What needs to be established is: (1) an outstanding existing monetary or non-monetary obligation; (2) an ‘in substance security’ to support the performance of that obligation; (3) that the security must amount to an interest in the personal property; and (4) that the interest must arise out of a transaction. This effectively means that any outstanding debt, even if it secures the debt and imposes other additional obligations, may be covered by the PPSA. The focus upon ‘substance’ indicates that all security interests are to be treated in a similar manner, irrespective of whether they are derived from law or equity or whether they constitute a charge or a mortgage. An ‘interest’ in personal property is defined in s 10 of the PPSA to include a right in the personal property that would encompass both a legal and an equitable interest. Finally, s 12 only applies if an anterior consensual security agreement results in the secured party obtaining an interest in the secured property. It will not apply if the security interest arises by operation of law. Examples of security interests include: charge, chattel mortgage, conditional sale, hire purchase, pledge and a goods lease. Collateral is defined under the PPSA as personal property to which the security interest is attached and includes personal property that is described by the registration. A grantor is a person who has an interest in personal property to which a security interest is attached. 114

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A secured party is a person who holds a security interest either in their own right or on behalf of a third party. Generally, a security interest will attach to personal property where a person gives value for acquiring the security interest (or does something else to acquire it) and in return the person gains rights in the collateral. Once a security interest becomes attached it will be enforceable against the grantor. A security interest will be ‘perfected’ (ss 21–22) if it is attached to the collateral, enforceable against third parties, (s 20) the collateral is registered, and the secured party has possession (ss 23–24) or control (ss 25–29) of the collateral. The PPSA sets out rules to determine the priorities of different securities. A secured party who holds lower priority security interests has rights in relation to the collateral that are subject to those of a higher priority security interest. When registering a PPSA security interest under the register created by the Act, the collateral must be described as either ‘consumer property’ or ‘commercial property’. The PPSA sets out that where a person acquires an interest that is not a security interest in personal property by purchasing or leasing the property free of a security interest, the buyer or lessee of the personal property for value takes the property free of an unperfected security interest and free of the security interest if a search of the register does not disclose that interest (ss 43–59). These provisions are subject to transitional periods and exclude migrated interests in motor vehicles or watercraft. A buyer or lessee of personal property will also take the property free of a security interest if the property was sold or leased in the ordinary course of a business of that kind. This will not apply if the buyer or lessee has actual knowledge that the sale or lease breaches a security agreement. A buyer or lessee of personal property will also take that property free of a security interest if the buyer or lessee intends to use that property for domestic, personal or household purposes, and the market value is $5000 or less. The order of priority for enforcement of competing interests in the same collateral is set out in ss 55–61 and may be summarised as follows: 1. a security interest perfected by control that was first perfected; 2. a security interest perfected by control that was subsequently perfected; 3. a security interest perfected other than by control that has the earliest priority time; 4. a security interest perfected other than by control that has a subsequent priority time; 5. an unperfected security interest that first attached to the collateral; 6. an unperfected security interest that later attached to the collateral; and 7. a security interest in relation to which the PPSA does not apply. The priority time is the first to occur of the registration time, the time the secured party or their representative first perfects the security interest by taking possession or control of the collateral or the time the security interest is temporarily perfected. Purchase money security interests (PMSI) are given a superior priority over other security interests under the PPSA. A PMSI will arise where both security interests are granted by the same grantor over the same collateral and it is in personal property and it is registered before the end of 15 days after the day the grantor obtains possession of the property. An example is the retention of a title arrangement where the goods are in possession of the purchaser. 115

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If the interest is not a PMSI, security interests that are ‘perfected’ by control have priority over security interests in the same collateral that are ‘perfected’ by other means: s 57. The type of security interests that may be perfected by control include: an investment instrument, a negotiable instrument, an authorised deposit-taking institution account and an ‘intermediated’ security: s 21(2)(c). Priority under the PPSA will generally be granted to the holder of an original security interest in the event of a dispute following the transfer of collateral: s 55(4). Further, a perfected security interest in collateral will have priority over an unperfected security interest in the same collateral: s 55(3). Priority between unperfected security interests in the same collateral will take effect according to the order of attachment of the security interests: s 55(2). The PPSA allows security interests to be enforced by conferring rights to seize, retain and dispose of the collateral. A secured party with a perfected security interest may seize collateral, by a method permitted by law, if the debtor is in default, where notice is given to the grantor: ss 123–24. A secured party may also take ‘apparent control’ where goods cannot be readily removed from the premises or adequate storage facilities are not available: s 126. A secured party who seizes the property must take action to dispose of the property (Div 3) or take action to retain (Div 4) the collateral. Parties may, however, contract out of enforcement provisions if the collateral is not primarily used for personal, domestic or household use: s 115(1). Further, the enforcement provisions do not apply to a receiver: s 116. The PPSA establishes a single, national personal property security register. Registration of a security interest is not mandatory but is an element of ‘perfection’. Neither the property nor the grantor need be located in Australia provided a sufficient connection to Australia can be established. Whenever a new registration or an amendment or removal occurs, the register will provide each relevant security party with a verification statement: ss 153–61. In summary, the PPSA has a number of key aspects to it which have fundamentally altered the way in which security interests in personal property are now regulated: 1. The PPSA applies to every transaction, regardless of form, that in substance generates a security interest and this includes both transfer and title retention (Romalpa clause) arrangements as well as a conditional sale agreement. 2. The PPSA sets up a national, uniform registration system for personal property security interests that apply to all ‘in substance’ security interests. 3. The PPSA provides for security interests to be ‘perfected’ by various means including in particular registration and sets out that the holder of an ‘unperfected’ security interest effectively becomes an unsecured creditor if the grantor becomes subject to insolvency proceedings (ie, bankruptcy, winding-up or voluntary administration). 4. The PPSA provides that an ‘unperfected’ security interest is subordinate to a competing perfected security interest in the same collateral and, in a competition between security interests that have been perfected by registration, the general rule is that the first registered security interest gains priority: s 55. 5. The PPSA gives super-priority status to ‘purchase money security interests’ and other Romalpa agreements so that the PMSI will gain priority over competing non-PMSI security interests despite the order of registration. 116

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6. The PPSA extends the PMSI’s super-priority status to cover proceeds that result from a sale or other dealing in the collateral so that the holder of the PMSI gains priority, subject to conditions, over competing claims to the money or other consideration the buyer receives in exchange for the original goods. 7. The PPSA introduces special provisions for raw materials and manufacturing inputs (commingled goods) so that the seller’s security interest continues into the product in the event of competing claims to the end product. 8. The PPSA enacts special rules for component parts and accessions, setting out that the component seller’s security interest continues following incorporation of the component into the integrated goods and thereby addressing competing claims to the component between the component seller and the owner of the integrated goods. Where the PPSA applies, because the security interest comes within the scope of s 12(1), the new priority and registration framework will apply and the old common law rules and state-based statutory provisions will not apply. Where, however, the PPSA does not apply, because the transaction does not comply with s 12(1) and does not come within the application of the Act, a security interest in personal property will continue to be subject to the common law principles outlined above. Section 73 of the PPSA provides priority rules for security interests that fall outside the PPSA. In essence, this section sets out that the priority of a security interest falling outside will be determined according to the relevant commonwealth, state or territory law. Section 8 of the PPSA sets out exclusions under the PPSA. These include: goods shipped, statutory security interests arising by operation of law, possessory liens arising by operation of law, financial services, any right or interest held under an approved ‘closeout’ or ‘market netting’ contract, certain creations and transfers of interests in relation to land, unearned rights to payment or wages, insurance and accounts, and other financial obligations. For further discussion and elaboration on the changes implemented by the PPSA see: J  Stumble, ‘The PPSA: The Extended Reach of the Definition of the PPSA Security Interest’ (2011) 2 UNSWLJ 448; F Hunt, ‘Enforcement of Security Interests under the Personal Property Security Act 2009’ (2011) 25 Australia and New Zealand Maritime Law Journal 130; A Duggan, ‘Romalpa Agreements Post PPSA’ (2011) 33 Sydney Law Review 645; A Duggan, ‘The Australian PPSA from a Canadian Perspective: Some Comparative Reflections’ (2014) 40(1) Monash University Law Review 59; S McCracken, ‘Personal Property Securities Legislation: Analysing the New Lexicon’ (2014) 35(1) Adelaide Law Review 71. In Dura Australia Constructions Pty Ltd v Hue Boutique Living Pty Ltd [2014] VSCA 326, Santamaria JA made some general observations and the operative scope and dimension of the PPSA at [17]: • ‘Personal property’ is any form of property other than land and certain licences. • The definition of ‘security interest’ is fundamental. It is a ‘functional definition’. It means an interest ‘in personal property that is provided for by a transaction that, in substance, secures payment or performance of an obligation’. ‘Transaction’ is not defined in the PPSA. • Although the PPSA lists a series of familiar security interests, such as a fixed charge or a floating charge, these are said to be only examples of the ‘functional’ concept. • The holder of a ‘security interest’ is referred to as the ‘secured party’. 117

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• The PPSA distinguishes a ‘debtor’ from a ‘grantor’; the former is the person who owes payment or performance of an obligation that is secured by a security interest in personal property; the latter is a person who has the interest in the personal property to which a security interest is attached. More often than not, the debtor and the grantor will be the same person. • Security interests are effective and enforceable against grantors where those interests have attached to the collateral that is the subject of the interest; they are enforceable against third parties where they have been perfected. • A security interest attaches to collateral when the grantor has rights in the collateral, or the power to transfer rights in the collateral, and value is given or the grantor does an act that creates the security interest. • A security interest in particular collateral is perfected when the interest has attached to the property and the secured party has either taken possession or control of the property or has registered it on the PPS Register established under s 147 of the PPSA. • The PPSA also sets up rules for the determination of priorities between security interests. In particular, a perfected security interest has priority over an unperfected security interest and the security interest that has been continually perfected for the longest time generally has the highest priority. • Finally, unperfected security interests held by a secured party vest in the grantor upon the bankruptcy or the winding up of the latter.

2.21  Revision Questions 1. What do you think is the rationale for excluding some personal property security interests from the application of the PPSA? 2. How does the definition of a security interest in the PPSA differ from the approach by the common law? 3. Explain how the new priority rules in the PPSA function? 4. Discuss the scope and range of the new statutory enforcement provisions in the PPSA and consider how they may impact upon some of the common law rules.

Possession and Seisin 2.22  Seisin is a term derived from feudal times which originally indicated that a person

held formal legal ownership of a freehold estate in land as opposed to a bare possessory title. Seisin means that the person in possession of the land also holds freehold title over the land. Hence, a tenant holding a leasehold interest in the land holds possession of the land but historically was not regarded as having title in the land and therefore was not ‘seised’ of the land. This was because only a person who was able to utilise the old real actions for the recovery of land could be regarded as ‘seised’ of the land. The writs of entry and possessory assizes were only available to a person seised of the freehold estate. Thus, a tenant who was dispossessed was unable to recover possession because seisin remained with the landlord. Eventually, the writ of ejectment evolved. This writ provided a more efficient and simpler process for recovery of possession than the old real actions. Consequently, the writ of ejectment began to be used as an action to recover possession for both freehold and­­

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non-freehold estates. The general application of this remedial writ diminished the importance of the distinction between seisin and possession. This meant that possessory title could indicate seisin, where the holder retained a freehold estate, or it could also indicate a lesser estate. In modern times, the concept of seisin has been replaced by ‘registered title’ as registration has become the primary method of conveying land title. The historical relevance of seisin and possession within the doctrine of estates was examined by Professor Philbrick. Extracts from his discussion are set out below.

  Seisin and Possession as the Basis of Legal Title  F S Philbrick (1938–39) 24 Iowa Law Review 268 at 272–7 Seisin, speaking loosely, was the legal possession of old Germanic law. For at least three centuries after the Norman Conquest our lawyers had no other word whereby to describe possession. It  is true, however, that possession, apparently, has never had in any century precisely the same meaning which attached to seisin in any other century. Before the end of the 1500s both concepts and words were well established. While the word possession had not appeared, many situations which we today cover with that label — indeed, the vast majority of them — were included within the concept of seisin. On the other hand there were certain exceedingly important forms of dispossession (described by the terms abatement and intrusion) that were treated as disseisins, yet were not typical disseisins because they lacked an actual ouster. Also, after a true disseisin, seisin might in some cases (probably actually numerous) be regained by acts which we would not today describe as amounting to a repossession, although Littleton (1485) did so describe them; namely, by ‘mere “continual claim” against a disseisor whose strength made an actual entry upon the land impossible or dangerous’. Nor is this analogous to the ‘constructive possession’ of our modern law, since the latter is attributed to one person only when no other person is in actual possession — though the analogy does fit Littleton’s usage. When seisin existed, it enjoyed a protection analogous to and in the main coincident with that accorded today to legal possession. But ‘possession’ also then existed in the case of a tenant for years, and the law’s protection of such possession was not the same as its protection of seisin; nor was it identical with the protection given today to a tenant’s possession. Also, without even the single exception … actual seisin could not be gained without acquiring actual possession. Both could be gained, however, by any wrongdoer; and the usurper could pass both to anybody else. … when the man whom we would call owner lost his seisin he was left with a ‘mere right’ which we could call an imperfect title; and the way he recovered both seisin and what we could call complete or perfect title was by merely reacquiring possession. ‘On the one hand the freehold [estate] could not be made by any person who had the possession without transferring the freehold.’ After the word ‘possession’ entered the law it and ‘seisin’ gradually acquired definitely variant meanings. In the 1400s possession became the proper term to designate legally protected control of chattels personal, whereas in the two preceding centuries it was constant usage to speak of the seisin of such chattels. The reason why seisin was thus detached from chattels, yet for centuries retained vitality in the land law, can only be conjecturally stated, yet with some confidence. The difficulty was not that feudal tenure and its consequences could not be applied to chattels. The rents and profits of the leasehold might, indeed, have been made the basis of feudal services, but the leasehold had been renounced; and the enjoyment of a chattel personal did not take the form of rents and profits. But feudalism was early doomed; its incidents began to lose vitality when tenure received in 1290 from the statute of Quia Emptores the blow which ultimately destroyed it. Nor did the difficulty lie 119

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in the inapplicability of seisin to chattels, as the history of the word shows. Seisin was quite unconnected in the origin, with feudalism’s basic concept of tenure, and the application of its principles very often totally defeated the claims of feudal lords to wardship, escheat and other feudal derivatives of tenure. The continued attribution of seisin to chattels in no way contradicted the doctrines of the feudal land law. The real cause lay merely, it would seem in the unimportance of such attribution, and in the influence of the attribution of possession to chattels real. The exclusive position in the land law, and special importance in governmental arrangements, of freehold estates, of which seisin was the basis, made seisin of chattels meaningless. Particularly important was the fact that the common-law rules governing the inheritance of land, with the basic principle of seisina facit stipitem, although also derived from Germanic law and quite independent from feudalism in origin, were perfectly adapted to the desires of the great landowners — especially, of course, the rule of primogeniture. To these associations with vital social interests seisin apparently owed its preservation as a concept of the land law. The practical differences between it and possession gradually decreased until finally, long after its own importance was gone and long after feudalism had lost all reality, ‘seisin’ became a ‘technical term to denote the completion of that investiture by which the tenant was admitted into the tenure, and without which no freehold could be constituted or pass.’ This last phrase was old and actual law; the preceding explanation was a fictitious legal principle of literary feudalism. Before these changes in the meaning of ‘seisin’ had more than well begun terms for years had become of importance. Originally not a property institute at all, when they became such they were perforce, for lack of seisin, denied recognition as real property, and thus became personalty as chattels ‘real’. The landlord was then regarded as seised of his reversionary estate (if a freehold) while the tenant was possessed of the land itself; and this usage persists in our law today. The differentiation of the two concepts was also unavoidable in distinguishing the rights of a guardian from those of his ward actually on the land, and the rights of any feudal lord from those of his vassal occupying the feudal tenement. True, some confusion of the two concepts inevitably continued; but such instances were exceptional. The way out of the difficulty lay, of course, in applying the differentiation (present and clear as far back as reversions and remainders were recognised, and necessarily accentuated by the development of leaseholds just referred to) between seisin ‘in law’ of an estate and ‘actual’ seisin of land. Legal speech followed this development. An illustration is found in the fact that after the Statute of Uses (1535) had declared that persons ‘having’ the use of lands should thereafter have a corresponding legal ‘seisin, estate and possession of them’, the courts proceeded to concede acquisition of the seisin, but not of the possession without actual physical entry … As used today in our lawbooks, words of seisin and disseisin can be more properly displaced by words of possession and dispossession except where the former are used with reference to freehold estate as distinguished from the land in which they exist …

Remedies for Real and Personal Property 2.23  Real property refers to property interests over land, whereas personal property

refers to property interests over goods and chattels. There is a fundamental difference in the way that each of these forms of property are protected. Historically, real property interests have always been supported by real actions including the praecipe in capite (historically the main writ for the recovery of land), the grand assize, the possessory assizes and the writs of entry, entitling a dispossessed holder to recover. By contrast, personal property is supported by personal remedies that are enforceable against the person interfering with the possession of the goods. Hence, where a holder is

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dispossessed of a chattel, the relief will generally stem from either a tortious or contractual action, depending upon the particular circumstances. For example, damages may be available to support a tort of conversion, a tort of detinue or to support trespass to property. Alternatively, damages may be available where it can be established that the interference with possession constitutes a breach of bailment or a breach of contract. In some limited circumstances restitution of the goods may be available under specific statutory provisions, or where the equity jurisdiction is prepared to impose a resulting or constructive trust in order to prevent the interfering party from unconscionably retaining goods that do not belong to them. The decision whether to seek damages at law or injunctive relief in equity may depend upon whether damages are inadequate, or whether damages are available at all. As noted by Millett LJ in Jaggard v Sawyer [1995] 1 WLR 269 at 276: … 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.

The danger of ‘expropriating’ the defendant’s property should be balanced by careful circumstantial assessment. 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 concluded 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.

The old common law real actions for recovery have been abolished: see Common Law Procedure Act 1852 (UK), which was subsequently followed in Australia. Today, there are specific statutory provisions and rules for the recovery of possession in each state. See Supreme Court Act 1986 (Vic) ss 79–84; Supreme Court Act 1970 (NSW) s 79 and Civil Procedure Act 2005 (NSW) s 20; Supreme Court Rules Amendment (No 8 of 1997) (WA) rr 12–15; Supreme Court Rules 2000 (Tas); Supreme Court Act 1995 (Qld); Civil Law (Property) Act 2006 (ACT) s 438; Law of Property Act 1936 (SA).

2.24  Revision Questions 1. What is the difference between possession and seisin? 2. What, according to Philbrick (see 2.20), was one of the main reasons for the attachment of ‘seisin’ rather than ‘possession’ to land estates? 3. Describe the remedial distinction between real actions supporting real property interests and personal actions supporting personal property interests. 4. In some circumstances the equitable jurisdiction will issue relief, where the common law is inadequate, against personal property. This relief will generally take the form of specific performance or injunctive relief that perpetuates or interrupts the rights of the holder of that personal property. Does the availability of specific performance to enforce — for example, a contract for the sale of goods — give a form of relief that is akin to a real action? What are some of the differences between equitable relief for personal property and the availability of common law real actions. 5. In what circumstances will a security interest attach to ‘collateral’ pursuant to the provisions of the PPSA? 121

Chapter 3

Fixtures, Encroachment and Boundaries The Doctrine of Fixtures 3.1 Degree of annexation 3.2 Case: Elitestone Ltd v Morris 3.2 Commentary 3.3 Object of annexation 3.4 The intention of the affixer 3.5 The nature of the chattel 3.6 Overall circumstances 3.7 Tenant’s rights to remove 3.8 Fixtures and third parties 3.9 Case: Metal Manufactures Limited v Federal Commissioner of Taxation 3.10 Commentary 3.11 Other statutory provisions 3.12 Revision Questions 3.13 Fixtures and the PPSA 3.14 Case: Power Rental Op Co Australia, LLC v Forge Group Power Ltd (in liq) (receivers and managers appointed) 3.14 Commentary 3.15 The Enduring Relevance of the Common Law Fixtures Text 3.16 Revision Questions 3.17 Boundaries: Land Abutting Water 3.18 Tidal water boundaries 3.19 Non-tidal water boundaries 3.20 Extract: Water Act 2000 (QLD) — s 5A 3.20 Water rights 3.21 The doctrine of accretion and avulsion 3.22 Case: Williams v Booth 3.23 122

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Commentary 3.24 Revision Questions 3.25 Boundaries and Encroachments for Land 3.26 Error in title 3.27 Contractual errors 3.28 Fence boundaries 3.29 Extract: Fences Act 1968 (Vic) — s 7 3.29 Encroachments on to land 3.30 Extract: Neighbourhood Disputes (Dividing Fences and Trees) Act 2011 (QLD) — s 52 3.30 Revision Questions 3.31 Answer Plan 3.32

The Doctrine of Fixtures 3.1  The common law doctrine of fixtures has ancient origins being broadly based upon the ancient Roman law of accession.1 Fixtures are goods that have been annexed to land such that they lose their independent identity as a good and become a part of the land. The  principles that regulate the doctrine of fixtures stem from the broader concept of ‘quicquid plantatus solo, solo credit’ — ‘whatever is affixed to the soil becomes part of the soil’. The question whether an item is a chattel or a fixture ultimately depends on whether the item was placed on the land with the intention that it become part of the land or whether it was placed on the land with the intention that it remain separate from it.2 In some ways, the doctrine is somewhat outdated in that it does not necessarily reflect current commercial practices. As outlined by Sackville AJA in Agripower Barabba Pty Ltd v Blomfield [2015] NSWCA 30 at [75]: The law of fixtures is in some ways a relic of a period when greater emphasis was placed on physical acts, such as the annexation of chattels to land, than on whether there were good commercial or policy reasons for concluding that those acts should produce changes in title.

In National Australia Bank Ltd v Blacker (2000) 179 ALR 97, Conti J set out that there are a variety of general principles relevant to this determination, but the two most common are the degree of annexation and the object of annexation. The question of whether or not a chattel has become a fixture is particularly relevant in circumstances where the exact scope and nature of the land interest is relevant. For example, when a purchaser enters into a contract of sale to purchase land, it is important for the purchaser to understand what chattels, if any, are to be treated as a part of the land. All of the naturally affixed resources such as trees and streams will automatically pass, but so too will other constructed fixtures that have been physically attached to the land for the purpose of benefiting the land. Fixtures can include a large number of different things. In a residential context they may refer to a dwelling, a boundary fence, a shed, a cubby house, carpets, light fittings, or blinds and curtains. In a commercial context they may refer to machinery, pipes, cables, or equipment. 1. Wake v Hall (1883) 8 App Cas 195 at 203–4 per Lord Blackburn; 206–7 per Lord Watson and 210 per Lord Fitzgerald. The doctrine of accession reassigns ownership of resources or things to some other thing, such as land, that is already owned. See the discussion by T W Merrill, ‘Accession and Ownership’ 1 Journal of Legal Analysis 259. 2. Reid v Smith (1906) 3 CLR 656. 123

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The two tests applied in determining whether a good has become a fixture are the degree of annexation and the object of annexation. These tests are useful directives but ultimately, the question is one that must depend upon a holistic examination of all of the circumstances. As outlined by Blackburn J in Holland v Hodgson (1872) LR 7 CP 328 at 334–5: There is no doubt that the general maxim of the law is that what is annexed to the land becomes part of the land; but it is very difficult, if not impossible, to say with precision what constitutes an annexation sufficient for this purpose. It is a question which must depend on the circumstances of each case, and mainly on two circumstances, as indicating the intention, viz, the degree of annexation and the object of the annexation. When the article in question is no further attached to the land than by its own weight it is generally to be considered a mere chattel. But even in such a case, if the intention is apparent to make the articles part of the land, they do become part of the land. … On the other hand, an article may be very firmly fixed to the land, and yet the circumstances may be such as to shew that it is never intended to be part of the land, and then it does not become part of the land. … Perhaps the true rule is, that articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as to shew that they were intended to be part of the land, the onus of shewing that they were so intended lying on those who assert that they have ceased to be chattels, and that, on the contrary, an article which is affixed to the land even slightly is to be considered as part of the land, unless the circumstances are such as to shew that it was intended all along to continue a chattel, the onus lying on those who contend that it is a chattel.

See also: Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841. In  PricewaterhouseCoopers Legal v Perpetual Trustees Victoria Ltd [2007] NSWCA 271 at  [14] per Ipp JA (with Giles JA and McClellan CJ concurring) noted that the object of annexation may go ‘beyond assessing the degree of annexation and the purpose of annexation to require a consideration of all the relevant circumstances’. This was confirmed in TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 273 ALR 134 at [24] per French CJ, Heydon, Gummow, Crennan and Kiefel JJ.

Degree of annexation 3.2  The general presumption, which is capable of being rebutted where the circumstances indicate otherwise, is that goods merely resting on the land are not attached and are therefore not fixtures, and goods that are attached to the land, however slightly, are fixtures. The position was well summarised by Blackburn J in Holland v Hodgson (1872) LR 7 CP 328 at 334–5: … Perhaps the true rule is, that articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as to shew that they were intended to be part of the land, the onus of shewing that they were so intended lying on those who assert that they have ceased to be chattels, and that, on the contrary, an article which is affixed to the land even slightly is to be considered as part of the land, unless the circumstances are such as to shew that it was intended all along to continue a chattel, the onus lying on those who contend that it is a chattel.

The often quoted passage in the judgment of Jordan CJ in Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700 at 712 also provides a good overview of the relevance of the degree of annexation:

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3.2

A fixture is a thing once a chattel which has become in law land through having been fixed to land. The question whether a chattel has become a fixture depends upon whether it has been fixed to land, and if so for what purpose. If a chattel is actually fixed to land to any extent, by  any means other than its own weight, then prima facie it is a fixture; and the burden of proof is upon anyone who asserts that it is not: if it is not otherwise fixed but is kept in position by its own weight, then prima facie it is not a fixture; and the burden of proof is on anyone who asserts that it is: Holland v Hodgson LR 7 CP 328 at 335. The test of whether a chattel which has been to some extent fixed to land is a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period: Holland v Hodgson, or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose: Vaudeville Electric Cinema Ltd v Muriset (1923) 2 Ch 74 at 87. In the former case, it is a fixture, whether it has been fixed for the better enjoyment of the land or building, or fixed merely to steady the thing itself, for the better use or enjoyment of the thing fixed: Holland v Hodgson; Reynolds v Ashby and Son (1904) AC 466; Colledge v H C Curlett Construction Co Ltd (1932) NZLR 1060; Benger v Quartermain (1934) NZLR s 13. If it is proved to have been fixed merely for a temporary purpose it is not a fixture: Holland v  Hodgson; Vaudeville Electric Cinema Ltd v Muriset. The intention of the person fixing it must be gathered from the purpose for which and the time during which use in the fixed position is contemplated: Hobson v Gorringe (1897) 1 Ch 182; Pukuweka Sawmills Ltd v Winger (1917) NZLR 81. If a thing has been securely fixed, and in particular if it has been so fixed that it cannot be detached without substantial injury to the thing itself or to that to which it is attached, this supplies strong but not necessarily conclusive evidence that a permanent fixing was intended: Holland v Hodgson; Spyer v Phillipson (1931) 2 Ch  183 at  209–210. On  the other hand, the fact that the fixing is very slight helps to support an inference that it was not intended to be permanent. But each case depends on its own facts. In Pukuweka Sawmills Ltd v Winger, a bush tramway introduced on the land for the temporary purpose of removing logs in the course of timber-getting and clearing, and capable of being moved from place to place, was held not to be a fixture; notwithstanding that a relatively secure degree of fixation was necessary whilst the tramway was in use in any particular place. On the other hand, a wooden building, resting on land by its own weight but brought there for the purpose of being permanently used as a dwelling house, was held in Reid v Smith 3 CLR 656; Austn Digest 176 to be a fixture.

In Belgrave Nominees Pty Ltd v Barlin-Scott Airconditioning (Aust) Pty Ltd [1984] VR 947 at 955, Kaye J stated: Even a slight fixing to the land is sufficient to raise the presumption that a chattel is a fixture. In those circumstances, the onus of proving otherwise rests upon the party so contending.

In National Australia Bank Ltd v Blacker (2000) 179 ALR 97, Conti J concluded that irrigation equipment resting on its own weight did not constitute a fixture. In reaching this decision, however, his Honour held that no single factor should be determinative. On the facts, the equipment was not attached to the land and was not heavy enough to raise the inference that it was intended to be permanent. His Honour stated at [16]: ‘… there is no single test which is sufficient to determine whether an item of property is a chattel or a fixture. It is clear that the court ought to have regard to all the circumstances of the case in making its determination …’. Similarly, in Loiero (aka Lero) v Adel Sportswear Pty Ltd [2010] NSWSC 113 at [11], Ball J noted that ‘the fact that the item is affixed to land is not determinative. An item may be a fixture where it simply rests on land by virtue of its own weight. A house resting on wooden piles is an obvious example … although even then there may be cases where a demountable house is not regarded as a fixture … Conversely, an item that is fixed to land may not be a fixture.’ In Agripower Barraba 125

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Pty Ltd v Blomfield [2013] NSWSC 1598, Black J in the New South Wales Supreme Court concluded that mining equipment should be treated as a fixture because of the extensive way in which they had been attached to the land as well as the fact that the cost of removing the equipment was high relative to their value and removal would occasion significant damage to the land. No contrary subjective intention could be demonstrated to displace the characterisation of the items as fixtures. This was overturned by the Court of Appeal where Bathurst CJ, Beazley J and Sackville AJA noted the declining importance of the degree of annexation, focusing instead upon the intention of the parties and the terms of the relevant mining leases. The court concluded that the seven disputed items should not be regarded as fixtures and therefore overturned the findings of Black J because the equipment could be readily dismantled and, despite its secure annexation, the intention of the parties was that the equipment would only endure for the duration of the mining leases and should not be permanently attached to the land. Where, however, there has been an annexation of the goods to the land, the greater and stronger the annexation and the more difficult it is to remove the goods without destroying them, the more likely it will be that the goods will be regarded as fixtures. This concept was discussed by the House of Lords in Elitestone Ltd v Morris [1997] 1 WLR 687, an extract of which is set out below.

—  Elitestone Ltd v Morris  — [1997] 1 WLR 687 Facts: Wooden bungalows were erected in an ‘idyllic rural environment’. They were resting on concrete pillars attached to the ground. The issue for the House of Lords was whether they were fixtures or whether they retained their individual character as chattels. The Court of Appeal held that the buildings were chattels. The court based this finding on the fact that the ‘common intention’ of the landowners and of the occupants was that the occupants should retain possession of the bungalows whilst the land upon which they stood would remain vested in the owner of the freehold. The House of Lords overruled the Court of Appeal and held that the bungalows were fixtures. Lord Lloyd of Berwick: … Thus the sole remaining issue for your Lordships is whether Mr Morris’ bungalow did indeed become part of the land, or whether it has remained a chattel ever since it was first constructed before 1945. It will be noticed that in framing the issue for decision I have avoided the use of the word ‘fixture’. There are two reasons for this. The first is that ‘fixture’, though a hallowed term in this branch of the law, does not always bear the same meaning in law as it does in everyday life. In ordinary language one thinks of a fixture as being something fixed to a building. One would not ordinarily think of the building itself as a fixture. Thus in Boswell v Crucible Steel Co [1925] 1 KB 119 the question was whether plate glass windows which formed part of the wall of a warehouse were landlord’s fixtures within the meaning of a repairing covenant. Atkin LJ said, at p 123: … I am quite satisfied that they are not landlord’s fixtures, and for the simple reason that they are not fixtures at all in the sense in which that term is generally understood. A fixture, as that term is used in connection with the house, means something which has been affixed to the freehold as accessory to the house. It does not include things which were made part of the house itself in the course of its construction. Yet in Billing v Pill [1954] 1 QB 70, 75 Lord Goddard CJ said: ‘What is a fixture? The commonest fixture is a house which is built into the land, so that in law it is regarded as part of the land. The house and the land are one thing.’ 126

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There is another reason. The term fixture is apt to be a source of misunderstanding owing to the existence of the category of so called ‘tenants’ fixtures’, (a term used to cover both trade fixtures and ornamental fixtures) which are fixtures in the full sense of the word (and therefore part of the realty) but which may nevertheless be removed by the tenant in the course of or at the end of his tenancy. Such fixtures are sometimes confused with chattels which have never become fixtures at all. Indeed the confusion arose in this very case. In the course of his judgment Aldous LJ quoted at length from the judgment of Scott LJ in Webb v Frank Bevis Ltd [1940] 1 ER 247. The case concerned a shed which was 135 feet long and 50 feet wide. The shed was built on a concrete floor to which it was attached by iron straps. Having referred to Webb v Frank Bevis Ltd and a decision of Hirst J in Deen v Andrews [1986] 1 EGLR 262 Aldous LJ continued: In the present case we are concerned with a chalet which rests on concrete pillars and I believe falls to be considered as a unit which is not annexed to the land. It was no more annexed to the land than the greenhouse in Deen v Andrews or the large shed in Webb v Frank Bevis Ltd. Prima facie, the chalet is a chattel and not a fixture. A little later he said: ‘Unit 6 was just as much a chattel as the very large shed was in the Webb case and the greenhouse in Deen v Andrews.’ But when one looks at Scott LJ’s judgment in Webb v Frank Bevis Ltd it is clear that the shed in question was not a chattel. It was annexed to the land, and was held to form part of the realty. But it could be severed from the land and removed by the tenant at the end of his tenancy because it was in the nature of a tenant’s fixture, having been erected by the tenant for use in his trade. It follows that Webb v Frank Bevis Ltd affords no parallel to the present case, as indeed Mr Thom conceded. For my part I find it better in the present case to avoid the traditional two-fold distinction between chattels and fixtures, and to adopt the three-fold classification set out in Woodfall, Landlord and Tenants, Release 36 (1994), vol 1, pp 13/83, para 13.131: An object which is brought on to land may be classified under one of three broad heads. It may be (a) a chattel; (b) a fixture; or (c) part and parcel of the land itself. Objects in categories (b) and (c) are treated as being part of the land. So the question in the present appeal is whether, when the bungalow was built, it became part and parcel of the land itself. The materials out of which the bungalow was constructed, that is to say, the timber frame walls, the feather boarding, the suspended timber floors, the chip-board ceilings, and so on, were all, of course, chattels when they were brought onto the site. Did they cease to be chattels when they were built into the composite structure? The answer to the question, as Blackburn J pointed out in Holland v Hodgson (1872) LR 7 CP 328, depends on the circumstances of each case, but mainly on two factors, the degree of annexation to the land, and the object of the annexation.

Degree of annexation The importance of the degree of annexation will vary from object to object. In the case of a large object, such as a house, the question does not often arise. Annexation goes without saying. So there is little recent authority on the point, and I do not get much help from the early cases in which wooden structures have been held not to form part of the realty, such as the wooden mill in Rex v Otley (1830) 1 B & Ad 161, the wooden barn in Wansborough v Maton (1836) 4 Ad & El 884 and the granary in Wiltshear v Cottrell (1853) 1 E & B 674. But there is a more recent decision of the High Court of Australia which is of greater assistance. In Reid v Smith [1905] 3 CLR 656, 659 Griffith CJ stated the question as follows: The short point raised in this case is whether an ordinary dwelling-house, erected upon an ordinary town allotment in a large town, but not fastened to the soil, remains a chattel or becomes part of the freehold. 127

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The Supreme Court of Queensland had held that the house remained a chattel. But the High Court reversed this decision, treating the answer as being almost a matter of common sense. The house in that case was made of wood, and rested by its own weight on brick piers. The house was not attached to the brick piers in any way. It was separated by iron plates placed on top of the piers, in order to prevent an invasion of white ants. There was an extensive citation of English and American authorities. It was held that the absence of any attachment did not prevent the house forming part of the realty. Two quotations, at p 667, from the American authorities may suffice. In Snedeker v Warring, 2 Kernan 178 Parker J said: ‘A thing may be as firmly fixed to the land by gravitation as by clamps or cement. Its character may depend upon the object of its erection.’ In Goff v O’Conner, 16 Ill 422, the court said: Houses in common intendment of the law are not fixtures, but part of the land … This does not depend, in the case of houses, so much upon the particular mode of attaching, or fixing and connecting them with the land, upon which they stand or rest, as upon the uses and purposes for which they are erected and designed.

Purpose of annexation Many different tests have been suggested, such as whether the object which has been fixed to the property has been so fixed for the better enjoyment of the object as a chattel, or whether it has been fixed with a view to effecting a permanent improvement of the freehold. This and similar tests are useful when one is considering an object such as a tapestry, which may or may not be fixed to a house so as to become part of the freehold: see Leigh v Taylor [1902] AC 157. These tests are less useful when one is considering the house itself. In the case of the house the answer is as much a matter of common sense as precise analysis. A house which is constructed in such a way so as to be removable, whether as a unit, or in sections, may well remain a chattel, even though it is connected temporarily to mains services such as water and electricity. But a house which is constructed in such a way that it cannot be removed at all, save by destruction, cannot have been intended to remain as a chattel. It must have been intended to form part of the realty. I know of no better analogy than the example given by Blackburn J in Holland v Hodgson, LR 7 CP 328, 335: Thus blocks of stone placed one on the top of another without any mortar or cement for the purpose of forming a dry stone wall would become part of the land, though the same stones, if deposited in a builder’s yard and for convenience sake stacked on the top of each other in the form of a wall, would remain chattels. Applying that analogy to the present case, I do not doubt that when Mr Morris’ bungalow was built, and as each of the timber frame walls were placed in position, they all became part of the structure, which was itself part and parcel of the land. The object of bringing the individual bits of wood onto the site seems to be so clear that the absence of any attachment to the soil (save by gravity) becomes an irrelevance. Finally I return to the judgment of the Court of Appeal. I need say no more about the absence of attachment, which was the first of the reasons given by the Court of Appeal for reversing the Assistant Recorder. The second reason was the intention which the court inferred from the previous course of dealing between the parties, and in particular the uncertainty of Mr Morris’ tenure. The third reason was the analogy with the shed in Webb v Frank Bevis Ltd [1940] 1 All ER 247, and the greenhouse in Deen v Andrews [1986] 1 EGLR 262. As to the second reason the Court of Appeal may have been misled by Blackburn J’s use of the word ‘intention’ in Holland v Hodgson, LR 7 CP 328. But as the subsequent decision of the Court of Appeal in Hobson v Gorringe [1897] 1 Ch 182 made clear, and as the decision of the House in Melluish v BMI (No 3) Ltd [1996] AC 454 put beyond question, the intention of the parties is only relevant to the extent that it can be derived from the degree and object of the annexation. The subjective intention of the parties cannot affect the question whether the 128

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chattel has, in law, become part of the freehold, any more than the subjective intention of the parties can prevent what they have called a licence from taking effect as a tenancy, if that is what in law it is: see Street v Mountford [1985] AC 809. As for the third of the reasons, I have already pointed out that Webb v Frank Bevis Ltd does not support the Court of Appeal’s conclusion, because the shed in that case was held to be a fixture, albeit a fixture which the tenant was entitled to remove. In Deen v Andrews the question was whether a greenhouse was a building so as to pass to the purchaser under a contract for the sale of land ‘together with the farmhouses and other buildings.’ Hirst J held that it was not. He followed an earlier decision in HE Dibble Ltd v Moore [1970] 2 QB 181 in which the Court of Appeal, reversing the trial judge, held that a greenhouse was not an ‘erection’ within section 62(1) of the Law of Property Act 1925. I note that in the latter case Megaw LJ, at p 187G, drew attention to some evidence ‘that it was customary to move such greenhouses every few years to a fresh site’. It is obvious that a greenhouse which can be moved from site to site is a long way removed from a two bedroom bungalow which cannot be moved at all without being demolished.

Commentary 3.3  Lord Lloyd of Berwick and Lord Clyde in Elitestone Ltd v Morris adopted the traditional approach to the determination of fixtures, noting that the two primary tests relevant to the consideration of whether goods had become fixtures were the degree of annexation and the object of annexation. Of particular relevance in this context was the fact that it was not possible for the house to be removed unless it was destroyed. In such a situation, despite the relatively slight nature of the affixation, his Lordship felt that it would be nonsensical to assume that the parties intended the house to remain as a chattel so that it could eventually be removed by destruction. Lord Clyde stated at 697: This is not simply a matter of counting the years for which the structure has stood where it is, but again of appraising the whole circumstances. The bungalow has been standing on its site for about half a century and has been used for many years as the residence of Mr Morris and his family. That the bungalow was constructed where it is for the purpose of a residence and that it cannot be removed and re-erected elsewhere point in my view to the conclusion that it is intended to serve a permanent purpose.

Their Lordships concluded that the degree of damage that would be caused if the cottages were removed was a highly relevant factor in the overall determination of whether the cottages should be treated as fixtures. Where removal would result in substantial destruction to the goods in issue, the parties could not have intended the house to retain its separate identity as a chattel. A similar approach was adopted in May v Ceedive (2006) 13 BPR 24,147 where the New South Wales Court of Appeal, approving the conclusions of the House of Lords in Elitestone Ltd v Morris, concluded that a house that had been attached to land had become a fixture because the dwelling was a solid-brick residence that could only have been removed by demolition. Santow JA concluded that a ‘common sense’ approach to the assessment suggested that the parties could not have intended the house to have retained its identity as a chattel and that once it was constructed, it had become affixed to the land. This decision can be contrasted with the subsequent decision of the New South Wales Court of Appeal in PricewaterhouseCoopers Legal v Perpetual Trustees Victoria Ltd (2007) NSWCA 271 where a ‘portable’ dwelling that had been attached to land was found not to have become a fixture because it was clear that this type of dwelling did not have to be 129

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demolished in order to be removed. The intention of the parties, taking into account the protective statutory provisions that precluded such homes from being treated as fixtures, was that the dwelling was to retain its separate identity as a chattel despite affixation. Ipp JA (with whom Giles JA and McClellan CJ concurred) stated at [61]: These matters tend to support an inference that the homes were intended to be fixtures. But, there are factors that tend in the opposite direction. These factors concern the intention with which the homes were placed upon the land, and the effect of the legislation governing manufactured homes installed on manufactured home estates.

In Darmanin v Cowan [2010] NSWSC 1118, Ward J discussed the issue of whether a cottage that was attached to land could be regarded as a fixture and ultimately concluded at [199] that where it could be shown that the cottage was ‘for the better use or enjoyment by the Cowans of the Cowans’ land, in the sense of furthering the use to which the land is put, then the cottage would be likely to be seen as a fixture; but if the intention was for the better use or enjoyment of the cottage itself (as distinct from the land), then the cottage would be likely to be held to be a chattel.’ The overall effect of these determinations suggests a decline in the significance being attributed to the degree of annexation test. This tendency was addressed by Kearney J in the Supreme Court of New South Wales in Palumberi v Palumberi (1986) ANZ ConvR 593 where his Honour stated at 596: It would seem from perusal of these and other authorities in the field that there has been a perceptible decline in the comparative importance of the degree or mode of annexation, with a tendency to greater emphasis being placed upon the purpose or object of annexation, or, putting it another way, the intention with which the item is placed upon land. This shift has involved a greater reliance upon the individual surrounding circumstances of the case in question as distinct from any attempt to apply some simple rule or some automatic solution.

See also Commissioner of State Revenue v Uniqema Pty Ltd (2004) 9 VR 523 at [47] per Ormiston JA. It would seem that the appropriate approach is to treat annexation as a starting point. While a strong annexation may indicate that the chattel has become affixed, the intention of the parties as evinced by the overall circumstances of the affixation may go against this. In Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841 at 4845, the court concluded that so long as the degree of annexation goes no further than what is required to achieve that object (on the facts, annexation occurred in order to steady the machinery so as to maintain quality control of the ultimate product and minimise safety risks), there is no need for a court to give annexation any particular or special regard in the overall assessment of whether a chattel has become a fixture. Similarly, in J & D Rigging Pty Ltd v Agripower Australia Ltd, Holmes JA, Applegarth and Bodice JJ held that the common law doctrine of fixtures does not require permanent annexation in order for a good to be regarded as a fixture. The court noted that under common law, if the intention is clear, placing the thing on the land for an indefinite or substantial period as opposed to temporarily may be sufficient to establish that the thing has become a fixture. On the facts of that case the Supreme Court concluded that the common law doctrine of fixtures should not be regarded as being imported into a statute that was concerned with the construction of contract because the wording of the statute went against it as it indicated that a temporary building or structure may be the subject of construction.3 3. [2013] QCA 406 at [27]. 130

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Object of annexation 3.4  Once it is clear that a chattel has been attached or affixed to land, it becomes necessary to consider the object underlying such an annexation. This involves a broad circumstantial assessment; it allows a court to take into account a variety of different factors that can assist in the judicial determination of whether, in the particular circumstances in issue, the parties truly intended the chattel to be henceforth treated as a part of the land to which it is affixed (or rests upon) or whether the chattel was intended to retain its separate existence. The following are relevant criteria to this assessment.

The intention of the affixer 3.5  A highly significant factor in the assessment of whether a chattel has become a fixture is the state of mind of the affixing party.4 This was discussed by the Northern Territory Court of Appeal in Pegasus Gold Australia Ltd v Mesto Minerals (Australia) Ltd [2003] NTCA 203. In that case, the court considered whether spare parts used to repair mineral processing equipment were fixtures or whether they kept their independent status as chattels. In his judgment, Mildren J concluded that where a common intention between the parties is objectively apparent, the common intention of the parties may become a critical factor. However, his Honour noted that on the facts, as is so often the case, evidence of this intention is not available and the courts must rely purely on the objective circumstances surrounding the annexation. This will include such things as the capacity to remove a chattel without causing significant damage to either the land or the chattel as well as the economic consequences of holding that a chattel has become a fixture. An extract of the judgment from Mildren J (at 206–7) follows: From the facts of this case, it is clear that the equipment was annexed to the land in such a way as to give rise to a presumption that the property in question had become a fixture and that the burden of proving otherwise rested upon the appellant. Secondly, although sometimes it is appropriate to take into account the subjective intention of a party fixing a chattel to land, usually the relevant test is to be determined objectively from such facts and circumstances that are apparent for all to see. I accept that as between, for example, a landlord and tenant, the actual intentions of the parties may well be critical if there was a common intention. But in this case, there are no findings as to what were the actual intentions of either party and therefore, the appropriate test as to the intention is to be ascertained to the objective facts and circumstances. The degree of annexation of a chattel to the land is of course relevant to the ascertainment of that intention. In this case, all of the mineral processing plant could be removed without causing any damage to the land. I also think it is significant that it was an economic proposition to sell and relocate that equipment, as was and is common mining industry practice, and that removal of the equipment would not damage it. It is also significant that there was a requirement, both under the terms of the lease and under the provisions of s 185 of the Mining Act 1980, that all the equipment be removed at the end of the lease. In my opinion, the purpose or object of the annexation was not for the better enjoyment of the mineral lease. The ore, once removed from the ground, in law became a chattel. The purpose of the equipment as a whole was to treat the ore in such a way as to separate the gold from it. Moreover, the equipment was extremely large and on the findings of the learned trial judge, would move and vibrate and therefore had to be fixed in such a way as 4. See Lynden Griggs, ‘The Doctrine of Fixtures: Questionable Origin, Debatable History and a Future that is Past!’ (2001) 9 Aust Prop LJ 1; M Haley, ‘The Law of Fixtures: An Unprincipled Metamorphosis?’ [1998] 62 Conv 137. 131

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to prevent that vibration. There is force in the argument that the individual chattels became part of a much larger piece of equipment, as the learned trial judge found, but this did not necessarily mean that the whole structure became a fixture. As was pointed out by counsel for the appellant, it was not vital that this equipment remained on the mineral lease. It could have been effectively located anywhere, although it was more economic to locate it as near as possible to the mine site in order to reduce the cost of transporting the ore. In my opinion, the  function to be served by annexing the plant to the soil was to stabilise it so that the equipment could be used as a piece of equipment.

See also Mahoney JA (at 9244–5) and Glass JA (at 9246) in NH Dunn Pty Ltd v LM Ericsson Pty Ltd (1979) 2 BPR 9241; [1980] ANZ ConvR 300; Ipp JA in Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841. In Agripower Barraba Pty Ltd v Blomfield [2015] NSWCA 30 at [76], Sackville AJA noted that the law of fixtures has ‘not stood still’ and that in adapting its principles to suit the exigencies of modern life, it has modified ‘the emphasis on the degree of annexation of chattels to the land in favour of the more amorphous concept of the purpose or object of annexation’. Subjective intention is, however, not relevant to the assessment of whether a chattel has become a fixture. What is relevant is the objective intention that is to be gathered from the circumstances applicable at the time of annexation rather than at any later point of time. As outlined by Santow JA in May v Ceedive Pty Ltd [2006] NSWCA 369 at [65]: [T]he intention which determines the question whether an object has, in law, become affixed to the land, or, to use the paraphrase emphasised in Elitestone Limited v Morris [1997] 1 WLR 687 at  690–1, 693, become part and parcel of the land by affixation is at least predominantly, ‘the objective intention of the person who brings the object onto the land and affixes it there’.

In Lictor Anstalt v MIR Steel UK Ltd [2014] EWHC 3316, Asplin J in the English High Court held that heavy steel mills installed on land with an operable life of up to 50 years, which could only be removed in exceptional circumstances, did constitute fixtures and should be regarded as a part of the land. The court noted the conclusions of the House of Lords in Elitestone and that of the New South Wales Court of Appeal in May v Ceedive, and held that on the facts, regard should be had to the actual intentions of the parties given that the mills were attached to the floor by means of heavy duty bolts cast in concrete and such that there was ‘nothing temporary about them’ (at [185]). The court noted that it would require specialist heavy machinery to remove the mills and any such removal would cause significant damage. Consequently, the court felt that the mills should be regarded as a part of the land as this was consistent with the overarching intention of the parties because the idea was to create a functioning, proximate steel mill with permanent or semi-permanent structures.

The nature of the chattel 3.6  Another important factor in the fixtures assessment is the nature of the chattel itself. Some chattels are of such a character that they can only be effectively utilised where they are attached to land and should not be treated as having an independent operation. On the other hand, some chattels will always retain an independent identity to that of the land to which they are attached, the purpose of the attachment being to maximise their operation or utility. The distinction between different categories of chattels was well illustrated in the decisions of Leigh v Taylor [1902] AC 157 and Re Whaley [1908] 1 Ch 615, where the difference between a fixture attached to the land for the purpose of enhancing the land and a fixture attached to the land for the purpose of enhancing the building were considered. 132

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In Leigh v Taylor [1902] AC 157, expensive tapestries were attached securely to the wall so that they could be properly viewed. The tapestries were never regarded as forming a part of the wall but, rather, were attached so that they could be effectively viewed. Lord Halsbury LC said (at 159): I suspect it is not the law or any principle of law, but it is a change in the mode of life, the degree in which certain things have seemed susceptible of being put up as mere ornaments, whereas at an earlier period under ruder construction rendered it impossible sometimes to sever the thing which was put up from the realty … Here we have objects of ornamentation of very great value. Undoubtedly their only function in life, if it may be so called, is the decoration of a room. Suppose the person had intended to remove them next month or the next year or what not, I do not know, notwithstanding the ingenious effort that has been made by Mr Levett, in what other way they could have been fastened than they were … It never was intended to remain part of the house; the contrary is evident from the very nature of the attachment, the extent and degree of which was as slight as the nature of the thing would admit of. Therefore, I come to the conclusion that this thing, put up for ornamentation and for the enjoyment of the person while occupying the house, is not under such circumstances as these part of the house.

By contrast, in Re Whaley [1908] 1 Ch 615, a valuable tapestry was attached to a wall in order to enhance the historical character of the room and to assist in the creation of a perfect ‘Elizabethan’ room. Neville J said (at 622): I think it is clear here that the decoration originally was intended to give the whole room the appearance of an Elizabethan room, that the whole decoration was in unison, and the ornaments were inserted primarily for the purpose of creating a beautiful room as a whole, and not intended for the mere display and enjoyment of the chattels themselves. I am not entirely unaffected in that consideration by the fact that part of this tapestry was placed over a part of the wall in which there either originally existing, or afterwards was made, a door, and that the tapestry was cut in order to enable the door to be used, which I must say, I think indicates that the owner was rather treating the tapestry as a decoration of the room than selecting a proper position for the display of this tapestry. In order to see what the testator meant by the will he made, one has to consider this; that an owner in fee, who attaches things even by way of ornaments to the freehold has no reason for desiring that they should continue as chattels rather than become part of the house, and the position of the tenant for life, or of a tenant for years is obviously of an entirely different character, because there the property going in different directions, the tenant for life is making a present to somebody else if he spends money in ornamenting the rooms which he occupies only as a tenant for years or for life.

The decision in Re Whaley [1908] 1 Ch 615 makes it clear that the tapestry was always intended to become a part of the house itself because the primary reason it was hung in the room was to decorate the room and enhance its Elizabethan character, rather than for the benefit of the tapestry as an independent chattel. See also Lord Chesterfield’s Settled Estates [1911] 1 Ch 237 where Grinling Gibbon’s carvings, which had been affixed to a suite of rooms 200 years earlier, were held to be fixtures.

Overall circumstances 3.7  The determination of whether a chattel was attached with the intention of becoming a

fixture must always be based upon a range of factors as applied to the specific circumstances in issue: Snowy Hydro Ltd v Commissioner of State Revenue [2010] VSC 221 at [26] per Davies J.

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In Palumberi v Palumberi (1986) NSW ConvR 55,287 at 56,671, Kearney noted that ‘It is universally recognised in the relevant authorities that the question is to be determined having regard to all relevant circumstances …’. In May v Ceedive Pty Ltd [2006] NSWCA 369, Santow JA stated at [65] that the intention is predominantly ‘the objective intention of the person who brings the object onto the land and affixes it there’ and this generally involves an assessment of all of the circumstances. Similarly, in Snowy Hydro Ltd v Commissioner of State Revenue [2010] VSC 221 Davies J at [23] held that there is ‘no one test that is conclusive of characterisation’. In TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 273 ALR 134 at [24], French CJ, Heydon, Gummow, Crennan and Kiefel JJ approved of the degree of annexation and the object of annexation as two ‘considerations’, which were relevant to an overall determination of the intention of whether an object has become part and parcel of the land. Other factors relevant to the assessment of intention are: the status of the ‘affixer’; the interests, if any, of any third parties in the goods; the duration for which the chattel was ‘intended’ to be affixed; the existence (if any) of any statutory provisions or contractual terms regulating affixation; and the level of damage that any removal of the chattels might have upon the chattels themselves as well as the land. In Snowy Hydro Ltd v Commissioner of State Revenue [2010] VSC 221 at [27], after a full evaluation of the facts, the Victorian Supreme Court concluded that gas turbine generation units that had been bolted to land were fixtures, despite the fact that they functioned independently of each other, were reusable and could be relocated or independently sold. Davies J held that these units were bolted to the ground with the intention that they would remain on the land permanently as they were the most valuable part of the land and that as such, the objective intention of installing the units was ‘for the long term use of that site as a gas turbine electricity generation plant’ and this meant that the units should be characterised as fixtures. See also Lictor Anstaldt v MIR Steel UK Ltd [2014] EWHA 3316 (Ch). The cases and principles we have examined that have developed and applied the fixtures tests reveal that this area of law is in a constant state of development. Change and adaptation is an important quality given the rapid shift in technology, machinery and areas of conflict. As outlined by P Luther, in ‘Fixtures and Chattels: A Question of More or Less’ (2004) 24 (4) Oxford Journal of Legal Studies 597 at 618: The focus of the law will no doubt continue to shift as new areas of conflict come to the fore (as happened with disputes involving industrial machinery in the 19th century) and others fade into the background (as has happened with disputes arising out of family settlements in the course of the past century). New disputes will no doubt arise, as new types of chattel are affixed to land by new methods and for new purposes; judges will continue to conclude — to quote some of Blackburn J’s less formal words on the subject — that, ultimately, it is all ‘a question of more or less’.

Tenant’s rights to remove 3.8  A tenant holding a valid and enforceable lease will acquire a common law right, in the form of a legal chose in action, to remove any trade, domestic or ornamental chattels that have become fixtures during the period of time that the tenant remains in legal possession. As outlined by French CJ, Heydon, Gummow, Crennan and Kiefel JJ in TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 273 ALR 134 at [26], where their Honours (quoting from the seventh edition of Megarry and Wade’s The Law of Real Property, Sweet & Maxwell, London, 2008, 1072) stated: Prima facie, all fixtures attached by the tenant are ‘landlord’s fixtures’, ie must be left for the landlord at the end of the lease. But important exceptions to this rule have arisen, and fixtures 134

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which can be removed under these exceptions are known as ‘tenant’s fixtures’. This expression must not be allowed to obscure the fact that the legal title to the fixture is in the landlord until the tenant chooses to exercise his power and sever it. The tenant may do so only during the tenancy or (except in cases of forfeiture or surrender) within such reasonable time thereafter as may properly be attributed to his lawful possession qua tenant.

This principle means that where a chattel has become affixed during the currency of the tenancy, the tenant retains a right to remove that chattel. If the right is not exercised, the chattel will remain a fixture because the existence of a right of removal does not mean, prior to the exercise of the right, that the chattel retains its separate identity.5 Subject to statutory provisions, where the chattel has become so affixed to the premises that it cannot be removed without either being destroyed or causing significant damage to the leased premises, the chattel will be treated as a landlord fixture and may not be removed by the tenant.6 The right of the tenant to removal of an affixed chattel will only be applicable to those chattels that have become affixed during the currency of the tenancy. It does not apply to chattels that became fixtures before the lease commenced or that have been affixed at the expiration of the lease. The right of removal will only apply to the original fixtures and it does not include any subsequent modification or addition.7 Once the right of the tenant to remain in legal possession of the leased premises expires, the tenant’s right to remove will expire and those affixed chattels that have not been removed will continue to be regarded as fixtures. In Agripower Barraba Pty Ltd v Blomfield [2015] NSWCA 30, the New South Wales Court of Appeal concluded that the tenant’s right to remove will endure during the currency of the lease and for a reasonable period after its expiration. On the facts the court noted that the right had clearly expired in 2008, making it unreasonable to assert the right a couple of years later when court proceedings were brought. It can be difficult to determine exactly when a lease has expired and therefore when a right of removal is extinguished as it depends upon the character of the lease in issue. Where a lease has formally expired, however, a tenant remains in possession of leased premises with the consent of the landlord, and it is clear that the premises have not been abandoned, the right of removal may continue to be exercised during the extended ‘lawful possession’ of the tenant.8 A tenant who does remove a fixture must repair any damage caused to the leased premises as a result of the removal and must leave the leased premises in a reasonable condition: Mancetter Developments Ltd v Garmanson [1986] QB 1212.9 The tenant’s right to remove fixtures is capable of being assigned. In Poole’s Case [1738] EngR 617; 90 ER 934 it was held that the interest that the tenant has in the fixtures is more than a bare right to remove and is capable of being assigned.10 In Commissioner of State Revenue v TEC Desert Pty Ltd [2009] WASCA 128, Wheeler JA noted at [98]–[100] that it was possible for a landowner to deal 5. See also North Shore Gas Co Ltd v Commissioner of Stamp Duty (1940) 63 CLR 2 per Dixon J; Vopak Terminal Darwin Pty Ltd v Natural Fuels Darwin Pty Ltd (2009) 258 ALR 89 at [66] per Lindgren J; Regreen Asset Holdings Pty Ltd v Castricum Brothers Pty Ltd Australia [2015] VSCA 286 at [123] per Warren CJ, Kyrou, McLeish JJA. 6. Bishop v Elliott (1855) 11 Ex 113; 156 ER 766; Vesco Nominees Pty Ltd v Shefan Hair Fashions Pty Ltd (2001) QSC 169. 7. Cottee Dairy Products Pty Ltd v Minad Pty Ltd (1997) 8 BPR 15,611. 8. New Zealand Government Property Corporation v HM & S Ltd [1982] QB 1145. 9. See also Empire Securities Pty Ltd v Miocevich [2008] WASCA 52 at [31] per Heenan AJA. 10. See also Eon Metals NL v Commissioner of State Taxation (WA) (1991) 91 ATC 4841. 135

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with its interest in fixtures on land owned by it separately from its interest in the balance of the land and that, in doing so, it may create in another an interest in the fixtures. While his Honour felt that the nature of that interest was not entirely clear, the cases that have most directly considered the question appear to lead to the conclusion that the ‘sale’ of an unsevered fixture gives rise only to an equitable interest in the purchaser. Similarly, McLure JA concluded that the right of a tenant to remove fixtures was an equitable right. His Honour noted at [226] that ‘considerable research has not unearthed any binding authority or detailed judicial consideration of the nature of the right of a tenant to remove tenant’s fixtures’. His Honour felt, however, that ‘there can be little doubt that it is a property right and is thus transferable. The controversy is whether the right constitutes an equitable interest in the land (either as an incident of the leasehold interest or otherwise).’ After examining all of the alternatives, his Honour concluded that a tenant’s right to remove fixtures gave rise to an equitable interest in the land to which it was attached. This would effectively mean that the interest that a tenant held in an unsevered fixture would have priority over a subsequent equitable interest in the land created by the freehold owner. On appeal, the High Court in TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 273 ALR 134, French CJ, Gummow, Heydon, Crennan and Kiefel JJ held that the mining tenement involved did not constitute an interest in land, and this precluded the application of the doctrine of fixtures thereby making it unnecessary to evaluate the nature of a tenant’s interest in an unsevered fixture, although their Honours did note the ‘unsettled’ state of the law. Under common law, the right of the tenant to remove fixtures was always restricted to trade, ornamental and domestic fixtures, and did not include agricultural fixtures. Statutory provisions have been introduced in some states to extend the application of the tenant’s right to remove other fixtures so as to ensure that it extends to all forms of fixtures. See, for example, the Agricultural Tenancies Act 1990 (NSW) s 10; Property Law Act 1974 (Qld) s 155; and Landlord and Tenants Act 1935 (Tas) s 26. Section 155 of the Property Law Act 1974 (Qld) makes it clear in s 155(2) that the precondition to exercising the right are that the tenant has paid all the rent owing and satisfied all other obligations and given the landlord one month written notice of an intention to remove the fixture. If, upon receiving such notice, the landlord elects to purchase the fixture, the tenant may no longer remove it; however, the landlord is obliged to pay a fair value. In Victoria, s 154A of the Property Law Act 1958 has replaced the repealed s 28 of the Landlord and Tenant Act 1958 (Vic). Section 154A is, in substance, a similar provision to s 28 in that it confers a right to remove all fixtures, without excluding agricultural fixtures. Section 154A, however, goes further in that it allows a tenant to remove not only attached fixtures, but also any ‘renovations, alterations or additions’. It applies to tenants under preexisting leases that includes leases of Torrens title land. Further, s 154A(2) specifically requires the tenant to restore the premises to the condition they were in prior to the removal of the fixtures, fair wear and tear excepted, and includes an additional provision in s 154A(2)(b) which makes it clear that if the premises are not restored to the condition they were in prior to their removal, the tenant may choose to pay the landlord an amount equal to the cost of restoring the premises. Other relevant legislative provisions in this context include s 114 of the Mining Act 1978 (WA), which confers a right upon the holder of a mining tenement to remove any ‘mining plant’ that has been brought on to the land during the currency of the mining tenement or within three months following the expiration of the mining tenement. The High Court 136

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in TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 273 ALR 134 concluded that this provision creates a separate statutory regime for the removal of materials that come within the definition of a ‘mining plant’ and that this regime was intended to exclude the general law respecting the affixture of chattels to the freehold. French CJ, Gummow, Heydon, Crennan and Kiefel JJ held at [35] that s 114 operates ‘upon the statutory assumption that what is a “mining plant” is not determined by the general law respecting the affixture of chattels to the freehold, of which they then became part and to which the general law respecting removal of tenant’s fixtures applies’.

Fixtures and third parties 3.9  In some situations, a third party may acquire a right to remove a chattel that has become a fixture. This may occur in a range of different circumstances where the third party holds a contractual right over the unsevered chattel. While it is not possible for a third party to hold any legal entitlement in such a situation, the equitable jurisdiction has recognised the enforceability of such a right. The classic scenario where this arises is where a chattel is hired or leased out and the hirer or lessee who acquires a possessory title proceeds to attach the chattel to land that belongs to another. In such a situation, the common law will assume that the chattel, as a fixture, is to be regarded as a part of the land. The equitable jurisdiction has, however, taken a different perspective. In Kay’s Leasing Corporation Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429, a company hired manufacturing machinery from the plaintiff, Kay’s Leasing Corp, and attached it to its land such that it became a fixture. The land was then mortgaged to CSR Provident Fund Nominees Pty Ltd. The company defaulted on both the hire purchase contract and the mortgage. The issue was whether CSR could claim the machinery as it was a fixture and therefore a part of the land that was security for the mortgage or whether Kay’s Leasing Corp had any equitable right to reclaim the property. The Victorian Supreme Court held that Kay’s Leasing Corp had an equitable right to enter the premises and remove the machinery. Adam J (at 436) found that the right of re-entry contained in the hire–purchase agreement amounted to a ‘species of equitable interest which entitled [the finance company], as against the [mortgagor], to enter upon the premises and sever and remove the chattels that had become fixtures’. The equitable right arose from the contractual right and was not referable to the chattel itself that had, at law, become a part of the land. Hence, arguably, if the contract did not specifically allow for chattels to be seized upon breach, the equitable right may not have arisen. The hire purchase agreement entitled Kay’s Leasing Corp to seize the goods on default and the retention of title clause combined with the right to remove the goods was sufficient to generate an equitable title. This title is enforceable against the land, but may not be enforced against a bona fide purchaser for value without notice. As Adam J stated (at 438): … it seems clear that the mortgagee upon registration of its mortgage became entitled to treat as part of the mortgaged property any fixtures annexed thereto by the hirer, whether before or after the giving of the mortgage. Accordingly, as between such equitable interests as the plaintiffs had in the mortgaged land by reason of the annexation of plant and machinery thereto, and the mortgagee’s powers and rights as registered mortgagee, the latter were paramount.

The equitable right to remove is a very specific right and, where recognised, will allow the holder the right to access and remove the fixture. The right must be exercised within a 137

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reasonable period and could be extinguished where, for example, a mortgagee proceeds to enforce security and exercises a right of possession following a breach of the loan contract. In such a situation, a grantee could lose a right to enter mortgaged land and remove fixtures provided the mortgagee has exercised its powers, as outlined by Adam J in Kay’s Leasing Corporation Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VR 429 at 438, ‘in a manner inconsistent with the continued existence of the equitable interests’. In Sanwa Australia Leasing Ltd v National Westminster Finance Australia (1988) 4 BPR 9514, the court suggested, however, that an equity to remove goods could remain enforceable up until the point when the mortgagee either entered into a contract of sale to sell the mortgaged property pursuant to its power of sale or foreclosed over the property. Powell J held (at 9515) that ‘… as the plaintiff moved to exercise its right prior to their being overreached by the exercise, by the defendant [mortgagee], of its power of sale … the plaintiff ’s rights ought, prima facie, to be regarded as having retained their priority’. In Empire Securities Pty Ltd v Miocevich [2008] WASCA 52 at [28], Heenan AJA concluded that where a vendor expressly reserves in the agreement for sale a right to sever certain fixtures that otherwise may have formed part of the land, it will confer upon the vendor an enforceable right. This right must be ‘exercised within the time specified’ and a failure to comply would generate similar consequences to ‘the position of a tenant failing to exercise a right to remove tenant’s fixtures at the expiration of its term’.11 In Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd [2009] WASCA 171 at [17] McLure JA, in discussing the possibility that a retention of title clause could confer an equitable interest upon the holder against chattels that had become affixed to land, noted that ‘the co-existence of contractual and proprietary remedies is well known to the law’. The equitable right to remove an affixed chattel is recognised as a form of equitable land interest because, until severed, the chattel cannot be regarded as having a separate existence.12 An equitable right to remove a fixture may arise where the owner of land to which a chattel has been affixed enters into a contract to transfer ownership of the land and retain title to the unsevered goods (a retention of title clause) or enters into a contract to transfer title to the unsevered goods and retain ownership of the land. In both cases, the courts have held that the contractual rights that the transferee acquires or that the transferor retains over the unsevered chattels amount to equitable rights to remove. The right acquired by the owner of land is sourced in the fairness obligations that arise between the contracting parties and is, therefore, not in the nature of a fee simple interest: see Melluish v BMI (No 3) Ltd [1995] Ch 90 at 117; Smith LJ in Hobson v Gorringe [1897] 1 Ch  182 at  193; Perron Investments Pty Ltd v Tim Davies Landscaping Pty Ltd  [2009] WASCA 171; and Commissioner of State Revenue v TEC Desert Pty Ltd [2009] WASCA 128 at [226] per McLure JA. 3.10  As outlined above, where a contract to transfer unsevered chattels that have been affixed to land is entered into, the courts have treated the contractual right of the transferee as an equitable entitlement. The scope and nature of the equitable right to remove was discussed by the Federal Court in Metal Manufactures Limited v Federal Commissioner of Taxation [1999] FCA 1712, a case involving a purported transfer of an unsevered chattel to a third party. An extract of this decision is set out below. 11. See also Re Samuel Allen & Sons Ltd [1907] 1 Ch 575; Re Morrison Jones & Taylor Ltd [1914] 1 Ch 50. 12. Commissioner of State Revenue v TEC Desert Pty Ltd [2009] WASCA 128 at [228] per McLure JA; Metal Manufactures Ltd v Federal Commissioner of Taxation [1999] FCA 1712 at [189] per Emmett J. 138

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—  Metal Manufactures Limited v Federal Commissioner of Taxation  — [1999] FCA 1712 Facts: MMT (the taxpayer) had been engaged for many years in the manufacture of energy cables, tubes, pipes and the business of electronic communications. ABM Pty Ltd, a wholly owned subsidiary of the taxpayer, was the owner of land which adjoined that of MMT. On this land, factory premises were erected and in these factories were various items of heavy plant and equipment (cables, tubes and lines) that were securely fixed to the floor of the factory premises. MMT subsequently entered into an agreement where they sold the equipment to ‘the bank’ and the bank leased it back in return for regular rental payments. MMT subsequently claimed these rental payments as tax deductions. The Commissioner of Taxation argued that they were not allowable deductions. It was argued that because the plant and equipment consisted of fixtures, the agreement between the bank and the taxpayer was ineffective to vest any title to the bank. The plant and equipment had become a part of the land. Thus, the Commissioner of Taxation argued that the payments made by MMT to the bank could not be characterised as (deductible) payments made under a lease for the purpose of securing the right to use property owned by the bank as lessor. MMT argued that the bank had acquired an equitable title to the plant and equipment despite the fact that it was affixed to the land. They argued that the equitable right of the bank arose from the fact that the bank had entered into a contractual arrangement, the Credit Purchase Agreement, whereby the taxpayer agreed to transfer ownership and that the plant and equipment would not become fixtures. Emmett J agreed with MMT and concluded that the bank did acquire an equitable title to the plant and equipment despite its affixation to the land. Emmett J: … The purpose for which the plant and equipment were annexed to the land, objectively ascertained, must be determined by reference to a number of the factors outlined above. The plant and equipment are extremely heavy items for the manufacture of tubes and pipes in the conduct of heavy industry. Whilst the plant and equipment may need to be replaced from time to time, in line with technological changes, there was no suggestion that the items in question were of a type inherently likely to become redundant within a fixed period of time. That situation may be contrasted with a situation where it is foreseeable that the presence of plant on a mining site would be limited because the mining site, by its nature, operates only for a limited period of time. In the present case, it is clear that properly maintained items of the kind in question could last indefinitely, although they could become redundant overnight by a major technological advance. Those considerations do not lead to any conclusion other than that the plant and equipment were installed with the intention that they would remain in place permanently or indefinitely, rather than for a purpose that had a particular, or in some way limited, life span. Certainly, it was necessary that the plant and equipment be attached to the land in a manner that would steady it, ensuring quality of the ultimate product, and for safety reasons. In that sense, the items were affixed for the better enjoyment of the items themselves, rather than for the better enjoyment of the land. However, there can be circumstances in which chattels may become affixed for the better enjoyment of land used for a particular use. Thus, a milk processing plant might constitute a fixture because it was annexed to the land for the better enjoyment or use of the land as a dairy processing plant — see National Dairies WA Ltd v Commr of State Revenue [1999] WASCA 152. Similarly, items of machinery in a factory plant may be fixtures because they were annexed for the better use and enjoyment of the land as a furniture factory — see Re Starline Furniture Pty Ltd (1982) 1 ACLC 312; (1982) 6 ACLR 312. Parts of the plant and equipment were installed on land belonging to a third party, namely Austral Bronze. That might suggest an intention that the items were not to become part of the land. However, Austral Bronze is a wholly owned subsidiary of the Taxpayer. In any event, 139

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the  relationship between the Taxpayer and Austral Bronze appears to be that of tenant at will and landlord. Thus, while the items may be removable as tenant’s fixtures they would nevertheless be fixtures. The law of fixtures may operate harshly. The doctrine of tenant’s fixtures ameliorates that harshness in certain circumstances. Thus, a tenant is given the right, upon the expiration of the tenancy, to sever items from the land that have been installed during the currency of the tenancy. The right stems not from any consideration that the tenant must not have intended that the items remain permanently on land belonging to the landlord, and therefore, the items must continue to be chattels. Rather, the principle recognises that, despite the fact that the tenant did not intend the item to become affixed to the land, the item did in law become a fixture. The fact that the plant and equipment was installed, in part, on land belonging to a third party does not assist in a determination of the objective intention with which the items were placed on the land. The evidence on the question of the practicality and viability of removing the plant and equipment demonstrates that it would be possible to remove the plant and equipment. The Tandem Wire Drawing Plants had, in fact, been removed to other locations. However, the removal was a time-consuming and difficult task. This tends to support the conclusion that the objective intention in affixing the plant and equipment on the land was that they remain there, and form part of the land. The land on which the plant and equipment was installed has been modified to adapt to the better use of the plant and equipment by the construction of footings and pitworks. The plant and equipment is more than merely bolted down in a way that could be easily reversed. Any removal will require jack-hammering concrete footings and grouting, dismantling part of the surrounding building (including cutting through cross-beams in the factory wall) and perhaps cutting through bolts which had seized up. Although strictly capable of removal, the degree of complexity, difficulty and the time involved indicates that the intention, objectively ascertained, was that the plant and equipment was to remain permanently or indefinitely. The degree of integration of the items with other aspects of the factory (furnaces and supporting services, for example) also indicates that the intention objectively ascertained was that it was to remain indefinitely. The degree of annexation of the plant and equipment is a very significant factor. It is difficult to see how items, the removal of which may require months to complete, considerable modifications to the buildings surrounding them (at least for the duration of the removal works) and digging up part of the underlying floor space, can still be said not to exhibit an objective intention that they were to become part of the land. Weighing up all the relevant factors, the circumstances surrounding the attachment of the plant and equipment to the land show that the plant and equipment were intended to become part of the land to which they were attached. They were fixtures as at 19 April 1988.

The effect of the arrangements The Commissioner contends that, because the plant and equipment were fixtures, the instruments were ineffective to achieve their stated objects. He says that the payments are therefore not lease payments or payments for hire because they were not for the use of chattels in the ordinary sense in which true lease or hire payments are for the use of chattels. Nor could the payments be characterised as being for the use of the land which the Taxpayer already owned, apart from the parcel owned by Austral Bronze. It is clear that the parties intended by the Credit Purchase Agreement that the bank would have rights in respect of the plant and equipment. Specifically, there can be no doubt that the bank acquired contractual rights in respect of the plant and equipment. Whether or not the Credit Purchase Agreement also secured to the bank some proprietary right in relation to the plant and equipment, the bank clearly had enforceable rights against the Taxpayer in respect of them. Those rights, if enforced, would have interfered with the Taxpayer’s right to unfettered use of the plant and equipment. 140

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Further, whether or not the plant and equipment constituted fixtures or chattels, the payments made pursuant to the Lease by the Taxpayer to the bank secured that unfettered right of use during the Term of the Lease. The same position applied in relation to any extension of the Term under the First Amendment or the Second Amendment. Even if the plant and equipment are fixtures, there can be no doubt that, as between the Taxpayer and the bank, the bank is entitled to require the Taxpayer to vest legal ownership of the plant and equipment in the bank. The promise for further assurance in clause 4.3.3 of the Credit Purchase Agreement would require the Taxpayer to do all such acts as may be required by the bank for further and more perfectly assuring the plant and equipment to the bank. Under clause 4.3.6, the Taxpayer warranted that the plant and equipment was severable from the premises and would not either at law or equity form part of the premises in the nature  of a fixture. The Taxpayer also warranted that title in and to the plant and equipment would at all times be and remain in the bank. Under clause 4.3.7, the bank was to have the right: ‘… to break open any gate, door or fastening and detach the Goods from any part of the Premises to which they may have become affixed.’ In addition, under the Landlords’ Waiver, each of the Taxpayer and Austral Bronze agreed that they had no right, title or interest to or in the plant and equipment and that they would not acquire any such right, title or interest. They agreed that no part of the plant and equipment would be treated as a fixture. They also agreed that the bank would have full right and licence to enter the Premises for the purpose of repossessing the plant and equipment and removing them from the Premises at any reasonable hour. They acknowledged |that the plant and equipment was, and was at all times to remain, the property of the bank. The Taxpayer and Austral Bronze had apparently granted a mortgage over their respective parcels of land to Permanent. Permanent also entered into the same arrangements with the bank. If the plant and equipment are fixtures, any interest of the bank could not be a legal interest since, as a matter of law, the plant and equipment would form part of the land to which they were attached. It is beyond question that the Taxpayer was intending to vest legal ownership in the bank. It agreed to do everything that was necessary to do so. If it has not achieved that stated object, it remained subject to a continuing obligation to do so. A court of equity would treat as having been done that which ought to have been done. I consider that the Credit Purchase Agreement was effective to vest in the bank an interest in the nature of property which should be characterised as equitable. That means, of course, that if a bona fide purchaser for value acquired the legal estate in the two parcels of land without knowledge of the bank’s interest, that interest may be defeated. On the other hand, if a third party acquired an equitable interest in the parcels of land, questions would arise as to priority between competing equitable interests. Such questions have arisen in the past and courts both in the United Kingdom and in this country have consistently held that a party in the position of the bank acquires an equitable interest — … On one view of the lease, standing alone, it has the effect of conferring on the bank the right, on default in the payment of the regular instalments of rent, to enter the Taxpayer’s premises and dismantle and remove the plant and equipment. However, the fact that the lease may be capable of having that effect cannot mean that the advantage that the Taxpayer sought by assuming the obligation under the lease, that it did not previously have, to pay the rental instalments, was to protect itself from what might happen if it failed to pay those instalments. The Taxpayer, so it might be said, cannot sensibly be regarded as having assumed a new obligation to pay rental instalments in order to obtain the advantage of protecting itself against detriment capable of arising if it were to fail to pay one or more of the instalments — see Eastern Nitrogen Ltd v FC of T (1999) 99 ATC 5163; [1999] FCA 1536 at paragraph 45. The consideration for which a tenant’s payment of rent is promised and made under a lease of land is governed entirely by the agreement. The Lease shows that the Taxpayer undertook 141

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to pay the regular instalments of Rent in return for the ‘leasing’, that is, possession of the plant and equipment, during the Term of the Lease. It did not undertake to pay the rental instalments for freedom from disruption of that possession by the bank. It might be said that the Taxpayer never needed to pay the instalments to acquire possession of the plant and equipment because it never lost that right — Eastern Nitrogen Ltd at paragraph 46. However, such an analysis ignores the effect of the Credit Purchase Agreement, which confers on the bank an equitable interest with respect to the plant and equipment. A question may arise as to whether that equitable interest was an interest in the whole of the land or only in that part of the land which consisted of the plant and equipment. The correct analysis does not matter. It is clear, however, that the bank did acquire a proprietary interest pursuant to the Credit Purchase Agreement. It is that interest that would give the bank the right to enter upon and sever the plant and equipment from the land, but for the rights conferred on the Taxpayer by the Lease. The concepts which appear to underlie the Arrangements are transfer of ownership of chattels by a seller to a buyer and then the hire by the buyer to the seller of the same chattels in consideration of a hiring fee. However, ownership was not intended to be conveyed by the Credit Purchase Agreement, no doubt because of stamp duty considerations. Rather, ownership, or legal title, was intended to be conveyed by delivery. That is clear from the language of clause  2.1.3, which provides that property is to pass by virtue of delivery being made in accordance with clause 2.1.1, and not by virtue of the Credit Purchase Agreement itself. Delivery is sufficient to convey legal ownership of chattels under the general law, although, of course, it is not sufficient to convey any legal interest in land. On the other hand, it was the common intention of the parties that, while title would pass to the bank, physical custody of the plant and equipment would not change. That is to say, it was intended that the Taxpayer would at all times retain dominion, possession and control over the plant and equipment, while ownership would pass by a constructive delivery. Common law concepts arising from bailment are steeped in Roman Law jurisprudence — see Coggs v Bernard (1703) 92 ER 107. Concepts of constructive delivery were recognised in Roman jurisprudence. The relevant concept is generally referred to as constitutum possessorium or ‘possessory agreement’, although that expression itself is not a classical one. While there is some considerable controversy as to whether or not there could, in Roman Law, be transfer of ownership by mere agreement, there is no doubt that Roman jurisprudence recognised a transfer of ownership by one party to another by mere agreement where the transferring party was to retain custody of the subject matter in a different capacity following the transfer of ownership. The classic example was where the seller of an object retains custody as hirer from the buyer. It is a sensible arrangement to avoid what would otherwise be a pointless handing over and taking back — see D 41.2.18.pr and the discussion in William W Gordon, Studies in the Transfer of Property by Traditio (University of Aberdeen, 1970) Chapter 1, at pp 13–35; W W Buckland, A Text Book of Roman Law (3rd ed 1966) at p 227; Barry Nicholas, An Introduction to Roman Law (3rd ed Clarendon Press, Oxford 1988) at p 119, and Ernest Metzger, A Companion to Justinian’s Institutes (Cornell University Press, 1998) at p 54. Under the common law, there are several ways in which there may be a change of possession without any change of the actual custody. Such a change of possession is sometimes spoken of as constructive delivery or delivery by attornment. An obvious instance is where a seller in possession assents to hold, on account of the buyer, a thing sold. When he or she begins so to hold it, that has the same effect as a physical delivery to the buyer or his agent and is an actual receipt by the buyer. That is so, whether the seller’s custody is in the character of a bailee for reward or of a borrower — Pollock and Wright, Possession in the Common Law (1888, reprinted 1990) at p 72 and N E Palmer, Bailment (2nd ed 1991) Chapter 20. If the plant and equipment are fixtures, of course, the constitutum possessorium contemplated by the Credit Purchase Agreement was ineffective to pass legal ownership. However, for the reasons I have indicated, I consider that the instruments were effective to create an equitable 142

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interest in the nature of property in the bank, which was sufficient to support the ‘leasing’ by the bank of the plant and equipment to the Taxpayer and the ‘taking on lease’ of the plant and equipment by the Taxpayer. …

Commentary 3.11  The decision in Metal Manufactures Limited v Federal Commissioner of Taxation examines the equitable rights that parties may acquire when contracting over chattels that have been affixed to the land. In this situation, while legal ownership cannot pass to a contracting party, Emmett J argued that equity may enforce the contractual right to the chattels. In this respect, Emmett J drew on Roman concepts of an agreement to transfer, on the one hand, and an intention to retain custody of goods, on the other. His Honour noted that it is well established that there may be a change of possession without any physical delivery of the goods and, in this respect, utilised the example of a seller in possession of goods agreeing to hold those goods for the buyer once sold. The conclusions of Emmett J with respect to the scope and enforceability of the equitable right to remove were not overruled by the Court of Appeal in the subsequent decision of Federal Commissioner of Taxation v Metal Manufactures (2001) 108 FCR 150. In that case, Sundberg J at [57] stated that as this issue was not raised on appeal, it was ‘unnecessary to consider the nature of any interest acquired by the Bank under the Credit Purchase Agreement’. Subsequent cases have, however, explored this issue further. In Eastern Nitrogen Ltd v Commissioner of Taxation (2001) 108 FCR 27 at 34, Carr J in the Full Federal Court held that a contract to sell plant and equipment, which had been affixed to the land, to financiers conferred on the financiers a ‘species of equitable entitlement’. Carr J noted that ‘the full panoply of equitable remedies would have been available to the extent necessary to protect the financiers’ equitable interest in the ammonia plant at any stage, whether in the face of a challenge to its equitable title or a denial of its rights of access’. In Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351, Ormiston JA (with whom Warren CJ and Buchanan JA concurred) at [80] held that the purchaser of land to which fixtures were attached could only retain an equitable entitlement to those fixtures when the land without the fixtures was subsequently sold to another party because it was not appropriate to treat the chattels as never having become fixtures. His Honour stated at [50]: ‘That which was treated by law as affixed to the realty ought not to be treated as detached therefrom merely by reason of some agreement inter partes, unless there is a clear doctrine of law or equity which gives rise to that legal consequence’. Ormiston JA went on to conclude that the interest that the parties would acquire where an agreement to transfer attached chattels existed was equitable in nature, amounting to a right to remove the chattel that has become affixed to the land. This was an interest in the land rather than the ‘hypothetical’ chattels. His Honour stated at [80]: A right to take away part of that which constitutes realty must be an interest in it, not an interest in some hypothetical chattels as they might thereafter become on enforcement of the right. … I am not persuaded that the interest here created was merely either a contractual interest or a personal right, so that I would conclude that there was an interest enforceable against the land and its owner for the time being. If that be so, then such an equitable right ought to be taken into account on assessing the amount for which the property might be sold.

In Commissioner of State Revenue v TEC Desert Pty Ltd [2009] WASCA 128, Wheeler JA at [86] noted that it is possible for a landowner to deal with its interest in fixtures on land 143

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owned by it separately from its interest in the balance of the land and that, in doing so, it may create another interest in the fixtures. His Honour went on to note that a contract for the sale of a fixture, by the owner of the land, appears to give rise to an equitable interest in the land. Subsequently, the High Court in TEC Desert Pty Ltd v Commissioner of State Revenue (2010) 241 CLR 576, found it unnecessary to consider the nature or efficacy at law and in equity of a sale by the owner of land, with retention of title to unsevered fixtures, or a sale of the unsevered fixtures with retention of the rest of the land. Their Honours noted the ‘unsettled state of authority’, and cited P Butt, Land Law, 6th ed, Lawbook Co, Sydney, 2010, pp 51–53 [3.19]–[3.22]. See also P Butt, ‘Selling Fixtures Separately from Land’ (2001) 75 (7) Australian Law Journal 405. In Epic Energy (Pilbara Pipeline) Pty Ltd v Commissioner of State Revenue (2011) 43 WAR 186, Buss JA at [173] concluded that the weight of authority favours the view that it is possible to pass an equitable interest in fixtures unsevered from the land on which they stand.13 The scope of the equitable right to remove can be a significant issue in the context of priority disputes. Where a person acquires an equitable interest that is enforceable against an ‘affixed’ chattel, that interest may be defeated by a bona fide purchaser of the legal (old title) estate for value without notice, but it will not be automatically defeated by the acquisition of a subsequent equitable estate. The prior equitable right to remove may be defeated where the subsequent interest is derived from a mortgage that pre-dates the contract because it has been held that a mortgage security will apply to all fixtures, even those that have become affixed after the date of the mortgage.14 The prior equitable right to remove may be enforced against a subsequent unregistered interest; however, where a third party acquires a registered interest over Torrens title land, the prior equitable right to remove will not be enforceable in the absence of fraud.15 The Personal Property Securities Act 2009 (Cth) (PPSA) does not apply to interests in fixtures: s 8(l)(j). Fixtures are defined in s 10 of the PPSA to mean goods, other than crops, that are affixed to land. In light of this, the PPSA does not affect the law relating to goods that become fixtures. Where, however, goods are affixed to or become commingled with other goods pursuant to the principles of accession, a security interest will continue into the accession: PPSA, s 88. The principle of accession sets out that ownership is established by assigning resources to the owner of some other thing that is already owned to which the goods are attached. Section 87 of the PPSA goes on to state: A security interest arising in an accession before it is affixed to goods has priority over a security interest in the goods as a whole. However, there are exceptions relating to interests in the whole created after the accession is affixed and before the security interest in the accession is perfected. A security interest arising in an accession after it is affixed will ordinarily be subordinate to an existing interest in the other goods (unless, for example, the holder of the existing interest agrees otherwise) and to a later interest in the other goods that arises before the interest in the accession is perfected: PPSA: ss 89, 90. 13. See also: Emanuel (Rundle Mall) Pty Ltd v Commissioner of Stamps (1986) 41 SASR 122; Melluish (Inspector of Taxes) v BMI (No 3) Ltd [1996] AC 454; Eastern Nitrogen Ltd v Commissioner of Taxation (2001) 108 FCR 27; Commissioner of Taxation v Metal Manufactures Ltd (2001) 108 FCR 150; Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351. 14. Meux v Jacobs (1875) LR 7 HL 481. 15. Cottee Dairy Products Pty Ltd v Minad Pty Ltd (1997) 8 BPR 15,611. 144

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Further, goods that become commingled with other goods no longer lose their separate identity as is the case with respect to accession principles. Section 99 of the PPSA specifically provides that a security interest in goods that subsequently becomes part of a product or mass continues into that product or mass unless it is not commercially practicable to restore the goods to their original state.

Other statutory provisions 3.12  In some states, specific legislative provisions have been introduced to protect the

equitable entitlement of a third party to remove a fixture. See, for example, the Chattels Securities Act 1987 (Vic) s 6 and the Chattels Securities Act 1987 (WA) s 6. Both of these provisions set out that goods which are subject to a security interest shall not become fixtures for the purpose of the security holder’s right to take possession, remove, or sell the goods. The Australian Consumer Law (ACL), which is set out in Sch 2 of the Competition and Consumer Act 2010 (Cth), may also be relevant where contracts that involve fixtures are found to come within the application of these provisions. Significantly, ‘consumer goods’ is specifically defined in s 2 to include goods that have become fixtures since the time they were supplied. Section 122 makes it clear that a compulsory recall of consumer goods may be made even if the goods have become fixtures since the time they were supplied. Section 141 sets out that a manufacturer of goods is liable to compensate a person if goods have been supplied in trade or commerce, the goods are ordinarily acquired for private use, or the goods have become fixtures and are subsequently destroyed or damaged because of a safety defect and that this has caused loss.

3.13  Revision Questions 1. What is the justification for a tenant retaining a common law right to remove fixtures and how long will it endure? 2. What is the relevance of a contractual relationship in circumstances where a chattel has been affixed to land? Can ownership of an ‘affixed chattel’ pass under a contract by constructive delivery? Explain the conclusions of Emmett J in Metal Manufactures Limited v Federal Commissioner of Taxation [1999] FCA 1712. 3. What is the rationalisation for the equitable jurisdiction accepting the validity, outside the context of a lease, of a special right to remove a chattel despite the fact that the chattel has been affixed? What is the scope of such a right? 4. What contractual terms need to be established in order for an equitable right to remove to be recognised? 5. Consider the following problems: A owns industrial equipment and B owns land that is mortgaged to C. A leases equipment to B pursuant to a lease contract. Under the terms of the contract, A can reclaim possession of the equipment if B defaults on payment. B subsequently affixes the industrial equipment to the land firmly intending that the equipment be used to enhance the use of the land. B defaults on his mortgage with C. Subsequently, C, exercising its mortgage security, sells the land to D. Does A have any right to reclaim its industrial equipment.

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Fixtures and the PPSA 3.14  The Personal Property Security Act 2009 (Cth) (PPSA) has no application to an

interest in land and this includes fixtures.16 A fixture for the purposes of the PPSA is defined as ‘goods, other than crops, that are affixed to land’.17 An important issue in this context is whether the test for determining whether a good has become a fixture under the PPSA is the same as that which applies under the common law, or whether a specific statutory test exists. This issue was examined by the New South Wales Court of Appeal in Power Rental Op Co Australia, LLC v Forge Group Power Ltd (in liq) (receivers and managers appointed) [2017] NSWCA 8, where the court considered whether the words ‘affixed to land’ in the definition of ‘fixtures’ in the PPSA incorporate the common law meaning of ‘affixed to the land’ (as was held by the primary judge), or whether the section created its own test based solely on whether the goods are physically affixed to land ‘in a non-trivial manner’. An extract of this decision is set out below:

  Power Rental Op Co Australia, LLC v Forge Group Power Ltd (in liq) (receivers and managers appointed)  [2017] NSWCA 8 Facts: Forge Group Power Pty Ltd (Forge) entered into a lease with General Electrical International Inc (GE) with respect to mobile gas turbine generators for use at a power station at Port Hedland in Western Australia (lease). GE did not register its interest under the lease on the Personal Property Securities Register (PPSR). Forge appoints administrators and is currently being wound up. The liquidators of Forge identified the lease as a ‘PPS lease’ and applied to the Court for declarations that the security interest under the lease had vested in Forge immediately before it entered into voluntary administration under s 267 of the PPSA. The question for the Court at first instance was whether the lease amounted to a PPS lease within the meaning of s 13(1) of the PPSA and this depended upon whether the mobile gas turbine generators had become affixed to the land. The PPSA has no application to a lease over land and this includes fixtures. If the generators were not affixed to the land and the lease was a PPS lease, it was undisputed that GE’s interest had vested in Forge. There were two issues considered by the primary Court: 1. Was GE was regularly engaged in the business of leasing the goods?; and 2. Were the turbines fixtures within the meaning of the PPSA? At first instance, the primary judge held that there was a PPS lease because GE was regularly engaged in the business of leasing goods and the turbines were not fixtures within the meaning of the PPSA. The turbines had therefore vested in Forge under s 267 of the PPSA. On appeal, Power Rental Op Co Australia, LLC and Power Rental Asset Co Two, LCC (Power Rental), who acquired the benefit of the lease from GE, challenged the conclusion by the primary judge that the turbines were not fixtures within the meaning of the PPSA. Ward JA: It is clear from the extrinsic materials to which I have earlier referred (and to which regard may be had in determining the legal and historical context in which words in the legislation are used — see  Bitumen and Oil Refineries (Aust) Ltd v Commissioner for Government Transport  (1955) 92 CLR 200;  [1955] HCA 1, following  Assam Railways and Trading Co Ltd v  Inland Revenue Commissioners  [1934] UKHL TC_18_509;  [1935] AC 445; [1934] All ER Rep 646, and more recently Alcan (NT) Alumina Pty Ltd v Commissioner

16. PPSA s 10. 17. PPSA s 10. 146

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of Territory Revenue (Northern Territory) (2009) 239 CLR 27; [2009] HCA 41 at [47]), that the ‘mischief’ that the PPSA was intended to address was the uncertainty and complexity of the various statutory and common law regimes applicable to security interests in personal property. The legislature sought to ameliorate this by providing a new national system of registration of interests of that kind and introducing a system of default rules to determine, among other things, priorities in respect of interests in personal property. In  Alcan, where the plurality in the High Court emphasised that the task of construction must begin with a consideration of the text itself, and that historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text (citing  Nominal Defendant v GLG Australia Pty Ltd (2006) 228 CLR 529; [2006] HCA 11 at [22] (Gleeson CJ, Gummow, Hayne and Heydon JJ); at [82]–[84] (Kirby J);  Combet v The Commonwealth  (2005) 224 CLR 494;  [2005] HCA 61 at [135] (Gummow, Hayne, Callinan and Heydon JJ); Northern Territory v Collins (2008) 235 CLR 619; [2008] HCA 49 at [99] (Crennan J)), their Honours went on (at [47]) to emphasise that, while the language employed is the surest guide to legislative intention, the meaning of the text may require consideration of the context, which includes the general purpose and policy of the provision, in particular the mischief it is seeking to remedy. In the present case, both parties point to awkward consequences or difficulty that may attend their opponents’ preferred construction of ‘affixed to land’ in the definition of fixtures in s 10 of the PPSA. The practical difficulty that flows from the appellants’ ‘bespoke’ definition is, as the primary judge observed (though not basing his decision on this), the difficulty in determining what is or is not a ‘nontrivial’ attachment in any particular case. On the appellants’ ‘bright line’ test, the more trivial or superficial the form of attachment, the less certainty there might be for a third party seeking to determine whether something has or has not become a fixture. That said, the common law test of what amounts to a fixture is attended by its own difficulties (as recognised by Sackville AJA in Agripower Barraba at [76], his Honour there referring to the amorphous concept of the purpose or object of annexation). Where both definitions are capable of producing uncertainty in their application, little can be drawn from that in favour of one or other construction. In the present case, the extrinsic materials shed light on what was meant by the legislature in using the expression ‘affixed to land’ in s 10 of the PPSA. In CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2, Brennan CJ, Dawson, Toohey and Gummow JJ said (at 408): It is well settled that at common law, apart from any reliance upon  s 15AB  of the Acts Interpretation Act 1901 (Cth), the court may have regard to reports of law reform bodies to ascertain the mischief which a statute is intended to cure. Moreover, the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses ‘context’ in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy. Instances of general words in a statute being so constrained by their context are numerous. In particular, as McHugh JA pointed out in Isherwood v Butler Pollnow Pty Ltd (1986) 6 NSWLR 363 at 388, if the apparently plain words of a provision are read in the light of the mischief which the statute was designed to overcome and of the objects of the legislation, they may wear a very different appearance. Further, inconvenience or improbability of result may assist the court in preferring to the literal meaning an alternative construction which, by the steps identified above, is reasonably open and more closely conforms to the legislative intent. [my emphasis] [footnotes omitted] The distinction between legislative purpose and linguistic meaning as the determinative factor of whether regard may be had to extrinsic materials has been doubted (see James Hardie & Co Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53; [1998] HCA 78 at 76-7 (Kirby J in dissent, with whose judgment McHugh J agreed)). Basten JA in Shorten v David Hurst Constructions Pty Ltd (2008) 72 NSWLR 211; [2008] NSWCA 134 in obiter, referring to the statement of principle by Mason P in Harrison v Melhem (2008) 72 NSWLR 380; [2008] NSWCA 67 to the effect that 147

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resort to a Minister’s speech to guide the meaning of legislation beyond identifying its purpose was not permissible, said (at [27]): The statement of principle set out by Mason P in Harrison … appears to accept that access may be had to extrinsic material to determine legislative purpose, but not if it directly addresses linguistic meaning. Thus, in the present case, reference might be had to the minister’s statement in order to determine the purpose which lay behind the introduction of the additional words, but might be inadmissible as an aid to understanding the meaning of the words. In Marshall v Director-General, Department of Transport [2001] HCA 37; 205 CLR 603 at [62], in a passage quoted with approval by the Court in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; 82 ALJR 489 at [31], McHugh J stated that the duty of courts ‘when construing legislation is to give effect to the purpose of the legislation’, identifying ‘[t]he primary guide to understanding that purpose’ as ‘the natural and ordinary meaning’ of the statutory language.  It would seem that linguistic meaning and purpose are inextricably interwoven: accordingly a distinction of the kind identified in Harrison, if intended, is unattractive. It finds no basis in the statutory language of the Interpretation Act, nor, in my view, in High Court authority. However, in the present case, it is sufficient to say that the extrinsic material may be of assistance in understanding the purpose of the provision. Earlier, the High Court in  Re Australian Federation of Construction Contractors; Ex parte Billing (1987) 61 ALJR 39 at 39; [1986] HCA 74 at [4], in a joint judgment, said: Reliance is also placed on a sentence in the second-reading speech of the Minister when introducing the Consequential Provisions Act, but that reliance is misplaced. Section 15AB of the Acts Interpretation Act 1901 (Cth), as amended, does not permit recourse to that speech for the purpose of departing from the ordinary meaning of the text unless either the meaning of the provision to be construed is ambiguous or obscure or in its ordinary meaning leads to a result that is manifestly absurd or is unreasonable. In our view neither of those conditions is satisfied in the present case. In Wilson v State Rail Authority of New South Wales (2010) 78 NSWLR 704; [2010] NSWCA 198  at  [12], Allsop P (as his Honour then was) said of the use of extrinsic materials in the interpretive process (Giles, Hodgson, Tobias and Macfarlan JJA agreeing): … as is now beyond dispute, in construing an Act, a court is permitted to have regard to the words used by Parliament in their legal and historical context. Context is to be considered in the first instance, not merely when some ambiguity is discerned. Context is to be understood in its widest sense to include such things as the existing state of the law and the mischief or object to which the statute was directed. These are legitimate means of understanding the purpose of the Act and of the relevant provisions, against which the terms and structure of the provisions of the Act, as a whole, are to be understood. There are of course limitations on the permissible use of extrinsic materials. See Re Bolton; Ex parte Beane (1987) 162 CLR 514; [1987] HCA 12, where Mason CJ, Wilson and Dawson JJ cautioned at 518 as follows: The words of a Minister must not be substituted for the text of the law. Particularly is this so when the intention stated by the Minister but unexpressed in the law is restrictive of the liberty of the individual. It is always possible that through oversight or inadvertence the clear intention of the Parliament fails to be translated into the text of the law. However unfortunate it may be when that happens, the task of the court remains clear. The function of the court is to give effect to the will of Parliament as expressed in the law. In  Saeed v Minister of Immigration and Citizenship  (2010) 241 CLR 252;  [2010] HCA 23  French CJ, Gummow, Hayne, Crennan and Kiefel JJ said (at [31]) that, however clear or emphatic, statements as to legislative intention made in explanatory memoranda or by Ministers cannot overcome the need carefully to consider the words of the statute to ascertain 148

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its meaning. More recently, in Certain Lloyd’s Underwriters v Cross (2012) 248 CLR 378; [2012] HCA 56 French CJ and Hayne J acknowledged (at [25]) that appropriate use may be made of extrinsic materials but emphasised (at [26]) that the task of construction begins with the terms of the legislation and not from some a priori assumption about its purpose. A similar warning was sounded by Kiefel J (as her Honour then was) at [89]: It is legitimate to resort to materials outside the statute, but it is necessary to bear in mind the purpose of doing so and the process of construction to which it is directed. That purpose is, generally speaking, to identify the policy of the statute in order to better understand the language and intended operation of the statute. An understanding of legislative policy by these means does not provide a warrant for departing from the process of statutory construction and attributing a wider operation to a statute than its language and evident operation permit. It is not permissible for a court, by a process of statutory interpretation, in effect to substitute its own view of what should be the preferable ambit of legislation or to take it upon itself to re-write legislation in a way that corrects what is thought to be an inadvertent consequence of infelicitous language in a statute. However, in the present case, while the ordinary meaning of the word ‘affixed’ is not unclear (in the sense that it points to a form of attachment), what is uncertain is the nature and degree of attachment that will be sufficient for the purposes of the definition. The appellants do not suggest that a trivial or superficial attachment (say, for example, a helium balloon attached by string to the land) would be sufficient but nor do they accept the suggestion that what is required is a ‘substantial and enduring’ kind of attachment — indeed, they maintained that the ‘temporariness’ or otherwise of the attachment is an irrelevant factor to take into consideration. In oral argument, Senior Counsel for the appellants accepted that in determining whether the Turbines were affixed to the land (for the purposes of the bespoke definition for which they contend), the only factors out of the list of factors identified by Conti J in Blacker (at [13]–[14]; see [62] above) that would not be relevant would be, first, whether the attachment was for the better enjoyment of the property generally or was for the better enjoyment of the land and/or buildings to which the item was attached; second, whether the item was to be in position permanently or temporarily; and, third, other than to the extent to which it informs the physical connection, the nature of the property the subject of affixation (i.e., the first and third bullet points at [13] as well as, to a limited extent, the second) (see AT 13). The genesis of the exclusion of ‘fixtures’ from the PPSA, as made clear in the 2009 commentary to the revised bill, was the request made from the States that ‘fixtures’ be excluded. In the context of the description of ‘fixtures’ in the commentary to the initial draft, and the reference in 2009 to existing schemes dealing with fixtures, it is clear that what the legislature had in mind (in excluding in s 8(1)(j) interests in fixtures from the PPS regime) was the concept of fixtures as understood in, or consistent with, the common law doctrine of fixtures. The commentary in relation to the revised draft bill (when s 8(i)(j) was inserted) makes that clear — the reference there to ‘fixtures’ must be understood as meaning fixtures according to common law concepts, since there is no other meaning readily attributable to ‘fixture’ to which that reference could relate. The appellants’ response to the reliance placed by Forge Power on the extrinsic materials in this regard is that this goes only to the question whether fixtures were to be included or excluded from the PPSA and does not fix the metes or bounds of what would or would not be considered a fixture for the purposes of the PPSA. However, read as a whole it is apparent that when the proposed bill was initially to include ‘fixtures’ in the PPS regime it was the common law concept of fixtures that was in contemplation and that what the revised bill was intended to do was to remove ‘fixtures’ in that sense from the regime. That provides strong support for the construction adopted by the primary judge. The primary judge was in my respectful opinion correct when he considered that the clear demarcation in the PPSA between 149

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real property and personal property supports such a conclusion. There is nothing in the PPSA to support the suggestion that Parliament intended personal property that is affixed to land, but not in such a way as to become part of the land at common law, to be a species of property not governed by the PPSA. The presumption that Parliament intended, by the use of the term ‘fixtures’, to import the common law notion of affixation is consistent with such a conclusion. In that regard, I note that TEC Desert did not suggest that Parliament might not in a particular case be taken to have intended by the use of a particular term to import the established legal meaning of that term, simply that it could not necessarily be assumed that this be the case. Nor do I accept that J & D Rigging provides much assistance to the appellants insofar as there the Court was dealing with the test for determining what formed part of the land for the purpose of legislation governing payment of moneys in the building construction industry. Here, the words ‘affixed to land’, in the context of a definition of ‘fixtures’ in legislation which draws a distinction between real and personal property, may more readily be seen as falling within the first of the situations to which Applegarth J had regard (namely, where the importation of rules about fixtures in the law of real property may be justified in the context of a statute concerned with property and its ownership or statutes which impose obligations based on ownership – see  J & D Rigging at [19]). However, as Forge Power submits, it is not necessary to resort to such a presumption in the present case. The extrinsic materials make clear that the common law meaning of the term ‘fixtures’ was what was initially proposed to be included in and then removed from the PPS regime. Little assistance is gained from the innovative nature of the PPSA. The desire to establish a new national regime to deal with security interests in personal property does not of itself make it more or less likely that the definition of ‘fixtures’ was intended to be a bespoke definition. As to the contrary indications sought to be drawn by the appellants from the text of the legislation, the presence of a definition of ‘general law’ does not advance matters. True it is that the legislature could have defined ‘fixtures’ in a way that would have made explicit the nature and degree of affixation required for goods to become fixtures; or could simply have left the term undefined (on the assumption that the well-settled meaning of the term at common law would then be applied). However, the fact that Parliament chose neither of those alternatives does not mean that the construction for which the appellants contend was what was intended. Nor does the use of the word ‘affixed’ in the PPSA provision dealing with accession of goods provide any real assistance to the appellants. Forge Power argues that this is so for three reasons. First, the expression ‘accession’ is used in the PPSA in a different sense from the way in which the expression is used in the general law (the latter identifying a proprietary consequence for a certain type of attachment of one chattel to the other; the former identifying particular goods). Second, in contrast to the common law doctrine of accession where detachment is not practicable, it says that ‘accession’ is used in the PPSA in the sense of comingling (referring to the discussion of this in Fisher & Lightwood at [5.94]). Third, it argues that there is no inconsistency in the word ‘affixed’ being used with different senses in different contexts in the Act. Forge Power argues that the concept of accession in the context of goods attached to other goods, unlike the concept of fixtures, does not have a technical meaning in the law of property. In my opinion, the fact that goods will not amount to an accession for the purposes of the PPSA if they, and the goods to which they affixed, are both required or permitted to be described by serial number under the regulations (which is the effect of the PPSA provision) illustrates that the concept of affixation in the definition of ‘accession’ cannot be assumed to be the same as that when used in the definition of fixtures. Resort to the analogy of tenant’s fixtures also does not assist the appellants. The fact that, at common law, a tenant may at the end of the lease term remove fixtures that would otherwise have formed part of the land by reason of their affixation (and that such fixtures will be part of the land until severed in accordance with the doctrine) says nothing about the meaning of ‘affixed to land’ in the statutory definition of fixtures for the purposes of the PPSA. Textually and contextually, there are a number of indications that support the conclusion that the definition was intended to import 150

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common law notions of affixation. First, though I do not place any weight on this, it might well be thought that use of the verb ‘affix’ is intended to have a more technical meaning than that which would be conveyed by the more everyday language of ‘attach’ or ‘install’. Second, there is the demarcation in the PPSA between land and personal property, which the primary judge considered to be a critical pointer towards the construction he adopted. Third is the exclusion of ‘fixtures’ from the definition of land. This makes sense only if it is contemplated that what is expressly excluded from the definition of land (i.e., fixtures) would or might otherwise fall within the definition. Chattels that are affixed to the land but not so as to form part of the land at common law (i.e., that would fall within the appellants’ bespoke definition) would not need to be excluded from the definition of land. This is a strong textual indication to support the construction for which Forge Power contends and which his Honour found. The irony of the stance adopted by the appellants is that, if applied to its logical extent, arguably this would not bring the Turbines within the definition of a ‘fixture’ for the purposes of the Act because both forms of attachment (via the Seismic & Wind Kits and via the pipelines/conductors) would be attachments to ‘fixtures’ not to ‘land’ (the Seismic & Wind Kits and pipelines or conductors themselves being items ‘nontrivially attached’ to the land). When this was raised in the course of argument, the appellants suggested that the answer to this may be that the accession provisions of the PPSA make the accretions to the Turbines part of the Turbines themselves; whereas for Forge Power it was submitted that the natural resistance to the syllogism encompassed in the proposition that goods affixed to a fixture are not fixtures for the purposes of the Act illustrates that the appellants’ construction is not a workable construction (see AT 25.31–26.19; cf AT 43.30–45). Based on the second and third of the textual/contextual indicators referred to above, and the clear legislative intent discernible from the extrinsic materials, grounds 1 to 2 of the grounds of appeal are not made good and ground 3 therefore does not arise. Had it arisen, i.e., had the correct test been one of physical affixation to land alone (albeit of a non-trivial nature), and assuming that the appellants could overcome the problem that on that definition the Turbines would not be a fixture because they would be affixed to another fixture, one would be driven (as the appellants appeared to accept) to the common law test for a fixture at least insofar as that relates to the nature and degree of annexation of the goods to the land. I consider the application of the common law test in relation to grounds 4–5 below. For the purposes of ground 3, suffice it to say that if the test of affixation is one that looks to the substance, or enduring nature, of the affixation (which seems in practical terms to be what is encompassed by the reference to a ‘non-trivial’ attachment), i.e., to some form of attachment that warrants a conclusion that the item should be treated in the same way as land, then even on that definition I am not persuaded that his Honour erred in holding that the Turbines did not become fixtures for the purposes of the Act. That is because, even if one could have regard only to the factors considered by Conti J in Blacker (at [14]) as to the degree of annexation, in the present case: the mode of attachment was one which was intended to be reversible (via the demobilisation process), even though that process might be a ‘tricky’ one; both the Turbines and the Seismic & Wind Kits themselves were intended to be re-usable once disconnected from the power station; and the damage envisaged to be caused by removal of the Turbines seems to have been limited to the need to cut through the bolts by which the Seismic & Wind Kits were attached to the pedestals or concrete foundation (which damage would hardly be comparable to the value of the Turbines themselves). The need (if in fact there be any need) to remove the concrete slabs in order to restore the ground to its pre-existing condition does not necessarily mean that the land underneath the concrete foundations, once they have been removed, would be damaged in any relevant sense.

Did the Turbines become fixtures under the common law test The remaining grounds of appeal proceed on the basis that his Honour correctly held that the definition of ‘fixtures’ in s 10 imports the common law notion of fixtures. In that event, the appellants challenge his Honour’s conclusion that the Turbines did not become fixtures in accordance with 151

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common law concepts. The appellants do not cavil with his Honour’s summary of the applicable principles in this regard; rather, they complain as to the application of those principles. There is no dispute between the parties as to the applicable common law principles relating to the determination of when an item placed on land becomes a fixture. His Honour clearly had in mind those principles and that it was necessary to take into account all the circumstances of the case. His Honour described in some detail the Turbines and the processes of installation and commissioning that occurred. Thus the suggestion that his Honour failed to take into account, or failed sufficiently to take into account, the physical characteristics of the Turbines is not a fair or sustainable criticism of his Honour’s reasoning process. Nor can it fairly be said that his Honour failed (or failed sufficiently) to take into account the purpose of affixation or the ‘temporary’ nature of the affixation. Rather, his Honour’s review of the contractual provisions addressed the circumstances in which the Turbines came to be installed at the site, their function and the parties’ objectively ascertainable intentions as to the temporary nature of the affixation. True it is that his Honour expressed succinctly the 12 factors which had led to his conclusion, those factors drawing heavily on the matters to which Forge Power had pointed, and did not similarly itemise the list of factors put forward by the appellants. To the extent that the latter were the converse of that which had been put by Forge Power, and accepted by his Honour, it was not necessary to list those factors that did not lead his Honour to reach the conclusion contended for by the appellants. Subject to one qualification, to which I refer below, I do not accept that his Honour did not have regard to the various matters on which the appellants relied, in the course of explaining the conclusion reached as to the various factors identified by Conti J in Blacker. In so doing, it is not correct in my opinion to suggest that his Honour placed undue precedence on the temporary nature of the affixation and the expressed contractual intention that there not be a gift of the Turbines. Those were matters that it was open to his Honour to take into account and, in the present case, those were matters that pointed strongly to the Turbines not being fixtures at common law, particularly when at least one of the modes of affixation (the Seismic & Wind Kits) was clearly for the better use of the Turbines and not for the better enjoyment of the land. Turning to the three particular areas in which complaint of his Honour’s reasoning process is made, the first is as to the purpose of affixation. I accept, and this is the qualification to which I referred above, that the primary judge did not expressly address the significance of the pipeline connections when concluding that the Turbines were installed on the land for the better enjoyment of the Turbines themselves and not for the better enjoyment of the land. As earlier noted, there were two aspects of physical affixation relied upon by the appellants: the electrical/fuel connections and the connection by means of the Seismic & Wind Kits. The latter kind of connection is in my opinion clearly one that is for the better enjoyment or use of the Turbines themselves (i.e., to stabilise them in the event of a cyclone). That kind of connection does not (as made clear in the printing press case) indicate that the item has become a fixture. More problematic is the former kind of connection. Some of the pipeline/fuel connections were clearly for the better use or enjoyment of the Turbines (such as the connection through which electricity was delivered in order for the Turbines to be able to operate). However, some (such as those through which electricity generated by the Turbines was to be delivered to the power station grid) can only be seen as being for the purpose of the use of the land as a power station. There is, therefore, substance to the complaint by the appellants that the primary judge did not expressly take that aspect of the connection to the land into account. However, the nature and degree of that kind of affixation is not in my opinion so substantial or enduring as to warrant a finding (when weighed with the other relevant factors) that the Turbines thereby became fixtures. The connection was one effected through an attachment to pipelines/conductors, which connection was designed to be reversible or detachable (much as a plug in an electric socket would be) and not of a permanent nature. As to the ‘temporary’ nature of the power station, from an objective point of view this can readily be gleaned from the finite terms provided for under the DBOM and lease. The fact that the parties 152

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might have chosen to renew their arrangement beyond the option terms specified or indefinitely (i.e., to do so outside the terms of the relevant agreements) does not gainsay that, on the documentation, the lease was intended to be operative for a relatively short finite period. While the temporary nature of the affixation is not a determinative factor, it is not, as the appellants contended, an irrelevant consideration. Nothing in N H Dunn or Agripower Barraba suggests otherwise. In N H Dunn, what his Honour said in this regard (at 9243-4) was as follows: However, the maxim has not been applied rigidly in this way: In re de Falbe; Ward v Table [1901] 1 Ch 523 at 530;  Reid v Smith  [1905] HCA 54;  (1905-6) 3 CLR 656  at 670. It is, in my opinion, now accepted that a chattel may become part of realty notwithstanding that it is not, in any formal sense, annexed to it but rests on it merely by its own weight: Reid v Smith, supra, at 668, 669, 679. Even if a chattel is physically annexed to the realty, it may yet remain, at all times, personalty: Attorney-General of the Commonwealth v R T Co Pty Ltd [1957] HCA 29; (1957) 97 CLR 146 at 156-7: Anthony v Commonwealth (1973) 47 ALJR 83 at 89E: Australian Provincial Assurance Co Ltd v Coroneo [1938] NSWStRp 35; (1938) 38 SR (NSW) 700 at 712. But, if whether a chattel has become part of the realty is not to be determined by the simple test of annexation, no other simple test has, in my opinion, been generally accepted. It has been said that whether a chattel has become part of the realty depends upon the object and purpose of its annexation or juxtaposition to it: see Halsbury’s Laws of England 3rd ed, vol 23, p 490(b) and the cases there referred to; see also Commissioner of Stamps (Western Australia) v L Whiteman Ltd [1940] HCA 30; (1940-41) 64 CLR 407 at 411. But that leaves to be determined the question: with what object or purpose must the chattel be there in order that it be held part of the realty? In the Coroneocase, supra, at 712, Jordan CJ said: ‘The test of whether a chattel which has been to some extent fixed to and is a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period:  Holland v Hodgson (1872) LR 7 CP 328 at 336; or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose:  Vaudeville Electric Cinema Ltd v Muriset [1923] 2 Ch 74 at 87.’ I would, with respect, find difficulty in accepting that the matter can be tested  simply by reference  to whether the annexation to the realty is intended to be temporary or otherwise, particularly if the words ‘temporary purpose’ are to mean what, in Holland v Hodgson: see at 337, Blackburn J took them to mean. I doubt that such a view is consistent with, eg, Attorney-General of the Commonwealth v R T Co Pty Ltd (No 2) (1956-57) 97 CLR at 156-7; cf Kay’s Leasing Corporation Pty Ltd v CSR Provident Fund Nominees Pty Ltd [1962] VicRp 62; [1962] VR 429 at 433-4; or Anthony v The Commonwealth(1973) 47 ALJR at 89. Both Fullagar J and Walsh J held that the items there in question were not part of the realty, notwithstanding that they had obviously been annexed for a purpose which, at least within the meaning of the term in  Holland v Hodgson, was not a temporary purpose. [my emphasis] The words ‘simply by reference’ in the above passage makes clear that what his Honour was there talking about was the proposition that the temporary nature of the affixation might of itself be determinative and expressing difficulty with that proposition. His Honour was not there saying that the permanence or otherwise of the affixation was irrelevant. Blackburn J said in Holland v Hodgson (1872) LR 7 CP 328 at 334-335: There is no doubt that the general maxim of the law is that what is annexed to the land becomes part of the land; but it is very difficult, if not impossible, to say with precision what constitutes an annexation sufficient for this purpose. It is a question which must depend on the circumstances of each case, and mainly on two circumstances, as indicating the intention, viz., the degree of annexation and the object of the annexation. When the article in question is no further attached to the land than by its own weight it is generally to be considered a mere chattel. … But even in such a case, if the intention is apparent to make the articles part of the land, they do become part of the land. … On the other hand, an article may be very firmly fixed to the land, and yet the circumstances may be such as to shew that it is never intended to be part of the land, and then it does not become part of the land. … Perhaps the true rule is, that articles not otherwise attached to the land than by 153

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their own weight are not to be considered as part of the land, unless the circumstances are such as to shew that they were intended to be part of the land, the onus of shewing that they were so intended lying on those who assert that they have ceased to be chattels, and that, on the contrary, an article which is affixed to the land even slightly is to be considered as part of the land, unless the circumstances are such as to shew that it was intended all along to continue [as] a chattel, the onus lying on those who contend that it is a chattel. Sir Frederick Jordan, in Australian Provincial Assurance Co Ltd v Coroneo [1938] NSWStRp 35; (1938) 38 SR (NSW) 700 at 712, said the following (in a passage later quoted by Conti J in Blacker and set out by Sackville AJA in Agripower Barrabba): The test of whether a chattel which has been to some extent fixed to land is a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period, or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose. In the former case, it is a fixture, whether it has been fixed for the better enjoyment of the land or building, or fixed merely to steady the thing itself, for the better use or enjoyment of the thing fixed. If it is proved to have been fixed merely for a temporary purpose it is not a fixture. The intention of the person fixing it must be gathered from the purpose for which and the time during which the user in the fixed positions contemplated. If a thing has been securely fixed, and in particular if it has been so fixed that it cannot be detached without substantial injury to the thing itself or to that to which it is attached, this supplies strong but not necessarily conclusive evidence that a permanent fixing was intended. On the other hand, the fact that the fixing is very slight helps to support an inference that it was not intended to be permanent. But each case depends on its own facts. I do not accept in light of the above that the ‘temporary’ (or otherwise) purpose of affixation is an irrelevant consideration. In the present case, there was ample evidence to support the primary judge’s conclusion that the Turbines were installed for a temporary purpose. This evidence supported the conclusion that objectively they were not intended to become part of the land. Neither the scale of the ‘temporary’ power station, nor the fact that it was operated by a statutory corporation and was to supply the growing electricity needs of the region, gainsays the conclusion that the Turbines were installed on the land for a relatively short finite term and for an objectively temporary purpose (even though that term might have been extended and even if the use of the adjective ‘temporary’ in the DBOM might be thought to have been somewhat of a misnomer since it was expected that there would be a larger longer term power station to be built there). The analogy with tenant’s fixtures again does not in my opinion assist greatly. It is not in dispute that, while affixed to a landlord’s property, a tenant’s fixture is part of the property (though with a right at common law and/or by way of contract for such an item to be removed). However, the existence of a contractual right to remove the Turbines does not mean that, absent such a right, they would have become fixtures at common law; it simply indicates that the parties were turning their minds to the question of removal at the end of the term of the lease (in the context that some items of plant were or might be required to be handed over). Finally, insofar as the appellants accept that evidence (properly admitted) of the parties’ subjective intentions as to reservation of title and the like may be admissible but contend that provisions of the contract that display their common intention in that regard are not, I do not consider that there is any logic to that distinction. In N H Dunn, Mahoney JA said (at 9244-5): The actual or subjective intention of the parties and, a fortiori, of one of them, is, no doubt, not conclusive as to the status of the chattel. But I do not think that the intention of the owner of the chattel is irrelevant. In Reid v Smith (1905) 3 CLR at 680-1, O’Connor J cited with approval the following statement: ‘The intention of the party making the approval ultimately to remove it from the premises, will not, by any means, be a controlling factor. One may erect a brick or a stone house with the intention, after a brief occupancy, to tear it down and build another on the same spot, but that intention would not make the building a chattel. A destination which gives a moveable an immoveable character, results from facts and circumstances determined by the law itself and could never be established or taken away by the simple declaration of the 154

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proprietor, whether oral or written.’ In  Anthony v Commonwealth, Walsh J, in relation to a telephone line, including poles and other equipment, said: ‘If the question to be considered was whether an actual intention could be inferred that the poles and the line should become the property of the landowner, it seems plain in the circumstances that that question would be answered “no”. But, in my opinion, the question is not one of ascertaining the actual intention, but one of determining from the circumstances of the case, and in particular from the degree of annexation and the object of the annexation, what is the intention that ought to be imputed or presumed.’ There are, in my opinion, distinctions which must be made. Whatever be the correct formulation of the fact to be proved in such disputes, it is not whether the owner of the chattel or any other person subjectively intended that it should or should not become part of the realty. Therefore a statement of the intention as to that particular matter is not a statement tending, as such, to prove the fact to be proved. But that intention, as such, is not necessarily irrelevant. Whether the question of whether chattels have become part of the realty is a question of fact (see supra) or a conclusion of law, various matters have been seen as of assistance in the final determination of it. The period of time for which the chattel was to be in position, the degree of its annexation to the land, what was to be done with it, and the function to be served by its annexation, are all matters which have been seen to be relevant for this purpose. In particular circumstances, statements made by the owner of the chattel or of the realty as to his intention that the chattel shall or shall not be part of the realty may, if appropriately proved and evidenced, be relevant as facts probative of such matters and therefore as relevant in the determination of the ultimate fact to be proved. I do not see what was said by O’Connor J or Walsh J, in the case to which I have referred, as indicating a contrary view. In Blacker, Conti J said (at [11]–[12]): ‘There is an abundance of authorities generally to the effect that the relevant intention is to be determined objectively from such facts and circumstances that are “patent for all to see”, and not by reference to subjective intention. ‘Despite this, there are some modern authorities which would leave room for recourse to actual and hence subjective intention. This may be more accurately limited to the extent that it would assist the Court to determine the level of permanence or temporariness for which the item is intended to remain in position and the purpose to be served by its affixation or annexation: see N H Dunn Pty Ltd v L M Ericsson Pty Ltd (1979) 2 BPR 9241 at 9244–9245 where Mahoney JA referred to the observations of O’Connor J in Reid v Smith  [1905] HCA 54;  (1905) 3 CLR 656  at 680–681 and Walsh J in  Anthony v The Commonwealth (1973) 47 ALJR 83 at 89; see also Ball-Guymer v Livantes (1990) 102 FLR 327 and Land Law, supra para 227. Indeed Professor Butt in his article ‘Near enough is not good enough’ or ‘We know what you mean’ (1997) 71 ALJ 816 at 821 has commented that: ‘While private agreements concerning the intended status of an item as chattel or fixture are not permitted to prejudice the interests of third parties, it is difficult to see why the courts should discount the parties’ actual intentions where no third parties are involved.’ There, his Honour did not need to express a view as to that issue. Nor, ultimately is it necessary to do so in the present case, save to accept that the common intention of the parties, objectively ascertained, is capable (if appropriately proved as was the case here) of shedding light on the purpose of the annexation of the chattel in question. As to the third of the matters about which complaint is made (the physical characteristics of the Turbines) I have already noted the careful description by his Honour of the Turbines and the processes by which they were installed and commissioned and by which in due course they are to be demobilised. Taking into account the factors put forward on both sides, and accepting that there are obvious constraints on the ready mobility of the Turbines once they have been installed and commissioned on the site, I am not persuaded that the primary judge erred in concluding that the Turbines did not become fixtures in the common law sense.

For the above reasons, the appeal should be dismissed. 155

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Commentary 3.15  The Court of Appeal in Power Rental concluded that the definition of fixtures in the PPSA was to be interpreted in accordance with the common law meaning of the term. In discussing the purpose of the PPSA, Ward JA, with whom Bathurst CJ and Beazley P agreed, said at [83]: ‘The “mischief ” that the PPSA was intended to address was the uncertainty and complexity of the various statutory and common law regimes applicable to security interests in personal property. The legislature sought to ameliorate this by providing a new national system of registration of interests of that kind and introducing a system of default rules to determine, among other things, priorities in respect of interests in personal property.’ In essence, the purpose of the PPSA is to bring broadly and functionally defined security interests within a single, uniform national system. The PPSA applies to all security interests, regardless of form, which are defined broadly to include any interest arising under a transaction that in substance secures payment or performance of an obligation (PPSA, s 12). The court went on to outline three textual and contextual grounds for applying the common law test for fixtures in the PPSA. First, the specific use of the verb ‘affix’ within the PPSA was, the court felt, intended to have a more technical meaning than that which is applicable the words ‘attach’ or ‘install’. Second, the demarcation in the PPSA between land and personal property indicated a clear intention to exclude land and land interests from the application of the PPSA. Third, the exclusion of fixtures from the definition of land in the PPSA indicates an awareness of the fact that at common law, fixtures can come within the definition of land. Applying this test to the facts the court held that the turbines were not fixtures within the common law meaning of the term. The Court of Appeal focused upon the temporary nature of the turbines in light of the objective intention with which they were placed on the land. Despite the turbines being affixed to the land by means of electrical/fuel connections and seismic and wind kits, and the installation requiring concrete slabs and the use of a crane, it was held that the degree of annexation was not ‘so substantial or enduring as to warrant a finding … that the turbines thereby became fixtures’. This was the case despite the obvious constraints on the ready mobility of the turbines when installed and commissioned. Significantly, the Court of Appeal noted that the connection was designed to be reversible or detachable, and not of a permanent nature. The temporary nature of the turbines could also be gleaned from the finite terms in the lease which was intended to operate for a relatively short period of time. The court noted, however, that the existence of a contractual right to remove the turbines did not mean that, absent such a right, the turbines would have automatically become fixtures at common law. An overall assessment of the circumstances is still required. The decision is important because it clarifies the applicability of the common law fixtures test to personal property brought onto land under a PPS lease or other security covered by the PPSA.

The Enduring Relevance of the Common Law Fixtures Text 3.16  The tests for determining whether a chattel has become a fixture are fundamentally

ambiguous and uncertain, and provide little in the way of guidelines or indicia. This has meant that legal principle in this area can be unclear and unstructured. The centrality of the ‘purpose’ assessment is often overwhelmed by particularised factors that are extrinsic to its core focus. The difficulty, as Scarman LJ noted in Berkley v Poulett (1977) 241 EG 911 at [12], ‘is not the formulation’ of the tests in this area, but rather, ‘the application of the law’. Similarly, as noted by Sackville AJA in Agripower Barraba Pty Ltd v Blomfield [2015] NSWCA

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30 at [75], ‘The law of fixtures is in some ways a relic of a period when greater emphasis was placed on physical acts, such as the annexation of chattels to land, than on whether there were good commercial or policy reasons for concluding that those acts should produce changes in title’. Endorsing a transaction-specific approach to fixtures helps to promote flexibility when addressing new and changing circumstances. The law of fixtures has a familiarity that can sometimes obscure the fundamental social, financial and environmental consequences that necessarily flow from a determination that a chattel has become a fixture and further, a determination that a tenant or other contracting party retains a legal or equitable right to remove an affixed chattel from the land to which it is  attached. The enduring relevance of the doctrine of fixtures, as an emanation of the broader category of accessionary rights is that it functions as an efficient organising tool for resources and thereby supports the important organisational architecture of the property concept. As outlined by T W Merrill in ‘The Property Strategy’ (2012) 160 University of Pennsylvania Law Review 2061 at 2070: The concept of accessionary rights also means that ownership of a thing entails ownership of emergent resources that have a prominent connection to the thing. Ownership of land includes plants that grow on the land, ownership of animals includes offspring born to those animals, and so forth. If new resources prominently connected to the original resource were up for grabs by the first taker, or were distributed in equal parts to everyone, or were systematically taxed away by the state, then we would have departed from the property strategy. … Thus, accessionary rights are residual, just as management authority is residual. Indeed, some economists have defined property as residual claimancy, meaning that the owner is the one who gets the residual value after all other claims are satisfied. Although this characterization is too narrow, since it leaves the critical element of residual managerial authority out of the picture, it highlights an equally important attribute of the property strategy — often overlooked — which I have called accessionary rights.

See also L Butler, ‘Property as a Management Institution’ (2017) 82 Brooklyn Law Review 215, where the author notes that to promote system integrity, property’s normative framework needs to more effectively integrate perspectives that take greater account of the need for social cohesion, political and economic stability, and ecological consistency. Accessionary rights and fixtures can may undermine these objectives where they function in an arbitrary and unclear manner.

3.17 Revision Questions 1. What is the difference between a fixture and a chattel? 2. Is it possible to conclude that a chattel is a fixture where it has not been attached to land in any way but merely rests upon its own weight? 3. How does the degree of annexation test relate to the object of annexation test? 4. What is the three-fold classification adopted by Lord Lloyd in Elitestone Ltd v Morris and do you agree with it? 5. How is the nature of the chattel relevant to the assessment of the object of annexation test? 6. Why was it necessary to confer a right to remove upon a tenant? 7. Does the existence of a right to remove mean that the tenant retains a separate ownership in the affixed chattel? 8. How does the PPSA approach the law of fixtures? 157

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Boundaries: Land Abutting Water 3.18  The boundaries of land and water may be determined according to natural or

artificial measures. Where land does not abut water, the boundaries are determined in accordance with specific measurements set out in the certificate of title. Where land does abut water, so that the boundary is natural, particular rules have been developed in order to determine where the boundary line should be set when the natural boundaries shift.

Tidal water boundaries 3.19  The boundary line for land abutting the seashore, whether the land is Torrens title or

old title, is presumed, in the absence of a contrary intention (such as an express boundary set out within the certificate of title), to be the mean high water mark.18 The mean high water mark is assessed by averaging out the annual tidal level reached by the spring (the highest tide of each lunar month) and the neaps (the lowest tide of each lunar month).19 Land that exists beyond the high water mark (ie, the foreshore), is deemed to belong to the Crown. The territorial sea is regulated by state and territory laws and is subject to public rights of navigation and fishing.20 It is possible for the foreshore to be the subject of a private grant.21 In some states, the common law presumption of the mean high water mark is modified by statute. See, for example, the Land Act 1994 (Qld) ss 9 and 10 where it is stated that all land beyond the high water mark is the property of the State, including beds and banks of tidal navigable rivers, and if the boundary shifts over time due to gradual and imperceptible changes, the boundary will also shift. These provisions are discussed further in State of Queensland v Beames [2001] QSC 132 at [7], where Wilson J accepted that the Land Act 1994 (Qld) introduced a different rule to the common law to the effect that: The ‘high-water mark’ under the Land Act does not denote ‘the mean high water mark’. Rather it is defined as ‘the ordinary high-water mark at spring tides’ (Schedule 6 — Dictionary). For present purposes I accept that they differ in this way. (i) The mean high water mark is the line of the medium high tide between the highest tide each lunar month, being the springs, and the lowest tide each lunar month, being the neaps, averaged out over the year (Attorney-General v Chambers (1854) 4 De GM & G 206 at 215; 43 ER 486 at 489). (ii) The ordinary high-water mark at spring tides is the long term average of the heights of two successive high waters during those periods of 24 hours (approximately once a fortnight) when the range of tide is greatest at full and new moon.

In 2010, the Land Act 1994 (Qld) was amended with the aim of preventing landowners registering exclusive rights over beach areas, as well as other coastal and riparian areas, and providing greater certainty for defining the boundary between a landowner’s dry land and the wet land owned by the State. According to the Act, land is bounded by a tidal boundary, a natural feature approximating the tidal boundary as shown in the current survey plan will be the tidal boundary at law. Upon the registration of the first new survey plan, the tidal boundary will be located according to the natural feature that was first identified as the tidal boundary in an old survey plan or, in some cases, according to a 18. A-G (UK) v Chambers (1854) 4 De GM & G 206; 43 ER 486; Elliot v Morley (Earl) (1907) 51 Sol J 625. 19. Elliot v Morley (Earl) (1907) 51 Sol J 625. 20. Blundell v Catteral (1821) 5 B & Ald 268; 106 ER 1190; Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; Northern Territory v Arnhem Land Aboriginal Land Trust (2008) 236 CLR 24. 21. Svendsen v State of Queensland [2002] 1 Qd R 216 at 221ff. 158

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specific boundary location criteria that ensures the boundary is landward of any tidal inundation. The natural feature cannot be the intersection of a tidal plane with land; for example, ‘mean high water springs’ or simply ‘high-water mark’. This means that in most cases, the State will own land that is on the water side of a tidal boundary as well as any fixed right line tidal boundary. Where the land is bounded by a non-tidal watercourse, a natural feature approximating the non-tidal boundary as shown in the current survey plan will become the non-tidal boundary. Following registration of any future survey plan, the non-tidal boundary will continue to be located according to its position before the registration of that plan. The boundary of a non-tidal lake will be the outermost extent of the bed and banks of the lake. This means that in most cases, the State will own land that is on the watercourse or lake side of a non-tidal boundary. The amendments do not alter the common law principle allowing a boundary of land to shift if the natural feature forming that boundary shifts by gradual and imperceptible degrees. Inter-tidal waters are subject to public and international rights to fish and navigate. In Attorney-General for British Columbia v Attorney-General for Canada [1914] AC 153, the Judicial Committee of the Privy Council at 170–1 stated that ‘the right of the public to fish in the sea has been well established in English law for many centuries and does not depend upon the assertion or maintenance in the Crown of any title in the subjacent land’. See also Harper v Minister for Sea Fisheries (1989) 168 CLR 314. Rights to fish and navigate in tidal and foreshore waters have an ambiguous common law heritage. As stated by Barrett J in Georgeski v Owners Corporation SP49833 (2004) 62 NSWLR 534 at [84] and quoted by French, Finn and Sundberg JJ in Gumana v Northern Territory of Australia [2007] FCAFC 23 at [89]: … it is not possible to make, with any degree of confidence, a complete and exhaustive statement of the common law rights of the public in relation to tidal waters and the foreshore. The matter is a ‘difficult question’ no less today than when so described by Lord Wright in 1935: Williams-Ellis v Cobb [1935] 1 KB 310 at 320.

Public rights to fish in inter-tidal waters may be abrogated or regulated by legislation.22 It is not, however, possible for a native title right to abrogate a public or international right of fishing or navigation. Where a native title right is inconsistent with the continuity of such rights, it does not, however, mean that native title is extinguished. French CJ and Crennan J in Akiba stated at [29]: Put shortly, when a statute purporting to affect the exercise of a native title right or interest for a particular purpose or in a particular way can be construed as doing no more than that, and not as extinguishing an underlying right, or an incident thereof, it should be so construed. That approach derives support from frequently repeated observations in this Court about the construction of statutes said to extinguish native title rights and interests.

In Gumana v Northern Territory of Australia [2007] FCAFC 23, the Full Federal Court held that fee simple land grants made under the provisions of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth), which conferred on the Land Trust fee simple rights that included rights of exclusive possession over the inter-tidal zone, excluded public rights to fish and, as such, public fishing rights granted pursuant to the Fisheries Act 1988

22. Harper v Minister for Sea Fisheries (1989) 168 CLR 314 at 330; Re MacTiernan; Ex parte Coogee Coastal Action Coalition Inc (2005) 30 WAR 138 at [88]ff and [105]ff; Northern Territory v Arnhem Land Aboriginal Land Trust (2008) 236 CLR 24 at [27]. 159

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(NT) had to be read down. French, Finn and Sundberg JJ made the following comments at [92]–[95]: … the question was what was the extent of those rights particularly in relation to the exclusion of others from entry upon, use of, and taking from, the land and space above it. The answer to that question is to be found not simply in the general law relating to what is ordinarily comprehended by an estate in fee simple in an inter-tidal zone or otherwise. It requires, first and foremost, a consideration of the Land Rights Act itself. It is this vital element which appears to be lacking in the majority judgment in Yarmirr FC 101 FCR 171. It has already been noted that the Native Title Act now defines foreshore ‘land’ as being ‘waters’, not land, for the purposes of that Act. Though the majority judgment in Risk 210 CLR 392 did not have to address the particular question of how the foreshore should be characterised for the purposes of the Land Rights Act, that judgment does with respect lend support for the view that that Act gives the converse characterisation of the foreshore where an estate in fee simple is granted to the low water mark. It is ‘land’ and not ‘waters of the sea’ (cf s 73(1)(d) of the Act) or the seabed. There are a number of textual and contextual reasons as to why this particular legislative choice appears to have been made and the consequences intended by it. First, the ‘buffer zone’ proposal as made by Woodward J and as varied in s 73(1)(d) of the Land Rights Act, presupposed a particular boundary from which the two kilometre zone would run. If the inter-tidal zone was for s 73(1)(d) purposes to be included within the ‘waters of the sea’ (ie the tidal water on it was ‘adjoining’ Aboriginal land), the two kilometre zone itself would either move with the tide, or else, paradoxically, be fixed at the high water mark. The significance of either possibility in areas known to have large tidal ranges is self-evident. Secondly, more importantly, the text, structure and context of the Act itself indicate that certain particular benefits were intended to be conferred upon or (in the case of the s  73(1)(d) legislative compromise) denied to, the Aboriginals by the grant to the low water mark. Considered in the context of the Second Report of Woodward J and of the declared beneficial purpose of the Act itself (reflected in its long title), the grant can properly be seen to represent a clarification of the rights of Aboriginals in relation to the inter-tidal zone (Second Report at [420]) which was itself a limited recognition of what they traditionally regarded as ‘their land’ (at [422]). While the legislative compromise in s 73(1)(d) denied a Land Trust the benefit of the inclusion of the two kilometre seaward buffer zone in the definition of ‘Aboriginal land’, it nonetheless still provided a means by which the Northern Territory legislature could still protect the ‘legitimate interests of Aborigines’ by ‘preserving their traditional fishing rights and their right to the privacy of their land’: Second Report [at 423]. The grant to the low water mark (as distinct from the high water mark) was in this regard some recognition of those ‘legitimate interests’ (both in relation to fishing and to excluding entry). Thirdly, in this statutory setting and context, s 70 is of decisive significance. As earlier noted, the powers of s 73(1)(b) and (d) were enlivened in the Northern Territory’s Land Act. There is nothing in that Act revealing a legislative intent that purports to exempt public rights to fish and to navigate from the prohibition imposed on entering Aboriginal lands (or for that matter closed seas) without a permit. On the contrary, the detail and breadth of the local Act suggests a legislative intent to deal comprehensively with lawful entry. In saying this we have not overlooked an argument advanced to the contrary effect by the Commonwealth that in entering onto Aboriginal land in the exercise of public rights to fish and to navigate, a person would be doing so in ‘accordance with a law of the Northern Territory’ (cf s 70(2A) and s 4(1) of the Land Act). We deal separately below with this. Having regard to the structure and purpose of the Land Rights Act, and to the context of the legislation particularly as evidenced in Woodward J’s two Reports: cf Risk 210 CLR 392 at [83]; the uncompromising language of s 70(1) does not admit of an implicit qualification that would exempt from its prohibition a person purporting to 160

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exercise a public right to fish or to navigate in the tidal zone. Rather, that language reflects and reinforces the extent of the Land Trust’s right to exclude from the inter-tidal zone which the Land Rights Act is to be taken as having intended it to have by virtue of a grant of fee simple under it. Save as modified by statute, it was an exclusive right.

These conclusions were upheld by the High Court in Northern Territory of Australia v Arnhem Land Aboriginal Trust (The Blue Mud Bay case) (2008) 236 CLR 24 (Gleeson CJ, Gummow, Hayne, Crennan and Kirby JJ, Kiefel J in dissent), which concluded that a fee simple grant issued under s  70(1) of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) could confer rights that would preclude the holders of fishing licences issued under the Fisheries Act (NT) from entering waters that were the subject of such a grant. The High Court concluded that the right to fish was a public rather than a proprietary entitlement and as such, was capable of being abrogated by legislation. Their Honours felt at [27] that the Fisheries Act (NT) had actually replaced this public entitlement so that ‘the comprehensive statutory regulation of fishing in the NT provided for by the Fisheries Act has supplanted any public right to fish in tidal waters’. Subsequently, it was held by the Full Federal Court in Manado on Behalf of the Bindanbur Native Title Group v State of Western Australia [2018] FCAFC 238 that s 212 of the Native Title Act 1993 (Cth), which seeks to confirm that any existing general law rights of the public to access and enjoyment of such places as waterways, beds and banks or foreshores of waterways, coastal waters and breaches may continue to be enjoyed notwithstanding a determination that native title exists, could not be applied to a public right to access and enjoy what is exercised by way of custom or convention in the absence of any specific prohibition. Barker, Perry and Charlesworth JJ stated: While the common law recognises public rights to fish and to navigate above the high water mark, as confirmed in Yarmirr, and some ancillary rights associated therewith, there appears no basis upon which it can be said that the law recognises, in the sense of enabling such an asserted ‘interest’ to be vindicated, any right, entitlement or interest to roam across, let alone enjoy, unallocated Crown land whether above or below the common law or statutory high water mark.

Non-tidal water boundaries 3.20  Different boundary principles apply where a body of water is non-tidal in nature,

determined according to an assessment of the ebb and flow motion of the water. The ad medium filum aquae rule sets out that a non-tidal river running through the centre of adjoining land, whether Torrens title or otherwise, is presumed to be divided down the centre by adjoining landowners: Micklethwait v Newlay Bridge Co (1886) 33 Ch D 133 (CA); Lanyon Pty Ltd v Canberra Washed Sands Pty Ltd (1966) 115 CLR 342. The application of this presumptive rule may be rebutted by proving that the Crown did not intend to make an equal division. All Australian states other than Australian Capital Territory, South Australia and Tasmania have either modified or abrogated the ad medium filum rule. In Victoria the rule has been abrogated so that the riverbed (the alveus) bounding adjacent land is deemed to remain with the Crown, although an owner entitled to take water may exercise a right of access to that water over the Crown land: Land Act 1958 (Vic) s 385; Water Act 1989 (Vic) s 7(1); see also Crown Lands Act 1989 (NSW) s 172(7). In the Northern Territory and Western Australia the ad medium filum rule has been completely abrogated: Water Act 1992 (NT) s 9; Rights in Water and Irrigation Act 1914 (WA) s 15(1). In Queensland, the definition of the ‘outer bank’ has been revised completely. Section 5A of the Water Act 2000 (Qld), is extracted below. 161

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EXTRACT

Water Act 2000 (QLD) — s 5A 5A  Meaning of outer bank (1) The outer bank, at any location on one side of a watercourse, is — (a) if there is a floodplain on that side of the watercourse — the edge of the floodplain that is on the same side of the floodplain as the watercourse; or (b) if there is not a floodplain on that side of the watercourse — the place on the bank of the watercourse marked by — (i) a scour mark; or (ii) a depositional feature; or (iii) if there are 2 or more scour marks, 2 or more depositional features or 1 or more scour marks and 1 or more depositional features — whichever scour mark or depositional feature is highest. (2) Howe ver, subsection (3) applies if, at a particular location in the watercourse — (a) there is a floodplain on one side of the watercourse; and (b) the other side of the watercourse is confined by a valley margin. Examples of valley margin — hill, cliff, terrace (3) Despite subsection (1)(b), the outer bank on the valley margin side of the watercourse is the line on the valley margin that is at the same level as the outer bank on the other side of the watercourse. (4) Despite subsections (1) to (3), if under this part the chief executive has declared an outer bank on a side of a watercourse for any length of the watercourse, the outer bank on that side of the watercourse for that length is the outer bank as declared by the chief executive. (5) To remove any doubt, it is declared that an outer bank of a watercourse — (a) can not be, or be a part of, an in-stream island, bench or bar located in the watercourse; and (b) can not be generally closer to the middle of the watercourse than any part of an in-stream island, bench or bar located in the watercourse.

Water rights 3.21  The right of adjoining landowners to access water from a lake or river is regulated by

statute. The Crown owns the riverbed, which means that any access rights must be granted by the Crown and the old common law riparian rights that conferred usufructuary rights to access and use adjacent river streams have now been abolished.23 Statutory regulation of water rights was effected early in the twentieth century and the primary objective of the legislative framework was to vest ownership and control of all private water entitlements in

23. ICM Agriculture v Commonwealth (2009) 240 CLR 140 at [51]–[57] per French CJ, Gummow and Crennan JJ. 162

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the Crown with the aim of fostering great public accessibility. Most of the early legislation transferred usufructuary rights in flowing water to the Crown. For example, the Water Rights Act 1896 (NSW) s 2 set out that the ‘right to the use and flow and to the control of the water in all rivers and lakes which flow through or past or are situate within the land of two or more occupiers … shall … vest in the Crown’. See also Hanson v Grassy Gully Gold Mining Co (1900) 21 NSWLR 271. The National Water Initiative (NWI) was signed on 25 June 2004 and it introduced a range of policy objectives for the regulation and management of water rights. The NWI makes it clear at [28] that one of the primary policy objectives is to ensure that statutory water rights remain separate to and independent from land titles. For a full discussion on this see: D Connell, S Dovers, and R Quentin-Grafton, ‘A Critical Analysis of the National Water Initiative’ (2005) 10 Australasian Journal of Natural Resources Law and Policy 81. Under the current legislative framework, access rights to water and the proprietary status of those rights varies from state to state. For example, in Victoria, the Water Act 1989 s 15 sets out that the unauthorised taking of water constitutes a civil liability. Water rights are granted pursuant to specific licences. The relevant Minister is required to issue such licences subject to the creation of a sustainable water strategy and a long-term water resources assessment that is reviewable by the Environmental Protection Agency. Section  64L of the Water Act 1989 (Vic) entitles the Minister to issue a water licence for the purpose of irrigation or for other purposes and s 64M requires the Minister to take into account a range of factors including: • the impact that such rights may have upon other persons or the environment with particular regard to water-logging; • salinity and nutrient impact; • whether the proposed licence meets standard water-use conditions and is consistent with water-use objectives; • any comments (if relevant) from the Catchment Management Authority; and • any other issues that the Minister may deem relevant. The legislation also gives the Minister the power to suspend, revoke or cancel a water licence if the holder has failed to properly comply with one of the conditions of the licence or the Minister reasonably believes that the water has not been used on the specified land. In NSW, the Water Management Act 2007 (WMA) was introduced with the express objective in s 3 of ‘providing for the sustainable and integrated management of the water sources of the State for the benefit of both present and future generations’. The Act also lists a number of particular objectives including: (i) to apply the principles of ecologically sustainable development; (ii) to protect, enhance and restore water sources, their associated ecosystems, ecological processes and biological diversity and their water quality; (iii) to recognise and foster the significant social and economic benefits to the State that result from the sustainable and efficient use of water; and (iv) to provide for the orderly, efficient and equitable sharing of water from water sources. The WMA incorporates water management principles with a particular focus on environmental protection and it sets out in s 5 that the principles of adaptive management should be applied. The WMA expressly abolishes common law riparian rights to water 163

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pursuant to s 393, and s 392 vests in the Crown the right to the ‘control, use and flow’ of (i) all water in rivers, lakes and aquifers, (ii) all water conserved by works under the control of the Minister, and (iii) all water occurring naturally on or below the surface of the ground.24 Further, the Act separates the right to extract or divert the water (for which an access licence is required — see Part 2) and the right to use it for a particular purpose at a particular place (for which a water use approval is required — see Part 3). In Queensland, the Water Act 2000 now incorporates provision for the assessment of what are known as ‘water resource allocation dealings’ and these dealings are distinguished from administrative dealings. Any applications for new water licenses and dealings with existing licenses that have the potential to impact on other water users, water resources or the environment are considered water resource allocation dealings. These dealings will undertake a full and rigorous assessment including a public notification and submission process. Generally, a water license is required for taking or interfering in water in a watercourse, lake or spring for such purposes as stock or irrigation use for land that does not adjoin a watercourse, lake or spring, and industrial or commercial use. A water license is also required in some areas for overland flow water and for groundwater usage in groundwater management areas and subartesian management areas.25 The management of the water resources of the Murray–Darling Basin is also dealt with pursuant to specific legislation. The Basin extends across New South Wales, Victoria, South Australia, Queensland and the ACT. The regulatory developments culminated in the Water Act 2007 (Cth) which provides for the management of the Basin water resources. On 3 July 2008, the Commonwealth and Basin State Governments signed the intergovernmental agreement on Murray–Darling Basin Reform.26 The intergovernmental agreement is now given effect to in the Water Act 2007 (Cth), which focuses upon the management of the water resources of the Murray–Darling Basin. The primary object of this national legislation is to modernise Australia’s irrigation infrastructure, address over-allocation in the Murray–Darling Basin, reform the management of the Murray–Darling Basin and provide for further investment in water information. The Act adopts the Murry–Darling agreement in Part 1A, Division 2, and sets up a Murray–Darling Basin authority, and Part 1A, Division 3, gives the authority power to ensure water resources are managed in an integrated and sustained manner; and includes powers to conduct research, develop strategies and disseminate information about water usage, water rights and water management.27 The release of the South Australian Royal Commission Report into the Murray–Darling Basin found, inter alia, that the Basin Plan, calculated the level of water capable of being extracted from the Murray–Darling Basin without compromising the environment — that is, the environmentally sustainable level of take (ESLT) — had, however, been incorrectly calculated through a failure to utilise 24. Similar provisions exist in other states. See, for example, Water Act 2000 (Qld) s 26. 25. See Water Act 2000 (Qld), Part 3, Division 2, for an outline of water licensing requirements. 26. See . Accessed 14 June 2017. 27. For further analysis see: L Godden, ‘Water Law Reform in Australia and South Africa: Sustainability, Efficiency and Social Justice’ (2005) 17 Journal of Environmental Law 181; J Gray, ‘Legal Approaches to the Ownership, Management and Regulation of Water from Riparian Rights to Commodification’ (2006) 1 (2) Transforming cultures eJournal 64; S Hepburn, ‘Statutory Verification of Water Rights: The “insuperable” difficulties of propertising water entitlements’ (2010) 19 Australian Property Law Journal 1; M McKenzie, ‘Water Rights in NSW: Properly Property’ (2009) 31(3) Sydney Law Review 443. 164

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best available science, including climate change projections. Further, the Report found that the sustainable diversion limit (SDL) — the allowable level of take — will result in the river remaining over-allocated and incapable of achieving the purposes of the Water Act 2007, despite the large amount of public funds that have been made available to restore the Basin. In light of this, reform of the Murray–Darling Basin Authority is likely, in order to take lawful account of factual and scientific findings and in so doing, to recalculate the ESLT and the SDL on the basis of the best available science including climate change projections. See further: Murray–Darling Basin Royal Commission Report, 20 January  2019 (Commissioner Brett Walker SC).

The doctrine of accretion and avulsion 3.22  It is possible for a landowner to acquire land through a gradual, imperceptible and natural process of alluvion or dereliction by the sea. Under the doctrine of accretion, land that is acquired by either the natural deposit of ‘ooze, soil, sand and matter … in a long time cast up, deposited and settled by and from the flux and reflux of the tide, and waves of the sea, upon and against the outside and extremity of the land’ will pass to the landowner rather than the Crown and the legal boundary held by the landowner will be altered: Gifford v Lord Yarborough (1828) 5 Bing 163 at 171; 130 ER 1023. If the accretion is rapid and perceptible, the boundaries will remain unaltered and any land acquired will pass to the Crown as owner of the sea because the Crown is the ‘owner of the soil while it is covered with water’ therefore ‘it is but reasonable he should have the soil, when the water has left it dry’.28 Alternatively, where land is gradually and imperceptibly lost, through erosion and encroachment by the sea, the land that is lost will pass to the Crown as it is treated as part of the sea and the boundary of the landowner will be reduced to reflect the loss.29 Where, however, the loss occurs pursuant to a rapid and swift avulsion the boundaries will remain unaltered.30 3.23  The nature and scope of the doctrine of accretion was discussed by the High Court in Williams v Booth (1910) 10 CLR 341, extracted below.

—  Williams v Booth  — (1910) 10 CLR 341 Facts: The plaintiff was in the process of bringing land under the provisions of the Real Property Act 1900 (NSW) when an ancillary question as to whether the plaintiff held title to a salt lagoon known as the ‘Dewy Lagoon’ was raised. The plaintiff argued that the soil or bed of the lagoon was included in Crown grants issued to his predecessors in title. Alternatively, the plaintiff argued that if it was not included, it had since become his under the doctrine of accretion. The lagoon was a piece of water entirely surrounded by land. The evidence clearly showed that the lagoon was accessible for periods of time by the sea through a specific channel and at those times the tide would ebb and flow within it. At other times, a sand-bar existed across the mouth of the channel and the water remained cut off from the sea. One of the issues for the court was whether such a body of water could be amenable to the doctrine of accretion. The High Court concluded that the doctrine of accretion could not apply to a sudden and considerable alluvion as it does not constitute an accretion.

28. William Blackstone Commentaries, Bk 2 at 262; Williams v Booth (1910) 10 CLR 341. 29. Attorney-General v Chambers (1859) 4 De G & J 55; 45 ER 22. 30. Gifford v Lord Yarborough (1828) 5 Bing 163; 130 ER 1023; Southern Centre of Theosophy Inc v South Australia [1982] AC 706. 165

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Griffith CJ: … Thus, when the rule of medius filus aquae was applied to conveyances of land described as abutting upon a non-navigable fresh water river, the reason was that, the title of the soil of the stream ad medium filum being vested in the vendor, it was inferred that it was not intended that he should keep for himself the soil covered with water, which might be inaccessible and useless to him, but that it was intended that that soil should pass to the purchaser. What then is the meaning of the words ‘by that lagoon and the sea’ and ‘by that lagoon to the sea’ used in the grants, as applied to the subject matter? As a matter of English, and apart from any technical or artificial rules of construction, I cannot doubt that a plain person with an ordinary acquaintance with the English language would understand that the parties meant, in the one case, a line dividing the land granted from the lagoon and the sea, ie, the margin of the lagoon and the sea, and, in the other, a line dividing the land granted from the lagoon and extending along its margin to the sea. In both cases the continuity of the lagoon and the sea is assumed. As I have shown, the existing facts at the dates of the grants were consistent with this view. It follows that the waters of the lagoon and the land covered by them were not included in the grants, unless there is some artificial rule of construction which compels us to a different conclusion. Even if at the dates of the grants the continuity of the lagoon and the sea was in fact interrupted, I do not think that it would make any difference, since the intention of the parties is to be gathered from the language which they used. If that language purports to comprise land extending to, but not beyond, the margin of the water, the meaning of the words is not altered by showing that the quality of the water was misunderstood. If, for instance, the boundary of lands comprised in a grant is described as navigable tidal water, of the identity of which there is no question, the clear intention of the parties is that the margin shall be the limit, and the operation of the grant is not affected by showing that the water was not navigable, or not tidal. Is there, then, any rule of law which in the present case requires a different construction? I know of none. No authority was cited to us which even suggests the extension of the rule of medius filus to marine lagoons. The onus is on those who assert the extension. But, even if it were not, the consideration that such lagoons are substantially part of the sea, and may be of public use for fisheries or even for navigation, at some times if not all, would exclude the basis of the rule applicable to fresh water rivers. For these reasons I am of opinion that the grants in question do not include the bed of the lagoon. With regard to the alleged accretion, the case made is that the mouth of the lagoon is now permanently closed, so that it has become an inland water. The first answer to this argument is that it is not proved that the facts are so. Upon the evidence it is highly probable that the channel will, as heretofore, be opened and closed periodically, as occurred in 1905. But, even if it were shown to be permanently closed, I do not think that any case of accretion is made out. The law as stated by Blackstone (2 Bl Com, p 262), is that ‘if this gain be by little and little, by small and imperceptible degrees, it shall go to the owner of the land adjoining. For de minimis non curat lex. … But, if the alluvion or dereliction be sudden or considerable, in this case it belongs to the King; for, as the King is Lord of the sea, and so owner of the soil while it is covered with water, it is but reasonable he should have the soil, when the water has left it dry.’ The word ‘imperceptible’ refers to the slowness of the additions to the soil. Assuming, then, that a moment has arrived at which the mouth of the lagoon became permanently closed, the suggested accretion is not an addition of an imperceptible quantity of soil to the plaintiff’s land, but of an area of many acres occurring at the moment of permanent closure, so that, according to the plaintiff’s contention, on one day the land belonged to the King as Lord of the sea and on the next to the plaintiff. This is a sudden and considerable alluvion or dereliction, and does not operate to confer a title by accretion. The exact point is considered in an able argument in Mr Hall’s Essay (2nd ed, p 115, et seq) the reasoning of which is I think conclusive. The plaintiff, therefore, substantially failed in the purpose for which the suit was brought. The statement of claim, as already stated, prays a declaration of the plaintiff’s title to five parcels of land, but the allegations of fact have reference only to the two parcels bordering on the lagoon. 166

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3.24

On these pleadings it would, I think, be competent for the Court to declare the plaintiff’s title to a portion of the lands in dispute, although, strictly speaking, it may be doubtful whether the plaintiff could claim such a declaration as of right. Probably he could not do so without amendment. It is not, however, desired by either party to take advantage of any technical points. It appeared in the course of the evidence that the area covered by water is now much less than at the dates of the grants, and it is obvious that a title by accretion might be set up, successfully or not, by the plaintiff in respect of the dry land so left by the salt water. But no distinct case founded on such a title was made by the pleadings, nor was the evidence addressed to this point. It may be that, with respect to some of the additions, the plaintiff is entitled to follow the margin of the lagoon as it imperceptibly receded, while as to others, which may have been sudden additions to the land, as, eg, on the occasion of the Dandenong Gale, he is not so entitled. These matters can, if desired, be investigated in the present suit, by way of inquiry or otherwise, but for that purpose an amendment of the pleadings would be necessary. Under these circumstances, I think that complete justice will be done by discharging the judgment appealed from, and ordering that upon payment of the costs of the suit subsequent to the statement of claim the plaintiff shall be at liberty to amend as he may be advised, and that in default of amendment within 30 days after the allocatur the suit be dismissed with costs. [Barton and O’Connor JJ agreed.]

Commentary 3.24  The High Court in Williams v Booth made it clear that the doctrine of accretion is a common law principle that is only applicable to gradual and imperceptible alluvions by the sea and not sudden and dramatic ones. Griffith CJ specifically noted at 346 that the word ‘imperceptible’ refers to a slow or gradual addition to the soil that would preclude the sudden closure of a sea channel by a significant shift in sand and soil. This principle remains good law although it is possible to modify or exclude the application of the doctrine of accretion through clear words within a grant where the land is described as ‘abutting the foreshore as it exists from time to time’. In Southern Centre of Theosophy v South Australia [1982] AC 706 at 714, the Privy Council concluded that the rationale underlying the need for accretion to be ‘imperceptible’ is that the rule is required for the ‘permanent protection of property’ and ‘in recognition of the fact that a riparian property owner may lose as well as gain from changes in the water boundary or level’. In this respect, a clear distinction should be made between imperceptible change and sudden, swift change. By contrast, where the doctrine of ‘avulsion’ applies, the general principle is that the property will remain with the original adjoining landowner where the avulsion is rapid and swift. Lord Wilberforce in Southern Centre of Theosophy v South Australia held that the common law doctrine of accretion would be applicable to alterations to a land/water boundary and may also be extended to apply to alterations resulting as a consequence of other factors such as wind or air. His Lordship felt that there was no reason to confine the doctrine of accretion to changes effected solely as a result of fluvial action. On the facts, of Southern Centre of Theosophy v South Australia, the Privy Council concluded that the doctrine of accretion was applicable because the gradual recession of the lake and the deposit of sand was imperceptible.31 The issue of what constitutes an ‘imperceptible’ accretion and what constitutes an avulsion will depend upon circumstantial analysis and is therefore a question of fact. As outlined by the court in Hugh

31. See also Coulson and Forbes, The Law of Waters, 6th ed, Sweet and Maxwell, London, 1952. 167

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and Tessa Prescott v Robert John Anderson (Rivers, Waterways and Foreshore: Accretion and diluvion) [2009] EWL and RA 2007_ 0760 where the court noted: Drawing together these legal strands, it is therefore in principle possible to make a clear distinction between two interpretations ie what is a gradual and imperceptible process of nature in the movement of water, being imperceptible in its progress — in other words being too slow to be perceived, and the movement of water which is subject to a substantial, recognisable, and sudden change. As there is, however, what has been described as a ‘grey’ area between what is imperceptible and what is considered to be an avulsion then the issue of imperceptibility is always considered to be a question of fact. In Lyn Shellfish Ltd v Loose [2016] 2 WLR 1126, at [79] Lord Neuberger and Lord Carnath, in examining an exclusive prescriptive right (ie an exclusive right obtained through a long period of use) to take cockles and mussels from a stretch of the foreshore on the east side of the Wash, on the west coast of Norfolk, noted that there was no reason why the doctrine of accretion outlined in Williams v Booth should not apply as equally to rights in land as it does to ownership of land.

See also Loose v Lynn Shellfish [2017] AC 599 where Lord Neuberger and Lord Carnwath held, in applying the principles outlined by Lord Wilberforce in Southern Centre of Theosophy, that the doctrine of accretion only applies where the actual change to the boundary is gradual and imperceptible, and not where ‘there is a specific moment in time when the whole of a sandbank becomes attached to the foreshore’ because this represents a single event rather than a gradual process. There has also been some legislative development to modify the doctrine of accretion. See, for example, Coastal Management Act 2016 (NSW) s 28, which sets out that a court has no jurisdiction to make a declaration that would increase the area of land to the landward side of the water boundary if a perceived trend by way of accretion is not likely to be indefinitely sustained by natural means, or, as a consequence of making such a declaration, public access to a beach, headland or waterway, will be restricted or denied. This provision applies to land that is defined by reference to a high water mark and is within a coastal zone of New South Wales, or that adjoins the tidal waters or Sydney Harbour or Botany Bay, or their tributaries.

3.25 Revision Questions 1. What is the boundary rule for land abutting tidal water? 2. If the foreshore is vested in the Crown, what rights do abutting landowners have to access those waters for the purpose of fishing or navigation? 3. In Gumana v Northern Territory of Australia [2007] FCAFC 23, the Full Court of the Federal Court concluded that a fee simple grant conferred upon a Land Trust for land abutting tidal waters extinguished any public rights to access those waters for fishing and navigation. What was the rationale for this decision? 4. How did the High Court in Northern Territory v Arnhem Land Aboriginal Land Trust (2008) 236 CLR 24 respond to this? 5. Explain the ad medium filum aquae rule and the legislative modifications in Victoria. 6. Why is it important to prove under the doctrine of accretion that land is gradually and imperceptibly lost? What is the difference between the doctrine of accretion and the doctrine of avulsion? 7. In Williams v Booth, Griffith CJ concluded that the doctrine of accretion was not made out because it involved a ‘sudden and considerable alluvion’. Explain this conclusion. 168

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Boundaries and Encroachments for Land 3.26  An owner of land can only enforce ownership rights within the specific dimensions

of that land. Consequently, prior to purchasing land, an owner should inspect the boundaries to make sure that the physical measurements accord with those set out in the title documents. For example, in Victoria, the boundary of a land title is defined according to the survey lines. Where such lines have been removed, following adverse possession principles, they will accord with the boundary set out by any erected fence or wall that has been in place for a period of 15 years: Property Law Act 1958 (Vic) ss 269 and 271. Further, an owner of land does not own the minerals in the soil. Legislation in each state vests ownership of minerals in the Crown: Crown Lands Act 1989 (NSW); Mines Resources (Sustainable Development) Act (Vic) 1990 s 9; Mineral Resources Act 1989 (Qld) s 8; Mining Act 1978 (WA) s 9; Mining Act 1971 (SA) s 16; Mineral Resources Development Act 1995 (Tas) s 6; Minerals (Acquisition) Act (NT) s 3. The royal minerals of gold and silver vest in the Crown pursuant to Crown prerogative.32

Error in title 3.27  Where land is incorrectly described in the title and is subsequently conveyed to a

third party, the effect of the conveyance will depend upon the character of the land and the stage of the conveyance that has been reached. An error in old title land of which neither the vendor nor the purchaser is aware will result in the purchaser acquiring a ‘defective’ title. If the vendor is aware of the error and fails to disclose it to the purchaser, the purchaser may be entitled to set aside the contract. For example, see: Sale of Land Act 1962 (Vic) ss 3–32; Conveyancing Act 1919 (NSW) s 52A; Property Law Act 1974 (Qld) s 61. Where the land is Torrens title land, the registered proprietor will not acquire an indefeasible title if there has been a ‘wrong description’ of the land. If land has been included by wrong description, the registered proprietor cannot claim it; however, a bona fide purchaser for value will be protected. By contrast, if there is an error that has arisen as a result of an incorrect survey rather than a wrong description, the registered proprietor will, in the absence of fraud, acquire an indefeasible title. In all jurisdictions the Registrar is entitled to correct any error in the Register. However, a correction or new entry cannot prejudice any rights that may have been entered on the Register prior to the correction being made. This is discussed in further detail in Chapter 11.

Contractual errors 3.28  Where a boundary has been expressly or impliedly misdescribed in a contract of sale, the effect will depend upon whether or not the term was fundamental. If the contract clearly sets out that the vendor agrees to hand over all land as described, a failure to do so will usually amount to a fundamental breach entitling the purchaser to rescind. This will also apply where the vendor sets out that both land and buildings are being sold. For example, if a vendor sets out a specific measurement of the land to be sold within a contract of sale, and states that the land, along with the buildings erected on the land are for sale, the vendor must provide the purchaser with a good title to the land upon which the building is erected: Heath v Allen (1875) 1 VR 176. The 32. Cadia Holdings Pty Ltd v NSW (2010) 269 ALR 204. 169

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expectation of the purchaser is to receive both the structure and the land upon which the structure is built. Where the vendor does not hold title over the transferred land, he or she may fail to make a good title to the whole of the land described in the contract. As noted by the High Court in Svanosio v McNamara (1956) 96 CLR 186 at 205–7 per McTiernan, Williams and Webb JJ: A purchaser who purchases land which is represented to have a building erected thereon expects to obtain a complete building and not a building partly erected on land to which the vendor cannot make title. When the purchaser discovers that part of the building is not on the land he should object to the title. Such a misdescription is an objection to the title.

It is well established, however, that the vendor need not have a good title when the contract of sale is made, provided the vendor is able to confer a good title on the purchaser by the time for completion.33

Fence boundaries 3.29  In most situations a fence will sit upon the boundary of the land. This may not

always be the case and where a fence is situated on an incorrect boundary it may affect the land measurements if adverse possession is claimed over the area. It is always important when purchasing land to make sure that the physical boundaries correspond with the legal boundaries set out on the title documents. Where a fence does sit on the boundary, it is usual for each adjoining landowner to keep the fence in reasonable condition. This is not, however, a common law obligation. At common law there is no duty upon owners to build or maintain boundary fencing for adjoining properties: Churchill v Evans (1809) 1 Taunt 529; 127 ER 939. There are, however, a number of exceptions to this principle. Common law requires owners to prevent livestock from roaming onto adjoining land and therefore fencing becomes obligatory in this situation. An easement or covenant compelling fencing maintenance may be imposed on a landowner or the owner may be subject to enforceable contractual obligations. Statutory provisions now exist in each state regulating the responsibility of adjoining owners with respect to the boundary fence. For example, in Victoria, the Fences Act 1984 (Vic) s 7 sets out that if there is no dividing fence between adjoining lands, the owners are liable to contribute in equal proportion to a sufficient fence. If there is a dividing fence, the owners are liable to contribute in equal proportions to fencing works to ensure its continuing adequacy as a dividing fence. In the absence of an agreement between adjoining landowners, a court may determine liability.

33. Bell v Scott (1922) 30 CLR 387; H & R Securities Ltd v Sayer [2009] NSWSC 427 at [40]. 170

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EXTRACT

Fences Act 1968 — s 7 7  General principle — owners are liable to contribute in equal proportions to a sufficient dividing fence (1) If there is no dividing fence between adjoining lands, the owners of the adjoining lands are liable to contribute in equal proportions to fencing works and any subsidiary works for the construction of a sufficient dividing fence for the adjoining lands. (2) If there is a dividing fence between adjoining lands for which fencing works and any subsidiary works are required so that the dividing fence would be a sufficient dividing fence, the owners of the adjoining lands are liable to contribute in equal proportions to the fencing works and any subsidiary works for a sufficient dividing fence. (3) Nothing in this section prevents owners agreeing to contribute in other proportions to the fencing works and any subsidiary works for a sufficient dividing fence.

The provisions in other states are similar. Generally, where contribution is sought for the construction or repair of a boundary fence, a notice in writing must be served on the neighbour setting out the relevant area and the type of fencing necessary. See also Dividing Fences Act 1991 (NSW) ss 6–7; Neighbourhood Disputes (Dividing Fences and Trees) Act 2011 (Qld) ss 20 and 21 (with s 21(2) expressly setting out that an adjoining owner who wants to carry out fencing work for a dividing fence to a standard greater than the standard for a sufficient dividing fence is liable for the fencing work to the extent that it is greater than the standard for a sufficient dividing fence); Fences Act 1975 (SA) s 5; Dividing Fences Act 1961 (WA) s 7; Boundary Fences Act 1908 (Tas) s 8.

Encroachments on to land 3.30  In circumstances where a building encroaches (rather than exists entirely) upon land belonging to another, that building will vest in the land belonging to the other in accordance with the doctrine of fixtures with no compensation being available. Further, where the adjoining landowner is dissatisfied with the situation, they may apply for a range of different forms of relief including: removal, compensation, a land transfer or a lease.34 However, if the adjoining landowner encouraged the construction, proprietary estoppel or acquiescence may be raised to prevent the adjoining landowner from asserting full ownership in the building: Dillwyn v Llewellyn (1862) 4 De GF & J 517; 45 ER 1285. In Queensland and Western Australia, legislation entitles a person to apply to the court for relief where it can be proven that they have made a lasting improvement over land that belongs to another, in the genuine belief that the land belonged to them: Property Law Act (Qld) s 196; Property Law Act (WA) s 123(1). These provisions make it clear that where a genuine, mistaken belief is proven and equitable relief should, in the circumstances be issued, the court has the power to:

34. Burton v Winters [1993] 3 All ER 847. 171

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• issue an order conveying, transferring, leasing, conferring any easement, right or privilege in any person, over the whole or any part of the land on which the improvement has been made; • issue an order requiring any person to remove the improvement from the land; • issue an order for the payment of compensation in respect of any land or any improvement; or • issue an order that any person have or give possession of the land or improvement for such period and upon such terms and conditions as the court may specify. In Queensland, encroaching buildings are dealt with pursuant to the Property Law Act 1974. Section 185 sets out that relief may be refused at the discretion of the court based upon a range of factors including the character of the encroachment, the situation and value of the land, loss or damage that has or will be incurred by the encroaching and/or adjacent owner, and the circumstances of the encroachment. The Neighbourhood Disputes (Dividing Fences and Trees) Act 2011 (Qld) also deals with the encroachment of trees on adjoining properties. Section 52 seeks to outline the responsibilities of tree-owners without creating any separate cause of legal action. EXTRACT

Neighbourhood Disputes (Dividing Fences and Trees) Act 2011 (QLD) — s 52 52 Responsibilities of a tree-keeper (1) A tree-keeper is responsible for cutting and removing any branches of the tree that overhang a neighbour’s land. (2) A tree-keeper is responsible for ensuring that the tree does not cause — (a) serious injury to a person; or (b) serious damage to a person’s land or any property on a person’s land; or (c) substantial, ongoing and unreasonable interference with a person’s use and enjoyment of the person’s land. (3) This section does not create a civil cause of action based on a breach of a treekeeper’s responsibilities.

In New South Wales, difficulties encountered by encroaching buildings are dealt with under the Encroachment of Buildings Act 1922 (NSW), which confers upon the Land and Environment Court the power to resolve disputes that may arise between adjoining landowners with respect to an encroachment, by a building, which is of a permanent nature. Section 3(2) allows the court to make an order that it deems to be ‘just’ regarding the payment of compensation to the person whose land has been encroached, the transfer or lease or grant of an easement or other right to the owner of land upon that the encroachment exists from the owner of land where the encroachment has come from, or the removal of the encroachment. The court may exercise broad judicial discretion in making a determination as to the appropriate relief and take into account such factors as the extent and purpose of the encroachment, the knowledge of the encroaching owner, how the encroachment affects the value of the encroached land, loss or damages suffered, 172

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how long the encroachment has existed, and costs associated with the removal of the encroachment.35 Alternatively, an action for trespass may be brought, provided it can be established that a structure or object existing upon one piece of land encroaches upon the adjoining piece of land to the extent that it impedes or obstructs the proprietary rights of the adjoining landowner: Kelsen v Imperial Tobacco Co (Great Britain & Ireland) [1957] 2 QB 334. An action in nuisance may also be established where the encroachment amounts to continuous unlawful interference with the use or enjoyment of adjoining land: Munro v Southern Dairies Ltd [1955] VLR 332. It is possible for an encroachment to occur where the airspace of a landowner has been interfered with. Under the maxim cujus est solum ejus est usque ad coelum et ad inferos an encroachment may occur via any spatial interference. Where a structural encroachment interferes with the airspace of an adjoining property, the encroachment will usually constitute a trespass entitling the owner to seek compensation. Thus, items such as cranes, advertising signs or even an encroaching treehouse may constitute a trespass. In the words of Scott J in Anchor Brewhouse Developments Ltd v Berkley House (Docklands Development) Ltd (1987) 284 EG 625 at 629: ‘… if somebody erects, on his own land, a structure — part of which invades the air space above the land of another — the invasion is trespass’. 36 The short extract from the article by S Grattan, ‘Judicial Reasoning and the Adjudication of Airspace Trespass’ (1996) 4 Australian Property Law Journal 13 at 17, contains a brief outline of some of the cases and judicial rationales underlying trespass to airspace: … From the facts of the cases, the most serious infringement was in LPJ Investments Pty Ltd v Howard Chia Investments Pty Ltd (No 2) (1989) 24 NSWLR 490 where the defendant’s scaffolding extended 1.5 metres into the plaintiff ’s airspace for a length of 16 metres and at a height of 4.5 metres above the ground. In both Bendal Pty Ltd v Mirvac Projects Pty Ltd (1991) 23 NSWLR 464 and Meriton Apartments Pty Ltd v Baulderstone Pty Ltd (unreported, SC (NSW), No 4940 of 1991) the offending structures appear to have encroached on airspace above the buildings on the plaintiff ’s land. Described simply, the question in each of these cases was whether the court should allow the plaintiff to stop the defendant using the airspace above the plaintiff ’s land for which the plaintiff had no immediate use. In each of these cases the court answered the question in the affirmative. The defendant was held to have committed a trespass to the plaintiff ’s land (damage not being a necessary element of the tort). Because the trespass was a continuing one, the plaintiff was entitled to an injunction prohibiting the defendant from further infringing upon the plaintiff ’s airspace and requiring the removal of any encroaching structure still in place (despite the hardship that might be caused to the defendant). The courts in these cases have not labelled the plaintiff ’s conduct as selfish or unreasonable; in fact they have on occasions expressly disassociated themselves from any such suggestion. The courts have at times, however, expressed regret that they were not empowered by statute to refuse the granting of an injunction and instead allow the encroachment upon the plaintiff ’s airspace 35. See J and T Lonsdale v P Gilbert [2006] NSWLEC 30. See also Encroachments Act 1944 (SA); Planning (Urban Encroachment) Act 2008 (Qld); Encroachment of Buildings Act 1922 (NT). 36. See also the discussion by P O’Connor, ‘The Private Taking of Land: Adverse Possession, Encroachment by Buildings and Improvement Under a Mistake’ (2006) 33(1) University of Western Australia Law Review 31 at 46, where the author notes that boundary discrepancies and building encroachments are particularly likely to arise in new high density housing developments where units are sold off the plan as buildings and footings must be constructed exactly within the block. 173

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to continue on payment by the defendant to the plaintiff of proper compensation. These cases show that the law protects what seems to be the selfish interest of the landowner whose airspace is violated at the expense of the interest of the encroaching landowner, and possibly also at the expense of the public interest.

3.31 Revision Questions 1. What is the effect of an error in the description of Torrens title land? 2. If an error in the boundary description is included within the contract of sale, what relief can a purchaser seek? 3. What is the rationale for the common law assumption that an encroaching building will vest in title to the land belonging to the other? 4. Are there any circumstances that would justify the owner of the encroaching building retaining title? 5. Why can a landowner claim trespass to airspace by an encroaching structure even though the landowner had no immediate use for the airspace involved?

3.32  Answer Plan When a question requires an evaluation of the scope and character of a land interest the following factors should be taken into account:

• Does the land include a dwelling or is it vacant? • If a dwelling is attached, what fixtures are included with the dwelling? • Where it is not clear whether or not a chattel is a fixture, consider the overall circumstances to try and determine the purpose of the annexation in the particular circumstances. Consider whether the chattel was affixed for the benefit of the land as a whole, or in order to ensure that the chattel would function more effectively. Take account of such factors as: ºº the nature of the chattel; ºº the degree of annexation; ºº the title of the affixer to the goods; and ºº the nature of the goods and the reason why they were affixed to the dwelling. • Whether any legal or equitable rights to remove the affixed chattel exist and if so, what the nature and scope of such rights are and whether such rights remain enforceable or have been defeated by subsequent interests. • Once the scope and nature of the land attributes have been determined, consider the scope and boundaries of the land. Consider whether the land abuts water. Remember, common law riparian rights to water have been extinguished but statutory rights to access and use water may be granted in accordance with the relevant statutory framework. • If the land abuts tidal waters, consider where the boundary line will be. If the boundary line is determined by the high water mark, consider any rights the landowner may have to access the foreshore and navigate or fish upon the tidal rivers. Consider whether the common law rule has been abrogated or modified by statute. • If the land abuts non-tidal waters, consider whether the ad medium filum rule applies and whether that rule has been modified by legislation giving the Crown ownership and control of the alveus. In many states this has occurred.

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• Where the land abuts tidal waters, consider whether the boundaries of the land have been expanded by the gradual and imperceptible process of alluvion or dereliction by the sea, the wind or the air or whether the doctrine of avulsion means that the land remains with the original landowner. • Consider the exact measurement of the land. Measurements are set out in the certificate of title or associated title documents. If there is an incorrect measurement on the title, consider whether the error is one of description or survey. If the latter, a registered proprietor may acquire a good title, in the absence of fraud. • In measuring the land, consider whether the fences sit properly on the boundary. Make sure that the physical measurement corresponds with the measurements set out on the title and that the fence is sitting on the correct boundary. Adjoining landowners will be jointly liable to keep the fence in reasonable condition. Consider any relevant statutory obligations. • Consider whether there are any encroachments on the land. A building that encroaches on land will vest in the owner of the encroached land where it satisfies the fixtures test unless it can be proven that the adjoining landowner encouraged or allowed such an encroachment to occur. Examine any relevant statutory provisions.

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Chapter 4

Adverse Possession The Meaning of Adverse Possession 4.1 Outline of the Title Hierarchy 4.2 The Nature of Adverse Possession 4.3 Policy Rationales Underlying Adverse Possession 4.4 Case: ‘Should the Law Recognise the Acquisition of Title by Adverse Possession?’ 4.5 Revision Questions 4.6 Limitation Period 4.7 Extract: Limitation of Actions Act 1958 (Vic) — s 8 4.7 Against which Owner? 4.8 Factual Possession 4.9 Open and peaceful 4.10 Without consent 4.11 Revision Questions 4.12 Intention to Possess: Animus Possidendi 4.13 Case: JA Pye (Oxford) Ltd v Graham 4.14 Commentary 4.15 Case: Whittlesea City Council v Abbatangelo 4.16 Commentary 4.17 Revision Questions 4.18 Multiple Possessions 4.19 Case: Kierford Ridge Pty Ltd v Ward 4.20 Commentary 4.21 Disability and Fraud 4.22 Adverse Possession and the Torrens System 4.23 Extract: Real Property Act 1900 (NSW) — s 45D 4.23 Revision Questions 4.24 Answer Plan 4.25

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The Meaning of Adverse Possession 4.1  Adverse possession refers to a particular type of land possession, where the occupation by the possessor has endured for so long and is of such a character that it generates a limitation of actions defence in favour of the possessor. Where adverse possession can be established, the provisions of the limitation of actions legislation, as they exist in each state, will prevent the paper title owner from defending an adverse possession claim. The fact that an occupier is in possession of land does not necessarily mean that the possession is adverse in nature. Adverse possession will only exist where it can be established that the possession satisfies the requisite factual and intention requirements. It must be established that the possession has continued for the requisite period of time and that the possessor (or a series of possessors) have physically occupied this land, continuously and uninterrupted in a manner akin to that of the paper title owner. The different tests and principles that have evolved to guide these tests were outlined by Ashley, Redlich JJA and Kyrou AJA in Whittlesea City Council v Abbatangelo (2009) 259 ALR 56 at [5]–[6]: (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).1 (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: • 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 1. It is important to differentiate between the defendant possessor and the paper title owner. It is not possible for an owner to claim adverse possession against him or herself: Phillips v Southage Pty Ltd [2014] VSCA 17 at [75]. 177

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•

• • • •

•

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 CJ said in Seddon v Smith (1877) 36 LT 168 at 1609: ‘Enclosure is the strongest possible evidence of adverse possession.’ Russell LJ in George Wimpey & Co Ltd v Sohn [1967] Ch 487 at 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 (1969) 20 P & CR 633 at 642 per Sachs LJ. 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. 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.2

Outline of the Title Hierarchy 4.2  Before moving on to consider the elements of adverse possession it is useful to consider what might be described as the ‘hierarchy’ of property rights that exist with respect to land. Appreciating the ‘relativity’ of each land title allows us to understand the nature and status of the adverse possession interest. • Common law estate: The highest and most enforceable form of land title is a common law estate, such as the fee simple estate. The holder of a vested estate in land holds a title that carries full ownership rights and that is enforceable against the rest of the world. • Adverse possession: Adverse possession is not the equivalent of a proprietary estate in land. While it occupies a higher status than ordinary possessory title, due to its enforceability (once established) against the paper title owner, it is not enforceable in rem against the entire world. Adverse possession is an absolute defence against the paper title owner; however, it is, in essence, a defence raised by a person in possession against the paper title owner legally entitled to take possession. Thus, adverse possession constitutes possessory title combined with an enforceable limitation of actions defence that equip the possessor with the necessary requirements for becoming the owner. As a defence, adverse possession 2. These guidelines were originally set out in Bayport Industries Pty Ltd v Watson (2006) V ConvR 54709 per Ashley J at [39]–[40]. 178

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is only enforceable against the paper title owner who is currently in possession. This means that it is not enforceable against every potential title holder in the land. For example, the adverse possession defence is not enforceable against the holder of a future interest in land, who holds title but possession is deferred until a future date. If the possessory rights of an owner are deferred until the future, the adverse possession defence will only begin to accrue at the point in the future when that possession vests. • Bare, possessory title: Bare possessory title amounts to a title that does not constitute adverse possession. This title will exist prior to the expiration of the limitation period. At this stage, the possessor holds a bare possessory title because the adverse possession is accumulating. Possession is both a physical and a legal concept (see  Chapter 2) and, once established, it confers both choate and inchoate aspects. A possessory title must, however, be contrasted from permissive use or merely passing through the land. In order to possess the land the paper title owner must not have consented to the occupation and the possessor must be in physical occupation. In the context of land, where the possession is of a sufficient degree that it results in the occupier having substantial control, a possessory title may arise. Possessory title is capable of being alienated (see Chapter 2) but is not enforceable against an owner: Asher v Whitlock (1865) LR 1 QB 1.

The Nature of Adverse Possession 4.3  Adverse possession over land will accrue in favour of a possessory titleholder

where all of the requisite elements have been properly established. The occupier must prove factual possession of the land, combined with the requisite intention, and this must continue for the entire limitation period. Where this can be proven, an adverse possession defence will arise. Once established, adverse possession confers upon the holder an absolute defence against the paper titleholder that allows the possessor to subsequently acquire title by registration or transfer. In this sense, adverse possession requirements do not actually confer full proprietary title upon the possessor but, rather, an elevated possessory title that equips the possessor with the capacity to acquire proprietary title.3 Adverse possession will only be enforceable against a paper title owner who, by virtue of their title, was entitled to exercise possession. In some situations, because land is a resource where ownership can be fragmented, different types of proprietary rights may exist over a single piece of land. Only those rights that carry current rights to possession may be adversely possessed.

3. The right to obtain registration of adverse possession title is set out in: Transfer of Land Act 1958 (Vic) ss 60–62; Transfer of Land Act 1893 (WA) ss 222–223A; Real Property Act 1886 (SA) s 80A (where the Registrar requires proof of 30 years adverse possession); Land Title Act 1994 (Qld) s 99; Real Property Act 1900 (NSW) s 45D(1); Land Titles Act 1980 (Tas) ss 138U, 138W(2), (4) and 138X. See also Perry v Clissold (1906) 4 CLR 374 at 377 where Macnaghten LJ said: ‘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 forever extinguished, and the possessory owner acquires an absolute title.’ 179

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LEGAL PROBLEM Emma acquires an interest in land for her life with remainder to Jack and Grace. Jack and Grace acquire a future interest (fee simple remainder) that carries no immediate right to possession. The right to possession will not vest until Emma dies. If an adverse possessor takes possession of the land while Emma is alive, for the requisite statutory period, with the requisite degree of control and intention, an adverse possession claim may arise against Emma. However, the adverse possessor cannot defend any claim that Jack and Grace may bring once Emma dies. In this situation, the interests of Jack and Grace will vest in possession and it becomes necessary for a further adverse possession period to be raised against Jack and Grace. The rationale for this is that you cannot punish an owner for failing to assert possessory rights in circumstances where those possessory rights do not yet form a part of their ownership bundle.

Policy Rationales Underlying Adverse Possession 4.4  It is important to appreciate the rationales underlying the principles of adverse possession. The law will not readily oust the rights of paper title owners to their land. The combined effect, however, of the paper titleholders not being in occupation of their land, not checking who might be in occupation of their land and/or not enforcing fundamental ownership rights (use, enjoyment, exclusion) over that land for a significant period of time has been found to be sufficient to justify the consequences of adverse possession. The justification process was outlined by Sir Thomas Plumer MR in Marquis Cholmondeley v Lord Clinton (1820) 2 Jac & W 1 at 139–40; 37 ER 527 at 577: The individual hardship will, upon the whole, be less, by withholding from one who has slept upon his right, and never yet possessed it, than to take away from the other what he has long been allowed to consider as his own, and on the faith of which, the plans in life, habits and experiences of himself and his family may have been … unalterably formed and established.

It is not easy to prove that an occupation of land constitutes adverse possession and, where the onerous tests can be satisfied, the positive acts of the occupier will be prioritised because of the failure to act by the paper title owner. In the words of Slade LJ in Buckinghamshire County Council v Moran [1990] Ch 623 at 636: ‘If the law is to attribute 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’. Some of the broader policies underlying the application of adverse possession include: • ensuring that property owners enforce their possessory rights to encourage effective management of land and deter inaction; • protecting the occupational rights and legitimate expectations of possessors against the possibility that, at any point, they may be ousted by the paper title owner, where the possession has endured for a significant length of time; • preventing the possibility of endless litigation over land; and • recognising the continued importance of possessory title, particularly in the context of land. The interconnection between the rationales underpinning the doctrine of adverse possession and a land system grounded in possession and the doctrine of relativity of title was explained by Fiona Burns, ‘Adverse Possession and Title By Registration Systems in Australia and England’ (2011) 35(3) Melbourne University Law Review 773 at 775: 180

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A system of land law based on possession and relativity of title which eschews a concept of absolute ownership has a significant weakness. There is always a danger that a person exercising possession and control over the land may be subject to a claim based on prior events by an earlier possessor who the law deems to have the better title. In order to deal with this, English law took a pragmatic response. Claims to land were barred by a statutorily based concept of limitation. As early as 1623, the Limitations Act 1623 barred the right of the true owner to recover possession by setting a fixed (albeit arbitrary) time limit for recovery. A person who had a long history of uncontested possession of the land was able to deal with it as an owner so that ‘[t]he door of justice … closed.’ The doctrine quietened title when it could be said that the documentary owner had ‘slept’ on his or her rights. The doctrine made sense in a preindustrial society when land was held by a relatively small group of persons and documentary exchanges were not necessarily the normal way of dealing with land. In any event, documentary exchanges could be irregular in nature and the documentation could be lost and destroyed. English (and Australian) scholars have recognised the historical importance of possession in the English common law and its role as the foundation for the traditional doctrine. Therefore, they have generally considered and accepted the operation and effect of adverse possession through the dual medieval lenses of ‘possession’ and ‘relativity of title’. While the doctrine was subject to a number of different statutes of limitations and the case law dealt with some important finer points, the fundamental principle of adverse possession remained intact and was not seriously challenged. The doctrine would not be challenged until these two concepts were themselves re-evaluated and were ultimately diminished in importance in England and Australia. The trigger for this was title by registration.

The importance of human rights in the context of adverse possession was examined in JA  Pye (Oxford) Ltd v United Kingdom [2007] ECHR 559 by the Grand Chamber of the European Court of Human Rights. The Chamber considered some of the foundations underlying the adverse possession principle. In particular, their Excellencies noted that the core principles associated with the limitation of actions legislation had their background in well-established social policies that in turn reflected the fundamental role of property. The court accepted at 567 that to ‘extinguish title where the former owner is prevented, as a consequence of the application of the law, from recovering possession of land cannot be said to be manifestly without foundation’. The Grand Chamber concluded, by ten votes to seven, that the enforcement of limitation of actions legislation in the United Kingdom did not, therefore, amount to a violation of Article 1 of Protocol 1 of the European Convention on Human Rights and Fundamental Freedoms.4 The Grand Chamber made the following comments: The applicant companies contended that their loss was so great, and the windfall to the Grahams so significant, that the fair balance required by Article 1 of Protocol No 1 was upset. The Court would first note that, in the case of James, the Court found that the view taken by Parliament as to the tenant’s ‘moral entitlement’ to ownership of the houses at issue fell within the State’s margin of appreciation. In the present case, too, whilst it would be strained to talk of the ‘acquired rights’ of an adverse possessor during the currency of the limitation period, it must be recalled that the registered land regime in the United Kingdom is a reflection of 4. Note that the Land Registration Act 2002 (UK) s 96 now makes it clear that no period of limitation shall run against any person in relation to a registered estate. Further, Sch 6 sets out that, after 10 years’ possession, a squatter may apply to the registrar to have his title registered. The registered proprietor then has 65 days to object. If he does not object, the possessor may be registered if he remains in possession for a further two years. If he does object, the registered proprietor has two years to take proceedings for possession. These principles are subject to limitations concerning unconscionability on the basis of estoppel or some other equitable entitlement retained by the possessor. 181

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a long-established system in which a term of years’ possession gave sufficient title to sell. Such arrangements fall within the State’s margin of appreciation, unless they give rise to results which are so anomalous as to render the legislation unacceptable. The acquisition of unassailable rights by the adverse possessor must go hand in hand with a corresponding loss of property rights for the former owner.

4.5  The extract from the following article provides a good outline of the rationales underlying adverse possession:

— ‘Should the Law Recognise the Acquisition of Title by Adverse Possession?’ — D K Irving (1994) 2 Australian Property Law Journal 17 … Classical liberal thought regards property rights as sources of stability and security that foster individual autonomy and are impervious to the passage of time. This view of property rights is not reflected in the common law, which is based on the notion of relativity of title. Land is never owned outright; rival claimants to possession each have a relative title. A person in possession is protected against all except those with a better claim, including the true owner. Consequently, title by adverse possession should not be viewed as an anomaly within property law; on the contrary, it is entirely consistent with the underlying theory of relativity of title. Adverse possession is often maligned through associating it with negative images of ‘land stealing’ and ‘squatter’s title’. However, most adverse possession cases are not of the ‘bad faith’ squatter paradigm. Many cases involve situations where the possessor holds an invalid document of title and eventually has to defend against the ‘true owner’ or someone claiming under the true owner, or where the boundary line observed by neighbouring property owners in practice does not correspond with what is recorded in their documents of title. Furthermore, by requiring adverse possession for a considerable period of time, currently set at 12 or 15 years, the legislatures of the individual states have sought to minimise the possibility of ‘land stealing’. Whether or not the law should recognise the acquisition of title by adverse possession is ultimately a question of public policy, requiring the balancing of competing principles. Possessory title involves the fundamental conceptual dilemma that the law appears to reward a wrongdoer by allowing acts of trespass ultimately to mature into legal title. Despite this strong moral argument against title by adverse possession, the law continues to recognise it. Recognition is often justified by reference to various policy considerations, many of which seem to have been accepted with little analysis or criticism. Consequently, it is important and appropriate to closely re-examine each of the following traditional rationales.

1. The law should discourage property owners from ‘sleeping’ on their rights. Although frequently invoked, this argument can only be a subsidiary one, because notice by the documentary owner of the accrual of the cause of action is not a precondition to the limitation period beginning to run. Furthermore, to deny protection to owners who have delayed in bringing an ejectment action effectively imposes a positive duty upon owners to police their property, involving expensive monitoring costs.

2. Interminable litigation founded upon stale claims is undesirable. This is undoubtedly true where there are evidentiary problems associated with establishing title. However, the principle of limitation applies even where the adverse possessor freely admits to never having had even a pretence of a right to possession and where the factual circumstances are clearly established. Thus, staleness can only be a partial explanation. 182

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3. The law should protect against the grave hardship which may ensue if an adverse possessor, who has occupied the property for a long period of time, is removed. Hardship is particularly clear in two situations: where the land was transferred many years ago without registration of a change of ownership, and appropriate evidence cannot now be obtained; and where the registered proprietor has vacated the land and a stranger has been in possession for many years, paying the rates and improving the land. This would be a persuasive argument were it not that hardship may also be caused by recognising possessory title, especially in circumstances where simple neighbourly indulgence may lead to the extinguishment of title, or where the owner did not know or could not know that the limitation period was running.

4. Title by adverse possession reduces the risks associated with conveyancing because defects are cured with time. It is submitted that this is the most convincing argument in support of possessory title. The recognition of title by adverse possession generally relieves purchasers from the need to investigate title back beyond 12 years (or 15 years in some states) where the vendor has been in possession throughout this period. Also, errors arising from inaccurate property descriptions will be cured with the passage of time. However, this rationale is not easily accommodated by the Torrens system of title by registration. Indeed, the recognition of inchoate and unregistered possessory claims clearly has the potential to actually increase the risk of conveyancing because it undermines the supremacy of the Register. On the other hand, there are occasions where the doctrine of adverse possession serves a beneficial purpose, for instance by providing proprietors of Torrens Title land with a remedy against legislative ambushes such as unregistered drainage reserves which would otherwise be an exception to indefeasibility of title.

5. Recognising title by adverse possession is economically efficient because it encourages the productive use of land. This justification for adverse possession contains a significant flaw, as it assumes that the use of the land by the adverse possessor maximises its value. Recognising possessory title provides an incentive for an adverse possessor to possess the land, rather than to use it efficiently. Moreover, there is no reason why the criterion of economic efficiency, rather than considerations of equity and fairness, should determine the content of property law. It is clear from the above discussion that there are powerful arguments both for and against recognising title by adverse possession. Despite the fact that none of the traditional justifications are entirely convincing, and that the moral argument against adverse possession appears formidable, it is really a situation of the lesser of two evils, because without possessory title, grave hardship may be caused and conveyancing practice would be made more uncertain. Consequently, it is submitted that the law should recognise the acquisition of title by adverse possession only within tight constraints, in order to ensure that the opposing public policy considerations are fairly balanced and that the paramount criterion of certainty of title is not prejudiced. I deal with some of these constraints below, in the context of reforming the law. The acceptance of possessory title within the Torrens Title system raises further complications which warrant consideration. Given that the chief purpose of the Torrens system is to provide certainty and indefeasibility of registered title, it can be strongly argued that adverse possession introduces substantial uncertainty, making the acquisition of title by adverse possession ‘inconsistent with the basic philosophy of the Torrens system, in that it permits the acquisition of rights not recorded in the Register and gives such rights priority over the existing title as recorded in the Register’. In response to this apparent fundamental incompatibility, it may be said that the theoretical sanctity of the Register is not a practical reality. Thus, although the availability of possessory titles might well hinder reliance on the Register, there are already many exceptions to indefeasibility of title, so why not one more? Furthermore, grave hardship and uncertainty may be caused were the law to deny recognition of the rights of people in 183

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adverse possession, particularly where there have been ‘off the Register’ dealings or where the true owner has abandoned possession. … See further: C N Brown and S M Williams, ‘Rethinking Adverse Possession: An Essay on Ownership and Possession’ (2010) 60 (3) Syracuse Law Review 583 where the authors made the following comments at 585: Adverse possession is an anachronistic doctrine within a legal context of mature statutory, constitutional, and common laws that have developed to address increasingly complex ownership models, competing interests, and facts. The doctrine unduly elevates possession over title. Possession is no longer the clearest, most unequivocal indication of ownership and there are increasingly valid and efficient reasons why an owner might be out of physical possession. Additionally, very few assume that real property is necessarily owned, in the fee simple absolute understanding of ownership, by the one who is in actual possession. Examples include mortgagees; leaseholds and licenses; cooperatives; time-shares; and condominiums. And, we have developed an intricate system of positive laws and rules to govern parties operating within these frameworks.5

4.6  Revision Questions 1. What is the difference between adverse possession and ordinary possession over land? 2. What are the consequences of adverse possession for a paper titleholder vested in possession? 3. Why is it important to protect the legitimate interests of occupiers of land? 4. Do you think that the rationale outlined by Sir Thomas Plumer MR in Marquis Cholmondeley v Lord Clinton is appropriate for a modern society where many adverse possession actions arise in the context of boundary disputes and the paper title owner was unaware of the error? 5. Do you agree with the conclusions of the Grand Chamber in JA Pye (Oxford) v  United Kingdom [2007] ECHR 559 that the limitation of actions legislation does not breach Article 1 of the Protocols in the European Convention on Human Rights and Fundamental Freedoms which states: Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. 5. For further reading see: F Burns, ‘Adverse Possession and Title by Registration Systems in Australia and England’ (2011) 35 Melbourne University Law Review 773 (which argues that adverse possession suits a land system based upon possession and relativity of title; however, the introduction of title by registration in Australia and England has seriously challenged the retention and usefulness of adverse possession); J G Sprankling, ‘An Environmental Critique of Adverse Possession’ (1994) 79 Cornell Law Review 816 (which argues that owners who are aware of adverse possession are motivated to place their property in some form of minimum productive use); L A Fennell, ‘Efficient Trespass: The Case for “Bad Faith” Adverse Possession’ (2006) 100 Northwestern University Law Review 1037 (which argues that three clusters of justifications exist for adverse possession: (i) protecting the expectations or investments of the possessor; (ii) procedural values such as neatening titles, reducing litigation and increasing the security of landholdings, and (iii) prodding the sleeping owner or rewarding the productive possessor); and O Liivak and E M Penalver, ‘The Right Not to Use in Property and Patent Law’ (2013) 98 Cornell Law Review 1437 (which argues that primary utility of adverse possession is to penalise ‘severely inattentive non-use’). 184

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The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

Limitation Period 4.7  The legislation in each state prescribes a different period of time for which a possessor of land must be in adverse possession. In Victoria, the period of time for which an occupier must adversely possess land before a defence can be raised against the owner is 15 years. This is set out in s 8 of the Limitation of Actions Act 1958 (Vic) extracted below. EXTRACT Limitation of Actions Act 1958 (Vic) — s 8 No action shall be brought by any person to recover any land after the expiration of fifteen years from the date on which the right of action accrued to him or, if it first accrued to some person through whom he claims, to that person: Provided that if the right of action first accrued to the Crown the action may be brought at any time before the expiration of fifteen years from the date on which the right of action accrued to some person other than the Crown.

Similar provisions exist in other states: see Limitation Act 1969 (NSW) s 27(2); Limitation Act 2005 (WA) s 4; Limitation Act 1974 (Tas) s 10(2); Limitation of Actions Act 1974 (Qld) s 13; Limitation of Actions Act 1936 (SA) s 4. In Victoria and South Australia the limitation period is 15 years. In all other states the limitation period is 12 years. When assessing the limitation period it is important to determine when the period actually commences. It is only possible for the limitation period to commence when the paper title owner is either physically dispossessed (of a house, or merely a portion of the land; for example, a fence built incorrectly), or where the paper title owner has discontinued possession and the occupier has assumed a possession that is ‘adverse’ in nature. It is not necessary to prove that the paper title owner has been ‘ousted’ or indeed that the possession was inconsistent with any use that the paper title owner might have. The words ‘dispossession’ and ‘possession’ must be given an ‘ordinary’ interpretation so that the real issue is whether the adverse possessor has gone into possession without the consent of the paper title owner, with the requisite degree of physical control over the land as well as the requisite intention. In the words of Lord Browne-Wilkinson in JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419 at [36]–[38]: Many of the difficulties with these sections which I will have to consider are due to a conscious or subconscious feeling that in order for a squatter to gain title by lapse of time he has to act adversely to the paper title owner. It is said that he has to ‘oust’ the true owner in order to dispossess him. That he has to intend to exclude the whole world including the true owner; that the squatter’s use of the land has to be inconsistent with any present or future use by the owner. In my judgment much confusion and complication would be avoided if reference to adverse possession were to be avoided so far as possible and effect given to the clear words of the Acts. The question is simply whether the defendant squatter has dispossessed the paper owner by going into ordinary possession of the land for the requisite period without the consent of the owner. It is clearly established that the taking or continuation of possession by a squatter with the actual consent of the paper title owner does not constitute dispossession or possession by the squatter for the purposes of the Act. Beyond that, as Slade J said, the 185

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words possess and dispossess are to be given their ordinary meaning. It is sometimes said that ouster by the squatter is necessary to constitute a dispossession: see for example per Fry J in Rains v Buxton (1880) 14 Ch D 537 at 539. The word ‘ouster’ is derived from the old law of adverse possession and has overtones of confrontational, knowing removal of the true owner from possession. Such an approach is quite incorrect. ‘There will be a “dispossession” of the paper owner in any case where (there being no discontinuance of possession by the paper owner) a squatter assumes possession in the ordinary sense of the word. Except in the case of joint possessors, possession is single and exclusive. Therefore if the squatter is in possession the paper owner cannot be. If the paper owner was at one stage in possession of the land but the squatter’s subsequent occupation of it in law constitutes possession the squatter must have “dispossessed” the true owner …’.

The usual starting point for determining possession will ordinarily be that the ‘land’ is in the possession of the holder of the paper title in respect of the land, because that person has a prima facie right to possession of the land: Petkov v Lucerne Nominees Pty Ltd (1992) 7 WAR 163 at 167; Payne v Dwyer [2013] WASC 271 at [63]. In order to be ‘in possession’ for the purposes of adverse possession, it is necessary to exercise some form of control over the land. In Payne v Dwyer [2013] WASC 271, Pritchard J held that subsurface minerals, which were treated as land, could not be the subject of adverse possession because the ‘possession’ of the land in which those minerals were located could not be regarded as also constituting factual possession of the minerals which were the subject of the mineral interest. In Victoria and Queensland, the legislation makes it clear that adverse possession cannot be claimed against the Crown: Limitation of Actions Act 1958 (Vic) s 7 (this also includes claims against the Victorian Rail Track (s 7A), water authorities (s 7AB) and councils (s 7B); Limitation of Actions Act 1974 (Qld) s 6(4). In New South Wales and Tasmania, the legislation sets out that an action against the Crown will accrue after 30 years of adverse possession: Limitation Act 1969 (NSW) s  27(1) (but note the separate ban on adverse possession against the Crown in Crown Lands Act 1989 (NSW) s 170); Limitation Act 1974 (Tas) s 10(1). In South Australia, pursuant to the application of the Crown Suits Act 1769 (Imp), an action against the Crown will accrue after 60 years of adverse possession. The rationale for imposing either an extended period or a complete ban on adverse possession claims against the Crown is that it is often difficult for Crown representatives to fully manage and regulate large tracts of Crown land and, in such circumstance, it would not be fair to endorse the same adverse possession rationales that apply to private ownership. As outlined by the court in R v Steele [1834] NSWSC 111 at 115: The right of the soil, and of all lands in the colony, became vested immediately upon its settlement, in his Majesty, in right of his Crown, and as the representative of the British nation. His Majesty by his prerogatives is enabled to dispose of the lands so vested in the Crown. It is part of the law of England, that the prerogatives can only be exercised in a certain definite and legal manner. His Majesty can only alienate Crown lands by means of a record — that is by a grant, by letters patent, duly passed under the great seal of the Colony, according to law, and in conformity with his Majesty’s instructions to the Governor. It is also a clear case of the same law, that the right of the Crown cannot be taken away, by an adverse possession, under sixty years. The nullum tempus act, as it is called, was expressly passed to limit the remedy for the recovery of lands belonging to the Crown, to sixty years — without the statute, there would have been no limit of time — for it is a maxim of law, that the King cannot be disseized of his possessions; no laches are imputable to him — nullum tempus occurrit negi. Unless therefore the King have been out of possession of the land now claimed, for full sixty years, there is no defence in point of the mere time of adverse possession, to this action. 186

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A reference to the Crown in this context will include Crown agencies and the rule has been applied equally to both alienated and unalienated Crown land. In Water Corp v Hughes [2009] WASC 152, Martin CJ concluded that adverse possession could not be raised against the Water Corporation as it was an agency of the Crown and therefore protected by the legislative immunity set out in s 36 of the Limitation Act 1935 (WA). His Honour made the following comments at [32]: Immunity from loss of title by adverse possession is one of the long-standing immunities of the Crown. No doubt it reflects the practical difficulty faced by the Crown in monitoring all land in which it has an interest, for the purpose of bringing actions for recovery of possession within 12 years of the commencement of adverse possession and thereby avoiding ‘squatter’s title’. There may be a case for distinguishing between unalienated land of the Crown and land which the Crown holds through an agency, on the basis that in the latter case it might be more practical for the relevant agency to monitor its land. However, that is not a distinction which is evident in the language used in s 36 of the 1935 Act. That section applies to ‘the right, title, or interest of the Crown to or in any land’. The breadth of this language is inconsistent with any legislative intention to differentiate between an interest.

See also Roads Corporation v Pearse [2012] VSC 527 holding that the Victorian Roads Corporation is entitled to claim immunity of the Crown against adverse possession. In Western Australia, pursuant to the Limitation of Actions Act 2005 (WA), adverse possession may bind the Crown subject to s 76, which explicitly states that ‘the right, title or interest of the Crown to, or in, any land is not affected in any way by any possession of such land adverse to the Crown, and is to be taken as never having been so affected’. In Goodwin v Western Australian Sports Centre Trust [2014] WASC 138, the West Australian Supreme Court considered whether an adverse possession that accrued against a paper titleholder was, as a consequence of s 76, unenforceable by the possessor because the paper titleholder had passed the title to the Crown. Em Heenan J held that this interpretation of s 76 should be rejected because ownership of a legal title earlier in time excludes the creation of an inconsistent subsequent legal right. In this regard his Honour noted that it is a well-established principle of statutory interpretation that legislation is presumed not to interfere with vested proprietary interests nor to alienate vested proprietary interests without adequate compensation. His Honour noted that an alternative interpretation of the scope of section 76 was possible. He stated at [76]: It is possible to interpret s 76 of the Limitation Act 2005 in a way which respects the traditional principle and which does not destroy a fully matured possessory interest in land such as the plaintiff now asserts. For example, there may be a parcel of alienated land owned by the Crown over which a trespasser in occupation has been exercising adverse possession for a period less than 12 years and, before that time has expired, the Crown conveys or transfers the land to a private owner who does nothing to dispossess or dispute the claim of the trespasser until that occupant has continued in possession for a total of 12 years or more. Section 76 is capable of being construed as meaning that during the time when the Crown owned the land it was taken as never having been affected by that adverse possession with the result that, once it was transferred into private ownership, the occupant could not acquire a possessory title after the expiration of 12 years from the commencement of his adverse possession but only if his adverse possession continued for a full 12 years from the time the land passed out of the ownership of the Crown. That appears, with respect, to be a construction of s 76 which is fairly open on the language of the section itself and one which does not do any violence to the meaning of the section. It also would have the effect that it would not destroy or extinguish a fully matured possessory title which had accrued before the Crown or a State agent became the owner of the subject land and, in that way, would conform to the established principle. I see no reason not to adopt such an interpretation and I therefore do so.

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There is no restriction on the Crown acquiring adverse possession against a third party. In Roberts v Swangrove Estates Pty Ltd [2008] Ch 439, it was argued that adverse possession could not be raised by the Crown because it would invariably involve the commission of a tort and the Crown cannot commit a tort. In rejecting this argument Lindsay J began by quoting Lord Atkin’s dictum in United Australia Limited v Barclays Bank Limited [1941] AC 1 at 29: ‘When these ghosts of the past stand in the path of justice clanking their mediaeval chains the proper course for the judge is to pass through them undeterred’. His Honour held that previous authority that suggested that where the Crown could not be liable for a tort it could not take advantage of one, should, after the introduction of the Crown Proceedings Act 1947 (UK) be revised. Lord Atkin went on to conclude at 29 that it was impossible to accept that a rule that underlies the privileged and advantaged position of the Crown could mutate, post-1947, into a principle that could put the Crown ‘at a disadvantage not suffered by the ordinary citizen’. The conclusions of Lindsay J were confirmed by Roberts v Crown Estate Commissioners [2008] EWCA Civ 98 where Mummery, Jacob LJJ and Mann J held that the conclusions of the House of Lords in JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419 were that the origin of the possession of the person relying on adverse possession is irrelevant to the barring of an accrued right of action. As such, it is possible for adverse possession to originate either in an unlawful entry into possession, dispossessing the paper title owner or in a lawful entry, such as a licence or tenancy, followed by a discontinuance of possession by the paper title owner. The important issue is that a right of action has accrued to the paper title owner and that the person claiming adverse possession is in ordinary exclusive possession of the disputed land for more than 12 years. With respect to the issue of the special position of the Crown, their Lordships further stated at [69]–[70] that: The pre-1947 bar was on a subject bringing an ordinary action against the Crown for the recovery of land claiming that it had committed a wrong against the subject. Now, however, that such an action is available against the Crown post-1947, it follows, in my view, that there is no possible legal basis for denying to the Crown the ability to plead a limitation defence that any of its subjects can plead or for treating the Crown’s ordinary possession of another’s land as other than that of a person in whose favour time can run under the 1980 Act. As Mr Hinks commented, there would be no point in making the Crown liable to an action in tort and to an action for the recovery of land in its possession if it remained, as Mr Wonnacott submitted it did, constitutionally incapable of committing a wrong by taking possession of the subject’s land and wrongfully retaining possession of it. In addition the provisions of the 1980 Act, its underlying policy and the general principles that can be extracted from it are all against acceptance of the constitutional principle. Quite apart from the express provision putting the Crown on the same footing as its subjects in matters of limitation, the general purpose and policy of setting time limits on actions for the recovery of land by the paper title owner (the protection of long continued possession of land in the public interest of certainty and stability, and the protection of defendants against the injustice of stale claims, which become more difficult to rebut with the loss of evidence in the passage of time) apply to land in the possession of the Crown as much as they apply in the case of land in the possession of another subject.

Incorporeal land rights cannot be adversely possessed, although they may be acquired by prescription. It is not possible to adversely possess rights, whether private or public, which are essentially incorporeal in nature. As outlined by Elias LJ in Smith R (on the application of) v The Land Registry (Peterborough) [2010] NPC 31 at [48], it is impossible to sustain the principle: 188

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… that the right of the public to use land as a highway can be defeated by adverse possession. The Limitation Act merely sets a 12 year limit to bringing an action to recover land. It has no application to rights of way. Nor could the principles readily apply to such public rights, given that the right can be exercised by a large and amorphous body of individuals none of whom may have sufficient interest or inclination to uphold the right as against the squatter.6

The Limitations Act 1958 (Vic) ss 7A and 7B now make it clear that water authorities and councils are not amenable to adverse possession claims.

Against which Owner? 4.8  Adverse possession is only available against a paper titleholder who is vested in

possession. This means that any limitation period will not begin to run against a future interest holder until possession vests and the interest becomes a full estate. Where the future interest applies to a life estate whether the future interest is remainder or reversionary, it will vest in possession and become a full estate as soon as the person holding the life estate dies provided there are no conditions to vesting. In this situation adverse possession may start to accrue at the point when the life estate holder dies. Where the future interest is a leasehold reversion, adverse possession may begin to accrue when the lease expires and the title is vested in possession in the hands of the landlord. Where the interest is bequeathed under a will, legislation generally sets out that the interest is deemed to vest at the date of death and not the administration of probate: see, for example, Limitation of Actions Act 1958 (Vic) s 9(2). If the future interest is subject to a contingency, it must be satisfied before title and possession can vest and any adverse possession period can commence. Equitable beneficial interests under a trust, like future interests, do not carry a vested right to possession. Hence, an adverse possession claim against trust property in land may be raised against a trustee but not against the beneficiaries. A third party may adversely possess trust property vested in the trustee and this will affect the title of the beneficiaries. However, a trustee cannot adversely possess against beneficiaries because the trustee is in possession of the trust property for the benefit of the beneficiaries and is subject to fiduciary and trustee duties. In New South Wales, s 47 of the Limitations Act 1969 sets out that a beneficiary bringing an action for breach of trust has 12 years to bring the action after the date on which the breach of action was either discovered or could, with reasonable diligence, have been discovered.7 The non-enforcement of adverse possession against future interest holders reflects the fact that adverse possession is a defence and that it only penalises paper titleholders who actually hold a possessory entitlement.

6. See also London Borough of Bromley v Morritt [1999] EWCA Civ 1631 at 1642, where Mummery LJ stated, ‘As a matter of law, an adverse possession or squatter’s title cannot be acquired to land over which a public right of way exists’. For a further discussion of the Australian position, see P Butt, Land Law, 6th ed, Lawbook Co, Sydney, 2010 at [22.02]. 7. In Victoria there is no limitation period applicable for either a breach of trust action or fraud: see Limitation of Actions Act 1958 (Vic) s 21(1). 189

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LEGAL PROBLEM Bob owns rural land and leases it out to X Co for 15 years, who plan to use it for mineral development in the future. Once the lease is executed, Bob acquires a fee simple reversion, which means Bob becomes the landlord but his possessory title is deferred for 15 years. In such a situation, a person who entered into adverse possession will have to wait until the expiration of the lease before any limitation period can commence against Bob. The rationale for this lies in the importance of ensuring that adverse possession is only enforceable against paper titleholders who have chosen not to enforce possession rather than interest holders who are actually unable to do so.

In New South Wales and South Australia, the general principle is that a future interest holder cannot be adversely possessed until, following the death of the preceding interests holder, the full limitation period has accrued.8 In other states, however, legislation has expedited the adverse possession period against ‘future title’ holders. For example, s 10(2) of the Limitation of Actions Act 1958 (Vic) requires an adverse possessor to be in possession for 15 years from when time starts running against the preceding interest holder or six years from the date when possession vests with the future interest holder — whichever is longer. This provision excludes leases as it does not apply to estates or interests that operate for a ‘term of years absolute’. The effect of this provision is to reduce the statutory time period in the context of its application to future interest holders. Under general principles, adverse possession would only arise 15 years from the date when the right to possession commenced. However, the Act makes it clear that the time frame is 15 years of adverse possession from the date when the cause of action accrues against the preceding life estate holder or six years of adverse possession from the date when the future interest vests in possession, whichever is longer.9 LEGAL PROBLEM X issues a grant to A for life with remainder to B in 1980. This confers an immediate life estate upon A and a fee simple remainder to B. A is then dispossessed by an adverse possessor, Y, in 2002. A dies in 2005. In this example B has until 2017 to reclaim possession against Y, which is 15 years from the date when adverse possession accrued against A (2002), or six years from when adverse possession commenced against B in 2005, which will be 2011. In this example, 2017 is the ‘longer period’ so that B will have until 2017 to reclaim possession. Alternatively, if A is dispossessed by Y in 1990 and then dies in 2000, B will have until 2005 to reclaim possession against Y (that is, 1990 plus 15 years), or 2006 (that is, 2000 plus six years). In this second scenario, 2006 is the ‘longer’ period so B will have until 2006 to reclaim possession.

Western Australia, ss 69 and 77 of the Limitation Act 1935 make it clear that in circumstances where a person holds both the life estate and a future interest, adverse possession will accrue against the future interest where it can be established that it has accrued against the life estate and that the future interest has vested in possession in the absence of any intervening interest. 8. See Limitation Act 1969 (NSW) s 31; Limitation of Actions Act 1936 (SA) s 9. 9. For equivalent provisions in other states, see Limitation Act 1935 (WA) s 7; Limitation Act 1974 (Tas) s 12(2); Limitation of Actions Act 1974 (Qld) s 15(2). 190

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Factual Possession 4.9  Once the limitation period is established, it must then be proven that the requisite factual possession is satisfied over the entire claimed area. This requires an examination of both the nature of the factual possession and the quality of the possessor’s intention. Lord Shaw in the Privy Council decision of Kirby v Cowderoy [1912] AC 599 at 609 concluded that 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’. In JA Pye (Oxford) v Graham [2003] 1 AC 419, Lord Browne-Wilkinson noted the ‘crucial’ interaction between factual possession and intention. His Lordship noted that there can be no possession without intention and in this respect, where the requisite intention exists, factual possession will often follow. Nevertheless, common law has always separated out the physical and intention aspects of possession. His Lordship made the following comments at [40]: What is crucial is to understand that, without the requisite intention, in law there can be no possession. Remarks made by Clarke LJ in Lambeth London Borough Council v Blackburn (2001) 82 P & CR 494, 499 (‘it is not perhaps immediately obvious why the authorities have required a trespasser to establish an intention to possess as well as actual possession in order to prove the relevant adverse possession’) provided the starting point for a submission by Mr Lewison QC for the Grahams that there was no need, in order to show possession in law, to show separately an intention to possess. I do not think that Clarke LJ was under any misapprehension. But in any event there has always, both in Roman law and in common law, been a requirement to show an intention to possess in addition to objective acts of physical possession. Such intention may be, and frequently is, deduced from the physical acts themselves. But there is no doubt in my judgment that there are two separate elements in legal possession. So far as English law is concerned intention as a separate element is obviously necessary. Suppose a case where A is found to be in occupation of a locked house. He may be there as a squatter, as an overnight trespasser, or as a friend looking after the house of the paper owner during his absence on holiday. The acts done by A in any given period do not tell you whether there is legal possession. If A is there as a squatter he intends to stay as long as he can for his own benefit: his intention is an intention to possess. But if he only intends to trespass for the night or has expressly agreed to look after the house for his friend he does not have possession. It is not the nature of the acts which A does but the intention with which he does them which determines whether or not he is in possession.

To establish factual possession it must be proven that the claimant has taken physical control of the property that is ‘open, not secret; peaceful, not by force; and adverse, not by consent of the true owner’.10 Whether the requisite factual possession is established will depend upon the individual facts of each case. As noted in Murnane v Findlay [1926] VLR 80 at 87: ‘the possession of the land in every case must be considered with reference to the peculiar circumstances of the case’. Unless possession satisfies this criterion, it will not extinguish the documentary owner’s title. The onus of proving that the possession is adverse lies on the possessor.11 We now consider the different aspects of factual possession separately. Where the possession asserted is ‘equivocal’ there will generally be insufficient 10. Mulcahy v Curramore [1974] 2 NSWLR 464 at 475. 11. Solling v Broughton [1893] AC 556. 191

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evidence to show from those acts that possession of the owner was excluded.12 Where a person who is not the true owner of land voluntarily pays rates and taxes in respect of the land that fact will be given significance in determining whether adverse possession has been made, because it shows that the claimant for possessory title was not committing mere casual acts of trespass but had the deliberate purpose to exercise possession and dominion over the land: Bank of Victoria v Forbes (1887) XIII VLR 760 at 765. Further, it is not necessary for an owner to show that physical use has been made of every section of the land and acts of possession done on parts of a parcel of land may be evidence of possession of the whole: Higgs v Nassauvian Ltd [1975] AC 464 at 474. Possession should also be distinguished from use. The person in actual possession is in charge of the land. Others may use the land with his or her permission or pursuant to a specific and limited right, such as an easement, without taking possession away. Thus, use by the registered proprietor with the permission of the adverse possessor will not be sufficient in itself to stop time running in favour of the adverse possessor: KY Enterprises Pty Ltd v Darby [2013] VSC 484 at [137]. In order for the factual possession to cease it is necessary to establish that the title owner has retaken possession of the whole land in question. In Robertson v Butler [1915] VLR 31 at 37, it was found that entering upon a country grazing property three or four times and walking about, occasionally shooting rabbits, picnicking, and sometimes putting up notices about cutting wood did not amount to retaking possession by the title owner. Nor did writing a letter objecting to the unauthorised occupation or sending a man to enquire about grazing and to report back. Cussen J concluded that these acts did not amount to repossession and were sufficient to divest the possession from the adverse possessor and revest it in the title owner. In Butler v Dickson [2018] VCC 610, the court held at [74] that ‘in order to retake possession, the relevant act must be brought to the notice of the person in adverse possession. In determining whether factual possession has been satisfied, the nature of the interest claimed should be taken into account. It is not necessary for factual possession to exist over every part of the land if only a particular section is claimed. In many cases, the land claimed will be an accessway. In such situations, it may be possible for the plaintiff to seek either adverse possession or to claim an easement by prescription. Both cases, if successful, will allow a plaintiff to exercise rights of access however the two actions are fundamentally different. Adverse possession is grounded in physical acts of control of the land, whereas prescription is grounded in the open exercise of rights of access by the defendant in circumstances where the owner either knew or should have known of the exercise of these rights and, despite this knowledge, failed to stop them. Adverse possession of an access way will, however, require proof of factual possession over the access way and this can be established where the possessor has exercised the requisite degree of control. This is an objective assessment and does not require continuous possession. The use of the land must be such that if the owner did all of the acts usually associated with ownership, it would be obvious that the land was in possession.

Open and peaceful 4.10  Open means that the possession must be noticed by a documentary owner who

is reasonably careful in the management of his or her land interests and is not secretive. For example, the construction of permanent fencing of the land will generally satisfy this

12. Clement v Jones (1909) 8 CLR 133 at 139–140; South Maitland Railways Pty Ltd v Satellite Centres Australia Pty Ltd [2009] NSWSC 716 at [9]. 192

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requirement as it provides clear evidence to the world of the existence of some form of occupation: Petkov v Lucerne Nominees Pty Ltd (1992) 7 WAR 163; Re Riley and Real Property Act (1964) 82 WN (Pt 1) (NSW) 373 at 381. Mere use of the land that falls short of possession will be insufficient as will casual acts of trespass.13 The payment of rates can, together with other acts, indicate open factual possession; however, the failure to pay rates is not determinative because it is often the case that the rates continue to be paid by the paper title owner.14 Peaceful means that the possession must have occurred without violence. In Shaw v Garbutt (1996) 7 BPR 14,816 a proprietor, who was out of possession, went to his land and was turned away by a man wielding a gun. The man was not the adverse possessor and was not acting with the authority of the adverse possessor. Young J concluded that this act could not be attributed to the possessor, but in dicta noted that there was, nevertheless, no reason why the dispossessed proprietor could not have gone to the law to assert his rights and, because that option existed, it could not be said that he had been kept out of possession ‘by force’. His Honour discussed what a ‘peaceful’ possession meant and reviewed international and domestic decisions relating to this area. Young J made the following comments at 14,886: There has been some discussion of the meaning of ‘peaceable’ in the context of Positive Prescriptions in Indian Courts. In Muthu Goundan v Anantha Goundan AIR [1916] Madras 1001, 1004, Sadasiva Aiyar, J said, ‘As regards the meaning of the word “peaceable”, I am inclined to hold that it means that the plaintiff who claims to be the dominant owner has neither been obliged to resort to physical force himself at any time to exercise his right within the 20  years expiring within two years of the suit, nor had he been prevented by the use of physical force by the defendant in his enjoyment of such right. I do not think that oral oppositions and oral expressions of dissent by the defendant can prevent the enjoyment being peaceable.’ Bakewell, J at 1005 indicated that ‘peaceably’ meant, ‘the person who claims a right over the property of another must not have deprived him of that right by the use of force’ … Mitra (in B B Mitra on the Limitation Act, 1963, 19th edn, Eastern Law House, Calcutta, 1994), says at p 399, ‘The word “peaceably” means that the plaintiff who claims to be the dominant owner has neither been obliged to resort to physical force himself at any time to exercise his right within 20 years, nor has he been prevented by the use of physical force by the defendant in his enjoyment of such right’, Muthu Goundan. … Whether the user has been peaceable or not is a pure question of fact. Repeated obstructions or interruptions by or on behalf of the servient owner show that the enjoyment has not been as of right. … There may be some debate as to whether it is legitimate to apply judgments dealing with Positive Prescription and easements to Limitation. There is so little on the concept of ‘peaceable’ in cases dealing with Limitation that there is very little choice but to go to the prescription cases and consider whether to apply them by analogy. In Eaton v The Swansea Waterworks Co, which was relied on in the Indian cases I have cited, the question was whether a watercourse had been enjoyed as of right for 20 years. There were two points involved in the case. The first was that on one occasion when the plaintiff ’s servant drew water from the watercourse he was summonsed and the plaintiff ’s son attended, defended the servant and paid a fine of one shilling and did not appeal. Evidence of this incident was rejected. The second point was that a juror asked the Judge what would have been the effect in law of a state of perpetual warfare between the parties which question the Judge did not answer. The Full Court of the Queen’s Bench granted a new trial on the basis that the evidence of a conviction should have been 13. Whittlesea City Council v Abbatangelo [2009] VSCA 188 at [6(g)]; Clement v Jones (1909) 8 CLR 133 at 140 per Griffith CJ. 14. Refina Pty Ltd v Binnie [2009] NSWSC 914 at [25] per Brereton J. 193

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admitted as evidence as an acknowledgment that the plaintiff did not enjoy the water as of right. Campbell CJ seemed to acquiesce in the proposition of counsel for the appellant that if there was perpetual warfare, then the jury may very well conclude that the water was not taken as of right. In Dalton v Angus (1881) 6 App Cas 740, 786, in the course of the Judges of England advising the House of Lords, Bowen J said, ‘It might, perhaps, be added with some show of reason that the user ought, if the analogy of lights and other easements were to be followed, to be neither violent nor contentious. The neighbour, without actual interruption of the user, ought perhaps, on principle, to be enabled by continuous and unmistakable protests to destroy its peaceable character, and so to annul one of the conditions upon which the presumption of right is raised.’ His Lordship based this statement on Eaton’s case. A brief survey of Canadian law suggests that it is not necessary that possession be ‘peaceful’; the claimant’s occupation of the land is adverse if it is actual, continuous, exclusive and ‘notorious’ (visible or obvious): McConaghy v Denmark (1880) 4 SCR 609; — ‘actual, constant, visible occupation … to the exclusion of the true owner’: Sherren v Pearson (1887) 14 SCR 581; Wood v LeBlanc (1904) 34 SCR 627; McLeod v McRae (1918) 43 DLR 350 (Ont); Clarke v Babbitt [1927] 2 DLR 7 (Canadian Supreme Court); — ‘open and visible, unequivocal and exclusive’: Stoddard v McKay (1970) 2 NBR (2d) 366 (New Brunswick); Crowley v Crowley (1984) 51 Nfld & PEIR 140; Tobias v Nolan (1985) 71 NSR (2d) 92 (Nova Scotia); Burke Estate v Nova Scotia (Attorney General) (1991) 107 NSR (2d) 91. Several United States decisions refer to the need for adverse possession to be ‘peaceable’: see, for example, North Fort Worth Townsite Co v Taylor (1924) 262 SW 505 (Tex); Anna Slattery et al v Neil B Adams et al (1954) 279 SW (2d) 445 (Tex); Mascall v Murray 149 P 517 (1915) (Or). However, ‘peaceable possession’ in these and other cases has been equated not with the use of force or threats to defend possession of the land, but merely with continuous occupation. ‘Peaceable possession’ has been held to be ‘synonymous with “uninterrupted possession”, and meaning only that possession must be continuous and exclusive’ (Hays v De Atley (1923) 212 P 296 (Mont)). It appears that ‘peaceable possession’ is established where possession of the land is not disturbed by the commencement of a suit for possession (Glover v Pfeuffer (1914) 163 SW 984 (Tex)) or possession is not physically interrupted (Gusheroski v Lewis (1946) 167 P (2d) 390 (Ariz)). In two New South Wales cases the conduct of a claimant in warning people off property has been characterised as an act going to establish possession of the land. Harnett v Green (No 2) (1883) 4 LR (NSW) 292 (L) was an action for trespass to a large parcel of waste land. The defendant claimed adverse possession of the property on the grounds that he was accustomed to walking over the land on Sundays, had sometimes received payment from persons cutting timber on the land, and had occasionally, when finding other persons on the property, warned them off, informing them that they were trespassing. Although in that case the defendant’s actions were found not sufficient (given the size of the property) to establish possessory title, what is significant is that the act of warning persons off the land was treated as an act of possession. In certain circumstances, and in conjunction with other conduct, such behaviour might support a claim to possessory title; it was not conduct which disqualified the defendant from alleging he had been in ‘adverse’ possession of the land. Similar conduct was found to constitute an act of possession by Bryson J in Beever v Spaceline Engineering Pty Limited, where the person in possession had warned other persons off the land and ‘once threatened a surveyor walking on [the land] with a shotgun’. Whilst this was held to be ‘very unsatisfactory behaviour’ nonetheless it was ‘an act of possession, in that it asserted a right to control the presence of the other person’.

In Bartlett v Ryan [2000] NSWSC 807, Hamilton J considered the conclusions of Young J in Shaw v Garbutt and concluded that it was arguable that the facts of the case did not satisfy the requirement that the possession be peaceful. His Honour made the following comments at [18]: 194

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It seems to me that there may be a real argument that the facts alleged may fall outside the concept of peaceable possession, whatever may have been decided by Young J in Shaw v  Garbutt. Authority on the ambit of peaceable possession is not easy to find. However, it seems to me arguable that the possession is not peaceable if the owner by reason of the adverse possessor’s conduct was frightened to go to law and this seems to receive some support from what was said by Sir Robert McMillan CJ in Hough v Taylor (1927) 29 WALR 97 at 98: The nature of the user which the plaintiff has to prove is set out in paragraph 524 of the 11th volume of Halsbury in these words: ‘The user or enjoyment of an alleged right in order to support a prescriptive claim, under the doctrine of prescription at common law, must be shown to have been user “as of right”, having been enjoyed, nec vi, nec clam, nec precario, neither as the result of force, secrecy, or evasion, nor as dependent upon the consent of the owner of the servient tenement.’ Consent or acquiescence on the part of the servient owner lies at the root of prescription. He cannot be said to acquiesce in an act enforced by mere violence, or in an act which fear on his part hinders him from preventing, or in an act of which he has no knowledge actual or constructive, or which he contests and endeavours to interrupt, or which he sanctions only for temporary purposes, or in return for recurrent consideration.

Factual possession focuses upon the acts carried out by the occupying possessor rather than the consequence of those acts. Hence, provided it can be established that the occupying possessor is dealing with the land as an occupying owner might be expected to deal with it, the fact that the owner might still access the land will be irrelevant if the owner does not do so. In KY Enterprises Pty Ltd v Darby [2013] VSC 484, the Victorian Supreme Court held that factual possession will be established where the possessor deals with the land as an occupying owner might be expected to deal with it. Any such dealing must be open and peaceful. It may also have the consequence of excluding the paper title owner. The manner in which the possessor deals with the land as an occupying owner might be sufficient to exclude the registered title owner even where the owner has the capacity to access the land. On the facts of KY Enterprises, the factual consequence of the registered title owner’s failure to maintain access through an entry door meant that adjacent gates, erected and kept locked by the defendant were sufficient to exclude the registered title owner. Lansdowne AJ held that it was not material that it was within the power of the plaintiff ’s predecessor in title to reclaim that access because it was found, on the facts, that the paper title owner did not do so until a much later date when the plaintiff purchased the land and repaired or replaced the door to make it usable. In Victoria, pursuant to s 14(4) of the Limitation of Actions Act, acts by one co-owner that exceed their undivided share will constitute adverse possession of the land. This provision has been described as a ‘statutory fiction’ because it presumes that acts by a co-owner that exceed their undivided share of the land, including possession of land by one co-owner to the exclusion of others, receipt by one co-owner of an excess share of the profits in respect of land, or receipt by one co-owner of an excess share of rent in respect of land are deemed to be adverse possession of the land. In Fourniotis v Vallianatos [2018] VSC 369, Croft J concluded at [93] that because section 14(4) operates as a deeming provision, its operation does not depend upon proving any further compliance with the animus possidendi test. The only requirement is to establish that the co-owner acts have been carried out. His Honour stated at [92]–[93]: It is important to note, however, that Pye and Abbatangelo are not cases involving s 14(4) of the Limitation of Actions Act [LOAA] or its English equivalent and so the discussion of the nature of the requisite possession as an element in adverse possession is unassisted or untrammelled by any statutory intervention. However, the position is otherwise where the operation of s 14(4) of the LOAA is enlivened. That is because this is a deeming provision, which renders it 195

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unnecessary to show an intention to possess the land in a case of adverse possession between co-owners, at least when the deeming occurs by the receipt by one co-owner of an excess share of profits or rent. This follows because, unlike in the ordinary case of adverse possession by someone with no interest in the land, or even a claim between co-owners based on possession, with a claim under s 14(4) of the LOAA, there is no need to prove factual possession. The only matter that is required to be proved is receipt of an excess share of profits or rent by one co-owner for its benefit or the benefit of other persons. In a case such as this one, there is no need to establish animus possidendi. Were, however, this to be regarded as incorrect, it would follow, in my view, on the basis of the language and historical context of s 14(1) of the LOAA, that the only intention on the part of the possessing co-owner or co-owners which it would be necessary to establish to enliven the operation of these provisions is an intention to receive and retain the rent from the land to the exclusion of the other co-owner or co-owners.

Without consent 4.11  It must also be established that the possession is taken without the consent of the paper titleholder. The possession cannot be adverse if it occurs with the express or implied permission of the documentary owner. As outlined by Tamberlin AJ in Bridges v Bridges [2010] NSWSC 1287 at [14 vi]: ‘The concept of adverse possession in 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 whether the claimant adverse possessor has dispossessed the paper owner by having possession without the consent of the owner.’ In Li Sau Sing v CTMA Holdings Ltd [2015] HKDC 1148, the Hong Kong District Court made it clear that the focus is upon the absence of consent rather than the absence of rent. Hence, the court stated that ‘an owner may allow someone to live on the land owned by him, giving exclusive occupation, possession and control of the land to the occupier and not demanding any rent from the occupier. In this scenario, the occupier’s possession of the land would still not be adverse to the owner, for the possession is with the consent of the owner.’15 If it can be proven, at any stage during the possession, that the paper titleholder has consented to the possession, the possession can no longer be classified as adverse in nature and it may revert to a licence or possibly a lease. In Phillips v Marrickville Municipal Council [2002] NSWSC 396, Windeyer J held in favour of adverse possession, concluding that an oral licence could not be ‘implied’ in the absence of clear evidence and the possessor was unaware of any arrangement that the council may have had with her predecessor. Authority supports the view that, for time to stop running on the basis of owner permission, the consent must be actual or implied and the fact that an initial consent was granted does not prevent a continuation of possession, in the absence of ongoing consent, from constituting adverse possession: JA Pye (Oxford) v Graham [2003] 1 AC 419. The revoking of an initial permission to enter may render the possession adverse and, in such circumstances, time may start to run from the date of when the permission is revoked.16 This has a particular cogency for the tenancy at will, which may arise in the context of negotiations for a lease or a purchase. In Ramnarace v Lutchman [2001] 1 WLR 1651 at [18], the House of Lords concluded that a tenancy at will would commonly arise where a ‘person is allowed into possession while the parties negotiate the terms of a lease or purchase’. In such a situation the exclusive, rent-free nature of the possession indicates the existence of a tenancy at will. This can often occur in the initial stages of negotiation for a lease or purchase. In Bridges v 15. [2015] HKDC 1148 at [15]. 16. See also P Butt, Land Law, 6th ed, Lawbook Co, Sydney, 2010 at [22.18]. 196

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Bridges [2010] NSWSC 1287 the possessor went into occupation of a property in 1969, with the agreement of the paper title owner, on the basis that the possessor would continue in occupation of the whole of the land as his home until the paper title owner decided otherwise or until a purchase price could be agreed. It was eventually found that the various threats and confrontations between the paper title owner and the possessor resulted in a withdrawal of possession and the termination of the tenancy at will. From this point, Tamberlin AJ held that the continued possession by the possessor became adverse in nature and the failure of the paper title owner to reclaim legal possession eventually resulted in a successful adverse possession because the limitation period was satisfied. Generally, where a possessor makes an offer to purchase a property it will constitute an acknowledgement of title. However, this is not always the case. Much will depend upon the context and circumstances of the offer; however, if it is clear that the offer is made while the possession is accumulating, then from the moment the offer is made it is clear the possessor is acknowledging title and, in making an offer, effectively precludes the possession from henceforth being characterised as ‘without consent’. See the discussion in Laming v Jennings [2017] VCC 1223 at [125]–[130].

4.12  Revision Questions 1. When will the limitation period commence? 2. Is it necessary for an adverse possessor to prove that they have ‘ousted’ the true owner? 3. What arguments did Young J in Shaw v Garbutt (1996) 7 BPR 14,816 raise in concluding that a possession which involved use of a firearm was, nevertheless, peaceful? Do you agree with this conclusion? 4. Why is it not possible for a possession that is given with consent to be treated as adverse? 5. What factors might be relevant to a determination that a paper title owner has given ‘implied’ consent to a possession?

Intention to Possess: Animus Possidendi 4.13  Once factual possession is established, it must be proven that the possessor intended

to occupy the land to the exclusion of the rest of the world. This element is established from the quality of the possession and the frame of mind of the possessor. Whether intention exists will depend upon a holistic examination of the circumstances. It is not necessary to prove that the possessor had a conscious intention to exclude the true owner. Rather, what is required is an intention to exercise exclusive possession in a manner akin to the true owner: JA Pye (Oxford) v Graham [2003] 1 AC 419 at 435; Whittlesea City Council v  Abbatangelo [2009] VSCA 188 at [5]–[6]; Bayport Industries Pty Ltd v Watson (2006) V ConvR 54-709; Ocean Estates v Pinder [1969] 2 AC 19; Bligh v Martin [1968] 1 WLR 804; Petkov v Lucerne Nominees Pty Ltd (1992) 7 WAR 163 at 168; see also Malter v Procopets [2000] VSCA 11 at [5] per Brooking JA. Intention is generally established where acts of exclusive control of the land can be proven. It is not sufficient for the defendant to rely on acts that are merely equivocal as regards the intention to exclude the true owner; however, equivocal acts may be evidence of intent when they are considered collectively with the rest of the evidence of acts of use and control. There is no need to establish that a defendant as a conscious intention to 197

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exclude the true owner; however, it must be proven that the defendant intends to act in a manner which is akin to that of an occupying owner and therefore an intention to exercise exclusive control must be established.17 A possessor cannot rely upon equivocal acts to manifest the animus possidendi unless they are accompanied by clear communications to the paper title owner that these acts evince an intention to take control. In this regard, the acts must relate to the land in issue and be separate from other land that is not the subject of a claim. One of the strongest indications of exclusive control lies in the act of enclosure: Seddon v Smith (1877) 36 LT 168. In Riley v Penttila [1974] VR 547 the holders of various lots surrounding a reserve acquired ‘recreational easements’ in that reserve. One holder eventually fenced some of the reserve (not prohibiting other holders from entering) and built a tennis court and put gates on the court that were unlocked. He argued adverse possession. Factual possession had been established but the intention to possess was not proven. Gillard J concluded that the holder had not proven an intention to possess to the exclusion of the rest of the world because the possessor did not prohibit access to the area by other right holders. Hence, the enclosure was not exclusive and did not satisfy the requisite tests for intention. While it is not necessary for all visitors to be excluded in order to satisfy the intention tests, it must nevertheless be established that visits do not actually prevent the possession from being exercised exclusively.18 Intention to possess land can be connected to the issue of factual possession and therefore requires an examination of both the level of physical control being exercised over the land as well as the intention that is connected with that control. In this respect, the existence of any legal acknowledgment of the separate ownership of the paper title owner becomes important. In Payne v Dwyer [2013] WASC 271 Pritchard J in the West Australian Supreme Court concluded that adverse possession of a mineral interest did not occur because there was no physical possession of the mineral interest and, there was no intention to possess because the registered landowner asserting adverse possession had, at the point of acquiring the land, expressly acknowledged the paper title owners entitlement to the mineral interest. 4.14  The question of intention was examined carefully by the House of Lords in JA Pye (Oxford) Ltd v Graham [2003] 1 AC 419. In particular, the House of Lords examined the issue of whether it needed to be established, following the older authority of Leigh v Jack (1879) 5 Ex D 264, that the intention of the possessor was inconsistent with that of the paper title owner. The decision is extracted below:

— JA Pye (Oxford) Ltd v Graham — [2003] 1 AC 419 Facts: The Grahams were in possession of grazing land pursuant to a grazing licence giving them the right to graze their cattle and cut hay. The licence expired in 1983 and no new licence was granted despite initial negotiations. The proprietor asked the Grahams to vacate the land; however, they did not do so and remained in possession of the grazing lands for the entire limitation period, continuing to graze cattle and cut hay in the same manner that they had during the currency of the grazing licence. Further, during the limitation period, they carried out

17. See the discussion in Bowman v Tremaine [2016] WASC 294 at [42]–[43] per Allanson J. 18. Petkov v Lucerne Nominees Pty Ltd (1992) 7 WAR 163. 198

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other acts, such as ploughing and spreading dung, which was not permitted under the previous grazing licence. The issue for the House was whether or not the possession during the limitation period was adverse in nature. The House of Lords concluded that the requisite intention had been established by the Grahams and that their possession was adverse in nature. Lord Browne-Wilkinson: In the present case the relevant question can be narrowed down to asking whether the Grahams were in possession of the disputed land, without the consent of Pye before 30 April 1986. If they were, they will have ‘dispossessed’ Pye within the meaning of paragraph 1 of Schedule 1 to the 1980 Act. What then constitutes ‘possession’ in the ordinary sense of the word?

Possession In Powell’s case Slade J said, at (1979) 38 P & Cr 452, 470: (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’). Counsel for both parties criticised this definition as being unhelpful since it used the word being defined — possession — in the definition itself. This is true: but Slade J was only adopting a definition used by Roman law and by all judges and writers in the past. To be pedantic the problem could be avoided by saying there are two elements necessary for legal possession: 1. a sufficient degree of physical custody and control (‘factual possession’); 2. an intention to exercise such custody and control on one’s own behalf and for one’s own benefit (‘intention to possess’). What is crucial is to understand that, without the requisite intention, in law there can be no possession. Remarks made by Clarke LJ in Lambeth London Borough Council v Blackburn (2001) 82 P & CR 494, 499 (‘it is not perhaps immediately obvious why the authorities have required a trespasser to establish an intention to possess as well as actual possession in order to prove the relevant adverse possession’) provided the starting point for a submission by Mr Lewison QC for the Grahams that there was no need, in order to show possession in law, to show separately an intention to possess. I do not think that Clarke LJ was under any misapprehension. But in any event there has always, both in Roman law and in common law, been a requirement to show an intention to possess in addition to objective acts of physical possession. Such intention may be, and frequently is, deduced from the physical acts themselves. But there is no doubt in my judgment that there are two separate elements in legal possession. So far as English law is concerned intention as a separate element is obviously necessary. Suppose a case where A is found to be in occupation of a locked house. He may be there as a squatter, as an overnight trespasser, or as a friend looking after the house of the paper owner during his absence on holiday. The acts done by A in any given period do not tell you whether there is legal possession. If A is there as a squatter he intends to stay as long as he can for his own benefit: his intention is an intention to possess. But if he only intends to trespass for the night or has expressly agreed to look after the house for his friend he does not have possession. It is not the nature of the acts which A does but the intention with which he does them which determines whether or not he is in possession.

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Factual possession In Powell Slade J, at pp 470–471, said this: (3) Factual possession signifies an appropriate degree of physical control. It must be a single and [exclusive] possession, though there can be a single possession exercised by or on behalf of several persons jointly. Thus an owner of land and a person intruding on that land without his consent cannot both be in possession of the land at the same time. 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. … 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. I agree with this statement of the law which is all that is necessary in the present case. The Grahams were in occupation of the land which was within their exclusive physical control. The paper owner, Pye, was physically excluded from the land by the hedges and the lack of any key to the road gate. The Grahams farmed it in conjunction with Manor Farm and in exactly the same way. They were plainly in factual possession before 30 April 1986.

Intention to possess (a)  To own or to possess? There are cases in which judges have apparently treated it as being necessary that the squatter should have an intention to own the land in order to be in possession. In Littledale v Liverpool College [1900] 1 Ch 19, 24 Lindley MR referred to the plaintiff relying on ‘acts of ownership’: see  also George Wimpey & Co Ltd v Sohn [1967] Ch 487 at 510. Even Slade J in Powell, at pp 476 and 478, referred to the necessary intention as being an ‘intention to own’. In the Moran case (1988) 86 LQR 472, 479 the trial judge (Hoffmann J) had pointed out that what is required is ‘not an intention to own or even an intention to acquire ownership but an intention to possess’. The Court of Appeal in that case [1990] Ch 623, 643 adopted this proposition which in my judgment is manifestly correct. Once it is accepted that in the Limitation Acts, the word ‘possession’ has its ordinary meaning (being the same as in the law of trespass or conversion) it is clear that, at any given moment, the only relevant question is whether the person in factual possession also has an intention to possess: if a stranger enters on to land occupied by a squatter, the entry is a trespass against the possession of the squatter whether or not the squatter has any long term intention to acquire a title. A similar manifestation of the same heresy is the statement by Lindley MR in Littledale v Liverpool College [1900] 1 Ch 19, p 23 that the paper owners ‘could not be dispossessed unless the plaintiffs obtained possession themselves; and possession by the plaintiffs involves an animus possidendi — ie occupation with the intention of excluding the owner as well as other people’. This requirement of an intention to exclude the owner as well as everybody else has been repeated in subsequent cases. In Powell’s case 38 P & CR 452, 471 Slade J found difficulty in understanding what was meant by this dictum since a squatter will normally know that until the full time has run, the paper owner can recover the land from him. Slade J reformulated the requirement (to my mind correctly) as requiring an ‘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.’

(b)  Must the acts of the squatter be inconsistent with the intentions of the paper owner? The decision of the Court of Appeal in Leigh v Jack (1879) 5 Ex D 264 has given rise to repeated trouble in later cases. In that case the plaintiff’s predecessor in title (Mr Leigh) had 200

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laid out part of his estate as proposed streets to be known as Grundy Street and Napier Place. He conveyed to the defendant certain land described as being ‘bounded by’ Grundy Street and Napier Place: therefore the intention to use the adjoining land for streets was known to all parties. Within the twenty year limitation period, both Mr Leigh and the defendant had carried out work on a fence separating Grundy Street from other land of Mr Leigh, Regent Road. From 1854 onwards the defendant had placed on Grundy Street and Napier Place old graving dock materials, screw propellers, boilers and refuse from his foundry. In 1872 (four years before action brought) the defendant completely enclosed Grundy Street and Napier Place. The Court of Appeal held that the defendant had not acquired title to the enclosed land under the Limitation Act 1833 [UK]. The decision on the facts is not a surprising one. Quite apart from anything else, during the twenty-year limitation period relied on, the paper owner (Mr Leigh) carried out works on the fence separating Grundy Street from Regent Road. This was inconsistent with a claim that he  had either discontinued possession or been dispossessed. Unfortunately, other reasons were given. Cockburn CJ said that the defendant’s storage of goods on the disputed land was not ‘done with the view of defeating the purpose of the parties to the conveyances’. It will be noted that the defendant was well aware of Mr Leigh’s intention to use the land as a public road since he was party to the conveyance so stating. Cotton LJ relied solely on the repair of the fence by Mr Leigh which I have mentioned as showing that there had been possession by him during the limitation period. The real difficulty has arisen from the judgment of Bramwell B. He said, at p 273: I do not think that there was any dispossession of the plaintiff by the acts of the defendant: acts of user are not enough to take the soil out of the plaintiff and her predecessors in title and to vest it in the defendant; in order to defeat a title by dispossessing the former owner, acts must be done which are inconsistent with his enjoyment of the soil for the purposes for which he intended to use it. 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. It reflects an attempt to revive the pre-1833 concept of adverse possession requiring inconsistent user. Bramwell B’s heresy led directly to the heresy in the Wallis’s Cayton Bay line of cases to which I have referred, which heresy was abolished by statute. It has been suggested that the heresy of Bramwell B survived this statutory reversal but in the Moran case the Court of Appeal rightly held that however one formulated the proposition of Bramwell B as a proposition of law it was 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 inference could be properly drawn in cases where the true owner has been physically excluded from the land. But it remains a possible, if improbable, inference in some cases.

(c)  Squatters’ willingness to pay if asked In a number of cases (such as the present case) squatters have given evidence that if they had been asked by the paper owner to pay for their occupation of the disputed land or to take a lease they would have been prepared to do so. In Ocean Estates Ltd v Pinder [1969] 2 AC 19, 24 Lord Diplock giving the advice of the Privy Council said that an admission by the squatter to that effect ‘which any candid squatter hoping in due course to acquire a possessory title would be almost bound to make’ did not indicate an absence of an intention to possess. In my judgment in the present case the Court of Appeal did not give full weight to that decision. In my judgment the decision of the Court of Appeal in R v Secretary of State for the Environment, 201

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Ex p Davies (1990) 61 P & CR 487 (the decision in Pinder not having been cited) was wrong. The decision in Pinder is to be preferred because it is consistent with principle. Once it is accepted that the necessary intent is an intent to possess not to own and an intention to exclude the paper owner only so far as is reasonably possible, there is no inconsistency between a squatter being willing to pay the paper owner if asked and his being in the meantime in possession. An admission of title by the squatter is not inconsistent with the squatter being in possession in the meantime.

The decision of Neuberger J The learned judge in a very full and careful judgment set out all the facts I have stated above. There are two points which I need to stress. First, although the judge referred to the grazing agreement of 1 February 1983, he did not set it out or indeed appear to treat it as being of major importance beyond showing that, during its continuance, the Grahams were in possession with permission of the paper owner. As will be seen, the Court of Appeal took quite a different view of the importance of that agreement. Second, the judge found that the Grahams ‘never vacated the disputed land’ but ‘just kept farming all the year round’. In addition to grazing the 80 to 140 head of cattle from February to November in every year, as I have said, the Grahams overwintered dry cattle and yearlings on the disputed land. In addition, in the years 1984/85 they dunged the land and in 1985 harrowed, rolled and fertilised the disputed land. After considering the law and, broadly, directing himself in accordance with the decisions in Powell and Moran the judge first held that, because of the hay-cutting agreement, the Grahams had been on the disputed land with permission of Pye until 31 August 1984: time therefore could not start to run until after that date. He then dealt with the question (which is no longer in issue) as to when time ceased to run. Thirdly, he considered whether the Grahams had been in possession ie factual possession with an intention to possess. He held that the acts done by the Grahams on the land from 31 August 1984 onwards and in particular the exclusion of the whole world from any access to the disputed land save on foot constituted factual possession. As to the intention to possess, the judge reviewed the evidence and in particular took into account six factors. First, what the Grahams had done on the land. Second, for many years before 1984 the disputed land had been used for grazing purposes ie grazing was a normal farming use of that land. Third, that although the Grahams had not themselves enclosed the disputed land in fact the whole world (including Pye) was excluded from it save on foot: the Grahams controlled all vehicular access to it. Fourth, the Grahams tended the land in the same way as the rest of their farm by rolling, harrowing, fertilising and maintaining the hedges and ditches. Fifth, the emphatic refusal by Pye to grant a further grazing licence prevented Pye from alleging that anything done on the land thereafter by Graham had been done with the intention of obtaining a further grazing licence. Sixth, the judge dealt with the argument that since the Grahams knew of Pye’s intention to obtain planning permission, the  Grahams should be taken as not intending to be in possession. The judge pointed out that the Grahams had been refused a further grazing licence expressly on the grounds that Pye did not want anyone using the land at that time when planning permission was to be applied for and that accordingly any agricultural use of the land by the Grahams thereafter was inconsistent with such intended future use by Pye. Considering all these factors together, the judge with considerable reluctance held that the Grahams had the necessary intention to possess and had accordingly obtained title under the Limitation Act.

The decision of the Court of Appeal The Court of Appeal attached great importance to the grazing agreement of 1 February 1983 which Mummery LJ (giving the lead judgment) described as a contemporaneous and irrefutable record of the common intention of Pye and the Grahams regarding possession of the disputed 202

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land. Given that importance, I must follow the example of the Court of Appeal and set out the agreement virtually in full. By the agreement Pye agreed to grant to John Graham (‘the Grazier’) and he agreed to take a ‘right to graze’ the disputed land on the following terms: 1. The grazier shall have the right to occupy and graze or mow the said land from 1 February 1983 until 31 December 1983 and shall have the use of the said land only for grazing or one cut of grass. 2. The grazier shall pay to the owner the sum of £2,000 in respect of the period of occupation mentioned in clause 1 above … 3. The grazier shall use the said land for the purpose only of grazing or mowing the same. 4. The grazier shall use only sheep/cattle/horses and/or ponies for the purpose of grazing the said land and shall not allow the said land to be entered upon or in any way used by goats, pigs, poultry or any diseased animals. 5. The grazier agrees to the following conditions (a) that he will not permit any trespass upon the said land (b) that he will keep the said land clean and free from [weeds] (c) that he will keep the gates, fences and ditches in good order (d) that he will not pasture on the said land any but his own animals (e) that he will graze and use the said land in a good and husband-like manner (f) that he will not assign the benefit of this agreement or part with possession of the land. … 8. This Agreement is not a contract of tenancy for the purposes of the Agricultural Holdings Act 1948. 9. It is expressly agreed and understood that the owner does not undertake to repeat this grazing licence for another period but if he agrees to do so a fresh agreement will have to be entered into by the grazier to operate from a date subsequent to the agreed period such fresh agreement to operate as a new and distinct contract. 10. The owner reserves the right to terminate this agreement and gain possession of the land on service of six months’ notice at any time during the period of the agreement with a proportional refund of the licence fee to the tenant but without any other form of compensation. The Court of Appeal considered that this agreement constituted a licence, not a tenancy, and that it did not give possession of the land to the Grahams. In reciting the facts, they stated that there was little change in the use of the land from the date of the expiry of that licence and the expiry of the cutting agreement right down to 1999: the Grahams continued to graze between 80 and 140 cattle on the land for 9 or 10 months. They then set out the ‘seven’ factors which the judge relied upon in finding that the Grahams had an intention to possess. It is not clear to me where the Court of Appeal discerned the seventh factor beyond the six enumerated by the judge. They held that the judge significantly underestimated certain uncontradicted oral evidence as to the Grahams’ intentions which consequently led him to a conclusion justified neither by the facts nor by a proper application of the 1980 Act. In outline their process of reasoning was as follows. The parties to the grazing agreement ‘plainly did not intend that the Grahams should have exclusive possession of the disputed land’. When that agreement came to an end on 31 December 1983 and the right to cut the grass had been exhausted by August 1984 the Grahams’ intention in relation to the land did not change: their intention remained to continue to graze, fertilise and maintain the land in just the same way as under the licence, ie not as possessors of the land of which Pye remained in possession. 203

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Although their occupation was no longer permissive it still lacked the intention to possess. In finding that this was the intention of the Grahams, the Court of Appeal relied on evidence given in the witness statement of Mr Michael Graham. He said of the year 1984: My intention was to carry on using the land for grazing until I was requested not to. However, no request was ever made to me or my father to vacate the land or to pay for the grazing which was taking place. Had Pye requested payment I would have happily paid them. In short I took advantage of the ability to use the land as no one challenged me … I farmed the land during the autumn of 1984 through to the spring of 1985 in the same way as I had in the previous year. … I was aware that there was a risk that I would not obtain the benefit of that work as again in 1984 like 1983 there was no formal grazing licence or an agreement to take a cut of hay. I would have paid Pye for a grazing licence or a cut of hay but in the absence of any formal agreement I was willing to take a chance that an agreement would be forthcoming later. In light of the lack of interest shown by Pye during the 1984 grazing season I continued to use the land [for] what I considered to be its best use … During the spring of 1985 I believe I made one or two telephone calls to Tim Evans to ask for a grazing licence for the 1985 season. I would have preferred to have obtained a formal agreement but in the absence of one I continued to farm the land in the same fashion as I had in the 1984 and 1983 seasons. I did not receive a response from Tim Evans to my request and after a couple of attempts I gave up trying and decided to leave matters until I heard from him or from Pye directly. I believed at that time that it was possible to obtain ownership of land after it had been occupied for a sufficient number of years which I mistakenly thought was a period of seven years.

The Court of Appeal expressed their conclusions: In my judgment, Mr Michael Graham’s account of his state of mind when considered in the context of the circumstances of an initial permissive use under licence and the continuation of the same use after the expiration of the licence, is not that of a person who is using the land with the intention of possessing it to the exclusion of Pye. It is that of a person who, having obtained the agreement of Pye to the limited use of the land in the past, continues to use it for the time being in exactly the same fashion in the hope that in the future will again be willing to accede to his requests to enter an agreement authorising him to use it. In brief, there was no direct evidence that the Grahams ever changed their intentions regarding the use of the land after the end of August 1984 from what it had been when they first started to use it under licence in September 1982. That initial use was on the basis of a common intention that Pye should retain possession of it (ie as part of a land bank for future development, if planning permission were granted) and that the Grahams should use it only for the limited purpose of grazing it and without any intention to possess it to the exclusion of Pye. After 31 August 1984 they did not do anything on the disputed land which they could not have done, and had not in fact done, under the grazing agreement. Their attitude to the land remained the same. Such direct evidence as there was on the intention issue positively indicated there was probably no change in the intentions of the Grahams …

Conclusion It will be seen that the chain of reasoning of the Court of Appeal is as follows: first, the grazing agreement of 1 February 1983 ‘plainly’ did not give possession to the Grahams; second, after the expiry of the grazing agreement the Grahams continued to use the land for grazing in the same way. They said that ‘both the nature and extent of the Grahams’ use of the disputed land, which did not amount to factual possession of it during the period of the licence, remained the 204

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same’; third, that Mr Michael Graham made admissions against interest that he continued to farm the disputed land in just the same way as in 1983. In my judgment each of the steps in that reasoning is suspect. First, did the Grahams obtain possession under the grazing agreement? It is important to construe that agreement against its background. In allowing the Grahams to use the land it was essential to Pye that the Grahams did not obtain security of tenure under the Agricultural Holdings Act 1948. Such security would have been obtained in any case where the rights granted over the land (whether by way of tenancy or licence is irrelevant) endured for a full year. Accordingly, in the present case it was of minor importance to the parties whether the Grahams were given possession of the land: what was important was that they did not enjoy whatever rights they had for a full year. Hence the grant of the grazing right for eleven months only and the express provision in clause 9 that a further term would only be granted by a new and distinct contract starting after the termination of 1 February 1983 agreement. It is against this background that the question whether the Grahams obtained possession or not has to be determined. The fact that clause 5 contains a covenant by the Grahams ‘not to part with possession’ and clause 10 expressly makes Pye’s right to regain ‘possession’ during the term dependent on serving a notice does not provide a promising basis for the holding of the Court of Appeal that the ‘parties plainly did not intend that the Grahams should have exclusive possession’. However I accept that there are substantial arguments that the document did create only a licence. Under the agreement the right granted is only a ‘right to graze’; the land could only be used for grazing or mowing; the right is described as a ‘grazing licence’ in clause 9 and the payment for the grazing is described in clause 10 as a ‘licence fee’. I do not find it necessary to decide whether the Grahams obtained exclusive possession under the agreement of 1 February 1983: I will assume that the Court of Appeal was right in holding that they did not. But even on that assumption it must be borne in mind that, ignorant of the legal niceties, the parties as lay people plainly thought that the Grahams were obtaining ‘possession’ for eleven months and in order to regain ‘possession’ during the currency of the agreement Pye would have had to serve notice. In my judgment the form of the agreement is inconsistent with any clear distinction being drawn by the parties between possession on the one hand and occupation without possession on the other. The second stage of the Court of Appeal reasoning was that, after the termination of the licence on 31 December 1983, and of the mowing agreement in August 1984, the Grahams continued to use the land in just the same way as they had during the currency of the grazing agreement: all that changed was that use was no longer permissive. In my view the facts as found by the judge or agreed do not support this view. The grazing agreement expired on 31 December 1983. In a letter from Pye’s agents dated 30 December 1983 the Grahams were expressly required to vacate the disputed land. But the Grahams did not vacate the disputed land either then or at any later date. They spread dung on the land, harrowed it and rolled it. They overwintered dry cattle and yearlings in a shed on the land. From 1 January 1984 onwards the Grahams repeatedly did things on the disputed land which they would have had no right to do under the old grazing agreement even if it had still been in force. The objective facts demonstrate that the Grahams made such use of the disputed land as they wished irrespective of whether it fell within the terms of any hypothetical grazing agreement. To this must be added another factor of some importance. When in January 1984 Pye refused to grant a further grazing licence they did so expressly on the grounds of the advice which they had received that, for planning purposes, they should have all the land in hand. Therefore, as the judge pointed out, the Grahams by grazing the land during 1984 and thereafter were not only acting without permission of the paper owner: they were acting in a way which, to their knowledge, was directly contrary to the wishes of the proprietors. The third limb of the Court of Appeal reasoning is that Michael Graham’s evidence, contrary to his interest, was consistent with the Grahams’ intention being not to possess the land on their own behalf but only to 205

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graze it as though there continued to be a grazing licence. In expressing this view the Court of Appeal was selective in its choice of the evidence in Michael Graham’s witness statement, relying only on such evidence as was contrary to his interest. It is true that from the decision in Powell onwards judges have stressed the common sense caution to be shown towards selfserving evidence such as that which can be given by a squatter as to his own intention at a past time. But this case is different: the Court of Appeal is relying on part of Mr Michael Graham’s evidence as to his attitude whilst ignoring other parts of the evidence. In my judgment a proper view can only be formed by looking at the whole of his evidence on the subject. The judge specifically accepted his evidence that the disputed land was farmed together with Manor Farm effectively as a single unit. As the judge pointed out, there was independent evidence that Michael Graham ‘treated the [disputed] land’ as his own. When all the evidence is looked at in my judgment it is wholly consistent with the judge’s view that, although the Grahams would have been willing to pay for the use of the disputed land if asked, such willingness is not inconsistent with them intending to possess the land in the meantime as demonstrated by them treating the land as part of Manor Farm and maintaining it on the same basis as the rest of the farm. If the view of the Court of Appeal were to be correct, the result would be anomalous. Although from 1984 to 1997 the Grahams were the only people who did anything on the disputed land and Pye had throughout that period been physically excluded from the land, nevertheless Pye was throughout to be treated as in possession. In my judgment, however favourably one approaches the claim of a paper owner to possession, such a conclusion would be so unrealistic as to be an impossible one. For all practical purposes the Grahams used the land as their own and in a way normal for an owner to use it throughout the period from August 1984 onwards. During that whole period Pye did nothing on the disputed land from which they were wholly excluded save on foot. Therefore I cannot accept the reasoning on which the Court of Appeal and Pye in their submissions before your Lordships sought to demonstrate that the Grahams did not intend to possess the land. In his persuasive submissions for Pye Mr Gaunt QC, whilst adopting the general tenor of the Court of Appeal reasoning, sought to concentrate attention on the first two and a half years, ie from 31 December 1983 to 30 April 1986. He was inclined to concede that at a later stage the Grahams might have been in possession. But, he submitted correctly, the Grahams had to demonstrate that they had dispossessed Pye before 30 April 1986. He submitted that this had not been done: from the date of the end of the grazing agreement the Grahams were seeking to obtain further grazing licences from Pye. Although this was initially refused they were granted the right to cut hay in 1984. Then in 1984 they again sought to obtain grazing licences but there was no response from Pye. Therefore, he submitted, whatever may have been the position in the later stages the Grahams had not demonstrated an intention to possess the disputed land on their own behalf before 30 April 1986 and accordingly had not demonstrated that Pye had been dispossessed before that date. This is the most persuasive way of formulating Pye’s case but I do not accept it. Despite Pye’s notification to quit the land in December 1983, its peremptory refusal of a further grazing licence in 1984 and the totally ignored later requests for a grazing licence, after 31 December 1983 the Grahams stayed in occupation of the disputed land using it for what purposes they thought fit. Some of those purposes (ie the grazing) would have fallen within a hypothetical grazing agreement. But the rest are only consistent with an intention, verified by Mr Michael Graham, to use the land as they thought best. That approach was adopted from the outset. In my judgment, when the Grahams remained in factual possession of the fully enclosed land after the expiry of the mowing licence they manifestly intended to assert their possession against Pye. …

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For these reasons I would allow the appeal and restore the judgment of Neuberger J. [Lords  Mackay of Clashfern, Bingham of Cornhill, Hope of Craighead and Hutton all agreed with Lord Browne-Wilkinson in separate judgments.]

Commentary 4.15  The conclusions of Lord Browne-Wilkinson in JA Pye (Oxford) Ltd v Graham make it clear that an intention to possess may be established where the possessor acts as if they were the true owner. In particular, his Lordship emphasised that it is ‘heretical and wrong’ to assume that the intention test is based upon any assessment of the intentions of the paper title owner.19 Such an approach would, his Lordship felt, ‘revive’ older cases, such as Leigh v Jack (1879) 5 Ex D 264, which argued that the adverse possession must be proven to be inconsistent with the rights of the paper title owner. According to Lord Browne-Wilkinson, the only relevance that proof of an inconsistent use might have 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’ (at 272). However, his Lordship felt that cases where such an inference could be drawn, particularly where the paper title owner has been physically excluded, would be rare. Thus, intention is determined through a holistic examination of the circumstances of each case in order to consider whether the possessor is exercising rights against the world at large in a manner akin to that of the paper title owner. On the facts, the Grahams repeatedly carried out acts on the land that they would have had no right to do under the previous grazing licence. This demonstrated the intention of the Grahams to use the land as they liked without regard to the terms of the previous grazing licence. Further, the fact that the Grahams remained on the land despite expressly knowing that the licence had not been renewed provided clear evidence of their intention to occupy the land in the manner of the paper title owners. It is also relevant to note that the willingness of the Grahams to pay for the land, if requested, was found not to negate their intention to occupy the land as if they were the true owners. See also Tennant & Burke v Adamczyk & Ellis [2005] EWCA Civ 1239, where Mummery LJ quoted extensively from the judgment of Lord Browne-Wilkinson in JA Pye (Oxford) v Graham; British Waterways Board v Toor [2006] EWHC 1256; and Pottinger v Raffone (Jamaica) [2007] UKPC 22, where Lord Roger of Earlsferry confirmed the approach of Lord Browne-Wilkinson. In Offulue v Bossert [2008] 3 WLR 1253, the English Court of Appeal approved Pye and held at [63] that ‘What emerges from Pye v Graham is that it is necessary only to show that the person who claims to have acquired property by adverse possession was in possession without the consent of the paper owner and intended to possess. A person who wrongly believes he is a tenant can occupy property in such a way that he has possession, just as much as a squatter. He does not have to show that he had an intention to exclude the paper owner.’ In Australia, the conclusions of the House of Lords in JA Pye (Oxford)

19. This principle is now enshrined in the Limitation of Action Act 1980 (UK) Sch 1, para 8(4), which sets out that for the purpose of determining adverse possession, ‘it shall not be assumed by implication of law that his occupation is by permission of the person entitled to the land merely by virtue of the fact that his occupation is not inconsistent with the latter’s present or future enjoyment of the land’. 207

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v Graham were approved and followed in Whittlesea City Council v Abbatangelo (2009) 259 ALR 56.20 The decision of JA Pye (Oxford) v Graham [2003] 1 AC 419 went on appeal to the Grand Chamber of the European Court of Appeal. JA Pye (Oxford) brought an appeal against the United Kingdom in JA Pye (Oxford) v United Kingdom [2007] ECHR 559. The basis of the appeal was that adverse possession, as set out in the limitations legislation in the UK, violated Art 1 of Protocol 1 of the European Convention on Human Rights and Fundamental Freedoms. By a finding of 10 votes to seven, the chamber held that the relevant provisions in the limitation of actions legislation did not violate Art 1. Their Excellencies held that the purpose of the legislation was not the deprivation of ownership but, rather, the regulation of title and possession. They held that it must be open to the legislature to attach weight to lengthy, unchallenged possession, even in the context of a registration framework. This was particularly the case in an English system where possession has always played an important role. Their Excellencies further held that the fair balance required by Art 1 was not upset by the benefit that adverse possession can confer because the rights that were acquired were proportionate to those lost by the paper title owner. Their Excellencies stated at [66] and [83]: The statutory provisions which resulted in the applicant companies’ loss of beneficial ownership were thus not intended to deprive paper owners of their ownership, but rather to regulate questions of title in a system in which, historically, 12 years’ adverse possession was sufficient to extinguish the former owner’s right to re-enter or to recover possession, and the new title depended on the principle that unchallenged lengthy possession gave a title. The provisions of the 1925 and 1980 Acts which were applied to the applicant companies were part of the general land law, and were concerned to regulate, amongst other things, limitation periods in the context of the use and ownership of land as between individuals. The applicant companies were therefore affected, not by a ‘deprivation of possession’ within the meaning of the second sentence of the first paragraph of Article 1, but rather by a ‘control of use’ of land within the meaning of the second paragraph of the provision … The applicant companies contended that their loss was so great, and the windfall to the Grahams so significant, that the fair balance required by Article 1 of Protocol No 1 was upset. The Court would first note that, in the case of James, the Court found that the view taken by Parliament as to the tenant’s ‘moral entitlement’ to ownership of the houses at issue fell within the State’s margin of appreciation. In the present case, too, whilst it would be strained to talk of the ‘acquired rights’ of an adverse possessor during the currency of the limitation period, it must be recalled that the registered land regime in the United Kingdom is a reflection of a long-established system in which a term of years’ possession gave sufficient title to sell. Such arrangements fall within the State’s margin of appreciation, unless they give rise to results which are so anomalous as to render the legislation unacceptable. The acquisition of unassailable rights by the adverse possessor must go hand in hand with a corresponding loss of property rights for the former owner.

4.16  One of the most significant acts suggesting an intention to adversely possess is

that of fencing. Where a possessor fences the property, either by building a new fence or

20. In Bride v Shire of Katanning [2013] WASCA 154 at [10], Murphy JA in the West Australian Supreme Court of Appeal approved of the conclusions of the House of Lords in JA Pye noting that in order for possession to constitute a source of right, ‘it is necessary for there to be an intention to exercise such control on one’s own behalf and for one’s own benefit’. 208

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repairing an old one, it may be sufficient to satisfy the requisite intention. As outlined in KY Enterprises Pty Ltd v Darby [2013] VSC 484 at [71], ‘Enclosure of land is not essential to a successful claim of possession of that land adverse to the interests of the registered proprietor, but it is a powerful factor in support of both factual possession and the intent to possess. Control of the entry to land is clear, arguably the best, evidence of exclusive physical control over the land in fact, and the intention to exert that control.’ However, the bare fact that a fence exists upon an incorrect boundary is, in itself, insufficient to prove an intention to exclude the rest of the world. Fencing was one of the issues examined by the Victorian Supreme Court in Whittlesea City Council v Abbatangelo (2009) 259 ALR 56, where the court concluded that the acts of Mrs Abbatangelo, in repairing and constructing fencing, contributed significantly to the overall conclusion that she did satisfy the requisite intention. The court also summarised some of the relevant principles that have evolved with respect to factual possession and the intention requirements.

— Whittlesea City Council v Abbatangelo — (2009) 259 ALR 56 Facts: Vacant land, belonging to the Whittlesea City Council which was surrounded by post and wire fences in all but the southern boundary, abutted Torrens title land which was registered in the name of Mrs Abbatangelo. At the time when the Abbatangelos purchased the property, in 1958, all of the boundary fencing was situated on the title boundaries although in dispute was the fencing on the southern boundary, which was misaligned from the title boundary by about half a metre. The Abbatangelos argued that they have never removed or shifted the position of the fences along the northern and western boundaries of the land although they did construct and repair the fences from time to time and installed a gate in the northern boundary fence sufficiently wide to permit vehicle access. They also used the land for grazing, installed water troughs, maintained the trees and vegetation, removed noxious weeds and mowed the grass. Over the years the Abbatangelos kept a wide variety of animals, including a free range poultry farm for a few years as well as horses and, in these ventures, the Council land was consistently used for grazing and for shade, shelter and at times enclosure. Eventually the Abbatangelos moved to Geelong; however, they kept the property for their animals, visiting it regularly on the weekend and often organising social occasions on the land. The Council argued that one indication that the Abbatangelos lacked the requisite intention to satisfy adverse possession lay in the fact that in 1978, when the Abbatangelos lodged a planning application with the Melbourne and Metropolitan Board of Works seeking a permit to subdivide their land, their plans included documents upon which the land was marked ‘NIT’ — that is, ‘Not in Title’. However, adjoining neighbours had given evidence that the conduct of the Abbatangelos with respect to the vacant land had encouraged them to assume that the land belonged to the Abbatangelos and not the Council. The trial judge found that the Abbatangelos had acquired the adjoining land by adverse possession. Whittlesea City Council appealed to the Court of Appeal. Ashley, Redlich JJA, Kyrou AJA:

Introduction and summary 1 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. 209

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2 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. 3

For the reasons that follow, we have concluded that the judge’s decision was correct and that the appeal should be dismissed.

Applicable principles 4

5

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:

(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 210

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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: • 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 CJ said in Seddon v Smith (1877) 36 LT 168, 1609: ‘Enclosure is the strongest possible evidence of adverse possession.’ Russell LJ 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 (1969) 20 P & Cr 633, 642, per Sachs LJ. • 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. • 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 211

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Australian Property Law 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 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

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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 JA Pye (Oxford) Ltd v Graham, where Lord BrowneWilkinson (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.

Summary of acts of adverse possession relied on by Mrs Abbatangelo 48 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; 213

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(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. … 73 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. 74 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; (4) submissions about factual findings made by the judge and findings as to the credit of witnesses; and (5) a submission about the judge’s failure to conduct a view. We will deal with the submissions in that order. 75 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. 76 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 77 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 214

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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. (d) The respondent did not make any improvements to the land. 78 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. 79 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. 80 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. 81 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.

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82 Also capable of bearing upon proof of an assumption of exclusive possession of the land, in our opinion, was the evidence given at trial by the five neighbours of the Abbatangelos to which we referred. The appellant sought to minimise the significance of that evidence by submitting that some or all of them had been invitees on the land, and so did not base their stated belief solely upon their observations of the physical appearance of the land from the road. Even if the last aspect of that submission be accepted, we do not accept its totality. The witnesses spoke in terms of the respondent appearing to be the owner of the land. That conclusion was necessarily based upon their observations of the way in which the Abbatangelos made use of — or, possessed — the land. At least some aspects of that use would have been observable from the road. Further, the act of the Abbatangelos in inviting some or all of the witnesses onto the land was in itself an implicit assertion of the respondent’s dominion over the land. 83 Before us, the appellant sought to rely upon Mr Draper’s evidence to show that a Council employee held a belief at a relevant time that the respondent was not the owner or possessor of the land. The trial judge accepted Mr Draper’s evidence that he was ‘shocked’ to be told, and ‘was surprised that [the land] was a Council block of land’. The witness’s evidence, in short, did not support a conclusion that the asserted belief was held. 84 The Council also relied upon part of Mr Christian’s evidence to show that he held a belief at a relevant time that it was the owner of the land. We have set out the gist of the particular evidence, together with the judge’s finding in respect of it. We see no reason to disagree with his Honour’s conclusion. Mr Christian’s evidence, put at its highest, was apparently founded on what he had been told at a young age by his father. It was not consistent with the uncontested evidence of the five neighbours, which was based upon their own observations and experience. Moreover, Mr Christian also gave evidence that over the past 50 years the land had been ‘joined’ to another property — that is, the respondent’s property. 85 The Council further submitted, given the trial judge’s acceptance that Mr Draper did not know who owned the land, that his Honour should have inferred that it was not evident to Mr Draper that it was part of the respondent’s property. Even if such an inference, based upon a single incident, had been available, it would not assist the Council. The incident occurred after the extinguishment of its title. In any event, Mr Draper’s single experience in connection with the land was not consistent with the preponderance of the evidence given by the neighbours. 86 The Council submitted also that Mr Christian had grown up in the area, knew the land as ‘Council Land’, had regularly driven past the land and had observed little activity on it. For those reasons, the judge should have inferred that Mr Christian had no reason to believe the land had stopped being ‘Council Land’. 87 We accept that Mr Christian did believe, at relevant times, that the land remained Council land. His understanding, from childhood, that the land was Council land, his evidence about permitted private grazing of Council land, and his evidence that he had observed little use of the land by the Abbatangelos over the years, made it inevitable that such was his belief. But in more than one respect, as we have pointed out, the factual underpinning for such a belief was not well-founded; and so little could be made of it. 88 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. 89 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 216

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argued that the land could at all times have been accessed by climbing through the wire strands of its southern boundary fence. 90 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. 91 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 a continuous period of 15 years. That was sufficient to establish factual possession. 92 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. 93 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 94 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. 95 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 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 217

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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. 96 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. 97 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. 98 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. 99 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. 100 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 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.

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101 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. 102 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. 103 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. 104 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. 105 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. 106 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 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. 219

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107 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 108 We come to the third category of submissions advanced for the Council which we identified at [74] above. 109 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. 110 The appellant next relied on the principle that possession of land cannot be adverse to the paper owner if done with the permission of that owner. It called in aid Mr Christian’s evidence about the appellant’s practice of allowing grazing on some Council land — even though, for reasons which we have described, the judge rejected its usefulness. It also called in aid evidence given by Mr Draper to which the judge did not refer. Mr Draper had said that some land owned by the appellant was fenced off by farmers who used it for grazing and that the appellant was happy for that to happen because it helped to keep the grass down. The appellant submitted that this was compelling evidence that the respondent’s use of the land for grazing was not adverse to the appellant. It also referred to evidence given by one of the respondent’s sons that the fences around the land were well maintained to keep animals from getting on to the road. It submitted that, consistent with Murnane v Findlay, the judge should have found that grazing was an equivocal act and indicated an intention to obtain a special benefit from the land rather than an intention to exclusively possess. 111 In our view, those submissions must be rejected. The trial judge was correct to conclude that whatever tacit permission the appellant gave for farmers to graze their cattle on Council land did not apply to this small, treed and fenced-off parcel of land. We need say nothing more about Mr Christian’s evidence in this connection; whilst Mr Draper’s evidence did not carry the matter any further in the particular circumstances. In any event, grazing was far from being the only act of possession by the respondent of the land. Those acts, which extended over a lengthy period, were not engaged in as a consequence of some express or tacit permission of the appellant. All of the acts, when viewed in combination, were not the mere obtaining of a special benefit. They were sufficient to establish factual possession and an intention to exclusively possess. We observe in passing that apart from the matters to which we have already referred, the Council did not at trial or on appeal rely upon any particular conduct by it in relation to the land that told against the respondent’s claim of exclusive possession for the requisite period. …

Conclusion 117 For the reasons stated, and as we said earlier, the appeal should be dismissed.

Commentary 4.17  Ashley, Redlich JJA and Kyrou AJA in the Court of Appeal found that the trial judge

had applied the law correctly and that the actions of the Abbatangelos over the land, in

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particular the repair and construction of the southern boundary fence, were indicative of an intention to exercise exclusive control. Further, their Honours rejected the argument by the council that the acts of the Abbatangelos were open to more than one interpretation and therefore did not manifest an unequivocal intention to exercise exclusive control. Their Honours noted that no matter how easy it may have been to get through the fence, the very existence of the fence was ‘a sign to all who saw it not to enter’ (at [56]). In this respect, the relevant question was not whether the Abbatangelos had done their best to exclude the council because clearly a different type of fence would have been more effective for that purpose, but, rather, whether it could be inferred from the acts of Mrs Abbatangelo ‘that she intended to exercise custody and control of the land for herself and on her own behalf ’ (at [95]). During the course of the judgment, the court made reference to the earlier conclusions of Ashley J in the earlier Victorian Supreme Court decision of Bayport Industries Pty Ltd v Watson [2002] VSC 206. In that case, Ashley J held that the plaintiffs had not made out an adverse possession claim and discussed the relevance of fencing in evincing the requisite intention. His Honour found that, prior to the subdivision, the fence in issue did not properly chart the perimeter of the land and, for the duration of the claimed possession, the fence had remained in an incorrect position; however, the plaintiffs had done nothing to repair the fence and it remained in a total state of disrepair. His Honour made the following comments at [42]–[43]: Counsel for the defendants submitted, apart from matters which I have already mentioned in the course of these reasons, that the presence of the north/south fence was not an act of possession of the disputed land as would support a finding of intention to possess that land. He contended that the fence was never more than an old internal fence, and that the import of any enclosure it thereby created was equivocal. He pointed out that the plaintiff ’s predecessors had not, on the evidence, actively used the disputed land. I had not heard from them at all. The fence, he submitted, had been used by the occupiers of Lot 2 in the period upon which the plaintiff relied as a means of containing stock; no more. The occupiers of Lot 2 had done some repair work on the fence for stock containment purposes. There was no evidence that the plaintiff ’s predecessors had done any work on the fence in the relevant period. What was critical was whether the plaintiff ’s predecessors had exercised possession over the disputed land, with the relevant intent. These were matters of which the plaintiff must satisfy me; and it had not done so. I am not satisfied, considering all the circumstances of the particular case, that the plaintiff ’s predecessors in title, most particularly between September 1968 and September 1983, had factual possession of the land accompanied by the requisite intention. True it is that the disputed land was enclosed behind the north/south fence in that period. On the other hand, it must have been evident to the plaintiff ’s predecessors, had they given the matter a moment’s thought, that the fence had started life well before the 1967 subdivision as an internal fence, for farming purposes. It could not be assumed that such a fence followed a title boundary. Moreover, its east/west alignment altered partway along its length; and at its northern end it intersected, as at 1966, with another old fence, running east/west, which again did not run straight but was rather stepped. Recourse to relevant Certificates of Title would have confirmed that the north/south title boundary was straight, and that it intersected to the north with a title boundary running east/west in a straight line. The fence was, by its obvious history and physical disposition, quite unlike a suburban fence built on the wrong alignment. … The submission for the plaintiff that its relevant predecessors in title asserted dominion over and possession of the land enclosed by the perimeter fencing, this including the land enclosed by the north/south fence, in my opinion does not assist the plaintiff to a favourable determination. First, the evidence as to the existence and state of the perimeter fencing generally in 1968 and thereafter until 1983 (in fact until 1990) was weak and imprecise. I could not conclude that there was perimeter fencing which plainly charted 221

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the extent of land over which the plaintiff ’s predecessors asserted dominion and of which they claimed possession. Second, even if all other sections of the perimeter of the claypit land and the plaintiff ’s other land had been definitively fenced during the pertinent period, I doubt that any assertion thereby of possession of all enclosed land would extend — in light of issues which I have raised concerning north/south fence — to the disputed land.

4.18  Revision Questions 1. Is it necessary for an adverse possessor to prove that his or her possession is inconsistent with the purpose that the paper title owner had for the land? 2. Do you agree with the conclusion of Lord Browne-Wilkinson in JA Pye (Oxford) v Graham that ‘the only relevant question is whether the person in factual possession also has an intention to possess’? 3. Following the decision of the House of Lords in JA Pye (Oxford) v Graham, what is needed to satisfy the requisite animus possidendi for adverse possession? 4. What is the relevance of fencing in establishing adverse possession? Is it necessary to prove that an adverse possessor has constructed a fence to exclude the rest of the world in order to satisfy the requisite intention test? Discuss. 5. Consider the following scenario: X takes possession of grazing land pursuant to a grazing licence in 1990 for the purposes of grazing his cattle. The grazing licence expires in 1993. For the duration of the grazing licence X uses the land for market gardening. This purpose is expressly prohibited by the terms of the grazing licence but it is not inconsistent with the purposes for which the paper title owner is to use the land. In 1993 X is told by Y, the paper title owner, that the grazing licence will not be renewed. X remains on the land, using it for market garden purposes until 2005 when the owner reclaims legal possession. Do you think X has a claim for adverse possession?

Multiple Possessions 4.19  If one adverse possessor is dispossessed by another, the second adverse possessor

can add the first period of adverse possession to their own for the purpose of satisfying the limitation period. It is quite acceptable for the limitation period to be comprised of multiple periods of possession provided that the possession is continuous and uninterrupted and there has been no abandonment. In Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464, Bowen CJ made the following comments at 476–7: 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 … 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 [the Limitations Act 1969 (NSW) as it was], 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 … 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 …

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In this context, ‘continuous’ will generally be proven where each possessor has remained in occupation of the property and there has been no interim period where occupation or possession of the land was discontinued. In Lambeth LBC v Bigden (2001) 33 HLR 4, Mummery LJ concluded that continuous possession could not exist where a property was occupied via a series of disjointed, ad hoc possessions with no consensual arrangement regulating each subsequent possession and no clearly established joint or communal control over the possession. In Roy v Lagona [2010] VSC 250, Hansen J concluded at [35]: ‘whether one possession has ceased and been followed by another “immediately” or with no “gap” will depend on the relevant facts and circumstances. It may be held that a person not presently in actual physical occupation of the land has yet not abandoned possession of it … in the sense that as a matter of fact, there had not been a break in possession that indicated a disconnection with the land or abandonment of the intention to possess it, such as to break the continuity of the adverse possession.’ Where a series of adverse possessors claim through each other, each of their separate possessions being for less than the statutory period, but the cumulative period of adverse possession exceeding the statutory period, the person in possession will acquire adverse possession when the statutory period expires: Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464 at 476. A period of continuous possession by multiple possessors will be enforceable against a registered titleholder despite the fact that the possession has not been specifically transferred. In Goodwin v Western Australian Sports Centre Trust [2014] WASC 138, the West Australian Supreme Court concluded that rights of possession may be enjoyed by the transferees notwithstanding that the possessory interest may not have been formally conveyed. Adverse possession may be aggregated despite the absence of any formal transfer of the possessory title. LEGAL PROBLEM If A has possession for five years and then passes this possession on to B in her will, who then takes possession of the land for another ten years, B may claim adverse possession despite the fact that B was not physically on the property for 15 years. B  inherited the five-year adverse possession from A and the possessory periods were continuous. Multiple periods of possession can be joined together provided it is clear that the possession in each period is ‘adverse’ and there has been no abandonment of possession between the periods.

Where the multiple possession is based upon successive trespasses it may be that the first possessor will have a greater title, once the limitation period has been satisfied, than the final possessor. This situation was explained by Bowen CJ in Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464 at 467: 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 223

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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 431–431. 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.

4.20  One of the issues for consideration in the decision below was whether the possession

was continuous and, in particular, whether an ‘accidental’ possession interferes with the determination that a possession is ‘continuous’.

— Kierford Ridge Pty Ltd v Ward — [2005] VSC 215 Facts: The plaintiff’s and the defendant’s land adjoined each other. The defendant’s land was brought under the operation of the Transfer of Land Act 1958 (Vic) in 1889 and the plaintiff’s land was brought under the operation of the act in 1989. The issue for the court was whether the plaintiff had established continuous possession of the disputed land which was at the rear of their own land and contained a kitchen and toilets. The plaintiffs acquired their possession from their predecessor accidentally and it was argued that this was insufficient to constitute adverse possession over the multiple periods of possession. Hanson J: In light of these findings I turn to the ultimate issue whether the plaintiff has established its claim of title by adverse possession. There was no difference between counsel as to the relevant principles and the approach to be taken by the Court in accordance with those principles. Each counsel was initially content to rely on the reference to those principles in the recent decision of Ashley J in Bayport v Watson where His Honour respectively quoted a passage from the well-known judgment of Slade J (as his Lordship then was) in Powell v McFarlane, and set out a series of propositions with reference to various cases. The latter cases include the decision of the English Court of Appeal in Buckinghamshire County Council v Moran which concerned the effect of enclosure of a piece of land. In that case, Slade LJ elaborated on his earlier decision in Powell. Counsel also referred to the somewhat earlier decision of Gillard J in Riley v Penttila. To use the language of Gillard J in Riley, to succeed in its claim the plaintiff must establish that it and its predecessors in title dispossessed the true owner and were intentionally in actual possession of the disputed land adverse to the possession of and with the intent to exclude the true owner and, I would add, all other persons. A mere accidental or unintentional possession is not sufficient. Nor is it sufficient if the evidence is equivocal as to the possession of the trespasser. And, unless there be evidence sufficient to establish the contrary, the true or paper owner is deemed to be in possession of the land. As the cases make clear, the question is one of fact in each case. Regard is to be had to the nature and characteristics of the property in question, the nature of the acts in question including those of the true owner and the conduct that might have been expected of that owner in relation to the protection of his or her interest. It was submitted by counsel for the first and second defendants that the plaintiff had not established continuous, exclusive and adverse possession of the disputed land for 15 years. There was no evidence of the required possession from the plaintiff’s predecessor in title between 1989 and October 1996. It was further submitted that because the plaintiff’s possession was accidental, it had not established the necessary intention to possess, the animus possidendi, the requirement of which was described by Slade J in Powell as follows: 224

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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. In my view each submission must fail. Dealing with the first submission, and even putting aside the evidence of Godson, the evidence of Nutbean takes the existence of the building on the disputed land back to 1976. Jacona takes it to 1989. In 1985 the plaintiff’s vendor, 286 Main Street Pty Ltd, purchased the plaintiff’s land. The building on the disputed land remained in place. There is no reason to suppose and every reason to infer that the premises were tenanted in the period to the sale to the plaintiff in 1996, or at least that there was no appreciable period when the premises were not occupied. The certificate of title to the plaintiff’s land notifies the existence of two leases, the first of which to Alpine commenced on 1 December 1987 and the second to Marsh  on 1 September 1988. Further, Jacona and Nutbean depose to tenants throughout 1976 to 1989. Then, when the plaintiff purchased the land Marsh was in occupation of the first floor under a further lease which had commenced on 1 September 1994. It would seem surprising if he had gone out of possession at any time prior to the commencement of that lease. But Marsh was not the only tenant, as Wilkinson states and Wines makes clear: Raine & Horne were tenants in 1996 to 1998 when Wines was employed at the property, although the date of commencement of their lease is not clear. Then following the renovation of the building in 1999, it has been occupied by the plaintiff. There was of course also evidence of occupation by a newspaper firm at a non-specified time but perhaps earlier than 1976. It is of course a reasonable inference that those who occupied the plaintiff’s building used the toilets thereat. It is also clear on these facts that the plaintiff’s building was occupied in the period between 1989 and October 1996, contrary to the first and second defendants’ submission. It is not possible to find that the building was occupied continuously throughout the period. However in light of the known history it is a reasonable inference, and one that I draw, that there was no appreciable gap in occupancy and therefore of use of the toilet area as an essential incident to occupation of the building. Of course, if and to the extent that there might have been a time when the building was not occupied, the enclosure of the disputed land in favour of the plaintiff’s building meant that the disputed land was enclosed from the owner of the hotel land. It is to be noted in relation to possession by a tenant, that a tenant can acquire adverse possession on behalf of the landlord; see Doe d Lewis v Rees. Further, in Nicholas v Andrew, where a person in adverse possession of land leased it over a period of 26 years but with intervals, one of two to three months, in which the land was not occupied, it was held by the Full Court of the Supreme Court of New South Wales that there had been continuity of possession sufficient to establish an adverse title. The question in such a case is whether the break in possession indicates a disconnection with the land or abandonment of the intention to possess such as to break the continuity of the adverse possession. As Gordon J said at 184 in giving the judgment of the Court, it is a question of fact in each case whether a trespasser has in fact abandoned his possession, and that question is not conclusively answered by showing that he may for a short time have ceased to be in physical occupation of the land. The conclusion in that case was that there was no lapse of time between the occupancy of one tenant and another that was more than would be in the ordinary case of a person holding land in the locality. 225

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In the present case, for the reasons mentioned, the correct conclusion is that those who owned and occupied the plaintiff’s building never abandoned possession of the disputed land and that if there was any gap in the occupancy of the building in the period relied upon it was not such as might constitute an abandonment of possession of the disputed land. In submitting that the plaintiff had not established the necessary intention to possess the disputed land to the exclusion of the owner of the hotel land, counsel said that mere possession of the area by the plaintiff and its predecessors was not enough. It had to be occupation with intent, and the plaintiff had the onus of establishing that intent. Counsel submitted that the fact that the disputed land was enclosed and attached to the plaintiff’s building was not enough to establish the requisite intention. The mere use of the toilet facility was not enough, what was required was evidence of the plaintiff’s predecessors in title of their intention, and there was no evidence from those persons. While not overlooking that submission it is important to attend to what Slade J said in the passage quoted, in particular that the courts will require clear and affirmative evidence that the trespasser not only had the requisite intention to possess but made such intention clear to the world. … In the present case one has enclosure and use for a purpose essential to enable the ordinary use and enjoyment of the building on the plaintiff’s land. This was not a mere detached shed, this was enclosure to enable the use of the only toilets on the property. It would be hard to imagine a use that was more private or intended to be exclusive to those in occupation of the building on the plaintiff’s land. Inherent in this was the exclusion of the owner for the time being of the defendant’s land and, indeed, the world at large. Nor, having regard to the nature of the structure, could it be said that the possession of the disputed land was or had the appearance of being temporary. In short, the building of the structure upon the disputed land so as to completely enclose that area for its exclusive use as toilets by the occupants of and lawful entrants to the plaintiff’s building, and the exclusion of the true owner from the disputed land since at least 1976, is clear and affirmative evidence of the intention to possess or, to put it another way, the adverse possession of the land and the dispossession of the true owner. Nothing could be clearer to constitute the necessary intention. It is apparent from the facts. I reject the first and second defendants’ submission to the contrary. I should mention that counsel for the first and second defendants did not make any point that the presence of the door in the east wall indicated that the possession of the disputed land was not adverse. That is, he made no point that the hotel owner might thereby have been able to enter the land, or even that the door was there for that purpose. I therefore have not mentioned that as a possibility. There may have been good reason why no point was made of this because to have done so would have conceded knowledge of the building being on the disputed land, or have gone very close to that, which was contrary to the case conducted by the first and second defendants. … In these circumstances the conclusion is that the plaintiff has established the claim of title by adverse possession of the disputed land. There will be a declaration accordingly.

Commentary 4.21  In this case, Hanson J made it clear that the plaintiffs had established adverse

possession over the multiple periods of possession. His Honour further concluded that there was no appreciable gap between the two periods of occupancy such as to constitute an abandonment.21 In KY Enterprises Pty Ltd v Darby [2013] VSC 484, Lansdowne  AJ

21. See also Shelmerdine v Ringen Pty Ltd [1993] 1 VR 315. 226

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4.22

concluded at [116] that the issue to determine is whether there has been a ‘break in possession that indicated a disconnection with the land or abandonment of the intention to possess it, such as to break the continuity of the adverse possession’. Adverse possession will cease where it can be established that, prior to the expiration of the limitation period, the possession has been abandoned. Abandonment is a question of fact to be determined in the particular circumstances. Essentially, where it can be established that the possessor is no longer in possession or control of the land to the exclusion of the rest of the world, an abandonment may be proven and if the abandonment occurs prior to the expiration of the limitation period a subsequent possessor cannot claim the possession. A temporary absence will not constitute an abandonment; however, long periods of absence may, depending upon the reason for those periods and their duration, constitute an abandonment.22 If a possessor abandons rights against a succeeding possessor, that does not necessarily mean that they have abandoned rights against the documentary titleholder: Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464.

Disability and Fraud 4.22  Adverse possession may also be affected where the true owner is under a disability

or has been the subject of a fraud. In all states, disability includes circumstances where the possessor is an infant or of unsound mind.23 In Victoria, Western Australia, Queensland and Tasmania, where a cause of action accrues in favour of a possessor, it cannot be raised against a person affected by a disability until six years after the person has ceased to be affected by the disability. Thus, it would need to be proven that: 1. the true owner has ceased to be under that disability; and 2. a further six years has passed from the time that the disability ceased.24 In New South Wales, where a cause of action accrues in favour of a possessor, it cannot be raised against a person affected by a disability until three years after that person has ceased to be affected by the disability.25 In South Australia, where a cause of action accrues in favour of a possessor and the paper title owner is under a disability, the limitation period shall be extended for the duration of the disability but this extension cannot exceed 30 years.26 Where an adverse possessor has committed a fraud, adverse possession will not begin to run until the paper title owner has either discovered the fraud or could, with reasonable diligence have discovered it.27 Fraud in this context extends beyond common law fraud to include a conscious wrongdoing or a willingness to take advantage of the documentary titleholder rather than broader concepts of unconscionability. In Hamilton v Kaljo (1987) 17 NSWLR 381 at 386, McLelland J held that fraud, deceit or concealment require proof of 22. Roy v Lagona [2010] VSC 250 at [35]. 23. Limitation of Actions Act 1958 (Vic) s 3(2); Limitation Act 1969 (NSW) s 11(3)(a) (which includes physical disease and war or warlike operations or circumstances arising therefrom); Limitation Act 1935 (WA) s 16; Limitation of Actions Act 1974 (Tas) s 2(2); Limitation of Actions Act 1974 (Qld) s 5(2); Limitation of Actions Act 1936 (SA) s 45(2). 24. Limitation of Actions Act 1958 (Vic) s 23(1); Limitation Act 1935 (WA) ss 35–37; Limitation of Actions Act 1974 (Tas) s 26(1); Limitation of Actions Act 1974 (Qld) s 39(1). 25. Limitation Act 1969 (NSW) s 52(1)(e). 26. Limitation of Actions Act 1936 s 45(1). 27. Limitation of Actions Act 1958 (Vic) s 27(1); Limitation Act 1969 (NSW) s 55; Limitation of Actions Act 1974 (Tas) s 32; Limitation of Actions Act 1974 (Qld) s 38; Limitation of Actions Act 1936 (SA). 227

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some form of dishonesty or moral turpitude. Subsequently, in Seymour v Seymour (1996) 40 NSWLR 358 at 372, Mahoney ACJ, with whom Meagher JA and Abadee J concurred, stated with regard to New South Wales: In my opinion, the section is not confined to simple common law fraud. It extends to conduct beyond that. … In my opinion, there must be in what is involved a consciousness that what is being done is wrong or that to take advantage of the relevant situation involves wrongdoing. At least, this is so in the generality of cases.28

In Wade v Trnka [2006] NSWSC 1097, Lloyd AJ indicated that a broader, equitable approach to defining fraud within the context of the limitations legislation was appropriate. In Nocton v Lord Ashburton [1914] AC 932 at 953–4, Lord Chancellor Viscount Haldane in the House of Lords held that: In Chancery the term ‘fraud’ thus came to be used to describe what fell short of deceit, but imported breach of a duty to which equity had attached its sanction … A man may misconceive the extent of the obligation which a Court of Equity imposes on him. His fault is that he has violated, however innocently because of his ignorance, an obligation which he must be taken by the Court to have known, and his conduct has in that sense always been called fraudulent, even in such a case as a technical fraud on a power.

In England, fraud within the context of the limitations legislation has been replaced with the concept of a ‘deliberate concealment’, which was interpreted by Morritt LJ in Brocklesby v Armitage & Guest [2002] 1 WLR 598 to mean that knowledge of the consequences of the act is irrelevant provided the actor intended to commit the act. Morritt LJ stated at 605G: Generally speaking, if he knows of the act and he intends the act, but is unaware of the legal consequences, his unawareness is immaterial for it is trite law that ignorance of the law is no defence. It appears to me that had Parliament intended in the case of a deliberate concealment under section 32(1)(b), as amplified by subsection (2), that there should be both deliberate commission of an act in the sense of knowingly and intentionally committing the act and also knowledge that such commission gave rise to a particular legal consequence, then it required clearer words to spell that out than are to be found in subsection (2) or subsection (1).

This interpretation was subsequently rejected by Millett LJ and Scott LJ in Cave v Robinson Jarvis & Rolf [2002] 1 WLR 581. Scott LJ at [61] made the following comments: Morritt LJ said, in a passage I have cited, that in general a person is assumed to know the legal consequences of his actions and that, therefore, if an act has been done intentionally, the actor’s unawareness of its legal consequences would be immaterial and no defence. The premise is, in my opinion, much too wide to constitute a satisfactory approach to construction of a statutory provision such as section 32(2). A person may or may not know that an act of his or an omission to do or say something or other constitutes a breach of tortious or contractual duty. His knowledge or lack of it may well be immaterial to the question whether a cause of action for which he is liable has accrued to the person injured by the act or omission. But that is no reason at all why Parliament, in prescribing the circumstances in which the person injured by the act or omission can escape from a Limitation Act defence, should not distinguish between the case where the actor knows he is committing a breach of duty and the case where he does not. The clear words of section 32(2) — ‘deliberate commission of a breach of duty’ — show that Parliament has made that distinction.

28. See also Grahame Allen & Sons Pty Ltd v Water Resources Commission [2000] 1 Qd R 523. 228

Adverse Possession

4.23

Adverse Possession and the Torrens System 4.23  Different states have approached the issue of enforcing adverse possession

against registered title differently. This reflects the fundamental tension underlying the enforcement of possessory rights within a framework that is aimed at protecting the primacy of registration. In Victoria and Western Australia, adverse possession is specifically protected under the Transfer of Land Act 1958 (Vic) s 42(2)(e) and the Transfer of Land Act 1893 (WA) s 68, and will constitute an exception to any subsequent registration. Thus, all subsequent registered proprietors will take subject to any possessory rights that an adverse possessor may have accrued. If the limitation period has expired, the interest of the adverse possessor will extinguish the title of the registered proprietor, and the adverse possessor will be entitled to be registered as the proprietor, subject to conformity with administrative specifications: Transfer of Land Act 1958 (Vic) s 60; Transfer of Land Act 1893 (WA) s 222(1). If the limitation period has not yet expired, the registered proprietor will take subject to the accumulated possession. In effect, this means that the subsequent registration will not, in itself, extinguish the accumulated adverse possession. If the Registrar of Titles (or Commissioner in Western Australia) accepts the application, a notice will be issued on both the land and in a newspaper. A person who considers that he or she has an interest in the land may lodge a caveat preventing the registration of the applicant as the new proprietor. If no caveat is lodged, the Registrar (or Commissioner) will proceed to register the applicant as the new proprietor. As outlined by Justice Kenneth Martin in Ben-Pelech v Royal [2019] WASC 297 at [74]: The Transfer of Land Act and the principles of indefeasibility envisage that a registered proprietor will hold the title to this land free of all encumbrances save those noted on the register. However, as one of the exceptions to indefeasibility allowed by s 68, if a neighbour trespasses upon the land in question and takes possession of it by building in a manner which encroaches upon the adjoining land, then, at the expiration of 12 years, the effect of the Limitation Act 1935 is that the true owner loses his right to complain of the trespass. Thus even though the encroacher’s title is imperfect in the abstract (because he obtained the land by a wrongful act), at the end of 12 years he is able to defeat any competing claim and is deemed to be the owner.29

In Queensland a subsequent registered proprietor will only take subject to a possessor who has been in possession for the requisite limitation period and has therefore satisfied the statutory requirements: Land Title Act 1994 (Qld) s 185(1)(d). Similarly, in South Australia, a registered proprietor will only take subject to the title of a person ‘adversely in occupation of, and rightfully entitled to, the land at the time it was brought under the Act and continuing in occupation at the time of issue of any subsequent certificate of title’: Real Property Act 1886 (SA) s 69VI. Tasmania has a similar provision in the Land Titles Act 1980 (Tas) s 46. It was not until 1979 that the provisions of the Real Property Act 1900 (NSW) were amended to give some protection to adverse possessors against the title of a registered proprietor. Prior to this time, adverse possession rights were not enforceable against a registered proprietor. Section 45D(1) of the Real Property Act 1900 (NSW) now sets out that an adverse possessor can make a possessory application. It is clear, however, pursuant to s 45D(1), that a possessory application cannot be made against a registered proprietor 29. His Honour further held that relief under ss 122 and 123 of the Property Law Act 1969 (WA) could not be applied to a situation where adverse possession could be established. Section 122(2) allows an encroaching owner to seek relief where any part of a building encroaches on a part of adjoining land. Section 123 allows relief where a building has been erected on land by reason of mistake as to boundary or as to the identity of the original piece of land. 229

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Australian Property Law

until the entire limitation period has run against that registered proprietor. Hence, unlike the Victorian and Western Australian position, in New South Wales, until registration, the adverse possessor does not acquire title to the land and the adverse possession does not extinguish the interest of the registered proprietor: Real Property Act 1900 (NSW) s 45C. See also Refina Pty Ltd v Binnie [2010] NSWCA 192 at [19]–[22]. This is a significant difference in the scope and impact of the Torrens regime upon adverse possession claims and reinforces the notion of the Torrens system being a system of title by registration rather than registration of title. It is unsettled whether prior to registration the adverse possessor acquires any title in the land. It has been argued that an inchoate possessory title may be acquired akin to that of an unregistered interest holder, although the legislative scope of Part 6A would appear to preclude any right prior to registration.30 In Queensland, the title of an adverse possession can be registered if the Registrar is satisfied that the interest of the registered proprietor has been extinguished: Land Title Act 1994 (Qld) s 185(1)(d). Unlike Victoria and Western Australia, accumulating possessory rights are not protected. The Registrar may also refuse applications that do not provide the necessary documentary support and, if the Registrar is satisfied that the caveator has an interest in the land that has not been extinguished under the Limitation of Actions Act 1974 (Qld), then the Registrar can refuse to register the applicant as owner but may register the applicant with a lesser interest: Land Title Act 1994 (Qld) s 107(1). The title of the registered proprietor may be extinguished by an adverse possessor despite the absence of registration. For a more detailed discussion on the relationship between the Torrens legislation and adverse possession see: F Burns, ‘Adverse Possession and Title by Registration Systems in Australia and England’ (2011) 35(3) Melbourne University Law Review 773, where it is argued at 797 that pursuant the Real Property Act 1900 (NSW), unlike Victoria, adverse possession is not an exception to indefeasibility and therefore prior to registration, the possessor is unlikely to hold any interest in the land. The author states: … the NSW statute clarifies that until registration, the applicant does not acquire title to the land and the adverse possession does not extinguish the interest of the registered proprietor. Indeed, it remains unsettled whether prior to registration the adverse possessor acquires any title in the land. Some authority suggests that the adverse possessor acquires an inchoate possessory title which has a status similar to that of other unregistered interest holders, while other authority relying on  pt 6A  has held that the legislation precludes the adverse possessor having any inchoate right. A possible way of resolving this issue is to ask whether the adverse possession is (like in Victoria, Western Australia and Tasmania) an exception to indefeasibility. It is not expressly stated to be so, and the provisions in pt 6A lean against any inchoate or possessory claim operating as an exception to indefeasibility (because upon a new registration, time runs afresh and a possessory claim does not extinguish the proprietor’s title). Therefore, it is unlikely that the adverse possessor acquires any interest in the land, and it is more likely that the possessor holds only a statutorily regulated possessory claim against the current registered proprietor after the expiration of the limitation period.

See also Marina Blue Pty Ltd v Gear (No 2) [2018] NSWSC 1442 at [48]. See also Eckford v Stanbroke Pastoral Company Pty Ltd [2012] QSC 48 at [40] where Dalton J concludes that the enforceability of adverse possession against land coming 30. See the discussion by Newington  v  Windeyer  (1985) 3 NSWLR 555, 563–4 per McHugh JA, and cf Refina Pty Ltd v Binnie [2009] NSWCA 914 per Brereton J at [38]–[43]. The decision in Refina Pty Ltd v Binnie was distinguished in Western Australia in Ben-Pelech v Royale [2019] WASC 297 at [132]–[134] per Kenneth Martin J. 230

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4.24

within the application of the land acts in Queensland does not require the consent of the Minister because it is not to be regarded as based on a dealing. Section 45D(1) of the Real Property Act 1900 (NSW) is extracted below: EXTRACT Real Property Act 1900 (NSW) — s 45D 45D  Application for title by possession (1) Where, at any time after the commencement of this Part, a person is in possession of land under the provisions of this Act and: (a) the land is a whole parcel of land, (b) the title of the registered proprietor of an estate or interest in the land would, at or before that time, have been extinguished as against the person so in possession had the statutes of limitation in force at that time and any earlier time applied, while in force, in respect of that land, and (c) the land is comprised in an ordinary folio of the Register or is comprised in a qualified or limited folio of the Register and the possession by virtue of which the title to that estate or interest would have been extinguished as provided in paragraph (b) commenced after the land was brought under the provisions of this Act by the creation of the qualified or limited folio of the Register, that person in possession may, subject to this section, apply to the Registrar-General to be recorded in the Register as the proprietor of that estate or interest in the land.

4.24  Revision Questions 1. What is the rationale for allowing adverse possessors to ‘add up’ multiple periods of possession? 2. What factors may contribute to a finding that possession has been abandoned? 3. What is the effect of ‘abandonment’ upon an adverse possession claim? 4. What type of fraud will suspend adverse possession? 5. Consider the following scenario: X is the paper titleholder of land that has been adversely possessed by Y. X sells the land to Z who is subsequently registered. Y then seeks to have the land he has adversely possessed transferred to him. Can Z object to this claim? Consider the relevant provisions under the Torrens legislation within each state. 6. Consider and discuss the following comment: In the 140 or so years since its introduction, the concept of possessory title (so very important to the English notion of seisin) has continued to play a part in weakening, or modifying, the principles of title by registration devised by Sir Robert Torrens. As we approach the new century, it is timely to reflect on those ideals of reliability, simplicity, low cost, speed and suitability, and how the technology of today can finally fulfil the promise or expectation of 140 years ago. To this end, possessory titles have no role to play. To allow them to remain only retains the conceptual confusion between a land system based on possession and one based on registration. Adverse possession, essentially an unjust doctrine which on occasions militates against hardship, is inappropriate in its potential to undermine the workings of the Torrens system. (L Griggs, ‘Possessory Titles in a System of Titles by Registration’ (1999) 21 Adelaide Law Review 157 at 170.) 231

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4.25  Answer Plan Based upon the above principles, it is possible to identify four basic requirements that must be satisfied in order for an adverse possession issue to be raised. These may be summarised as follows:

1. Determine whether or not the claimant has been in possession for the requisite statutory period (15 or 12 years of continuous occupation that may comprise either a single period of possession or, alternatively, multiple, continuous possessions). The limitation period may be suspended if the paper title owner is under a disability or affected by a fraud. Remember, adverse possession can only be raised over corporeal land interests that carry possessory rights. It is not possible to adversely possess incorporeal rights to land such as easements because these rights do not confer any possessory entitlement. In this respect, rights acquired by limitation should be distinguished from rights acquired by prescription. Adverse possession confers a possessory title that, coupled with a limitation defence, makes it enforceable against the paper titleholder who is entitled to exercise possession. In its bare state, adverse possession is a limitation defence that is only enforceable against paper title owners vested in possession. 2. Determine whether or not the claimants have the requisite degree of factual possession. This requires an examination of the facts and a determination that the physical control of the land was open and peaceful and that possession was taken without consent. Students should make sure that the physical acquisition involves a reasonable degree of control over the area of land claimed. This can depend upon the type of land the claim relates to — for example, is the land vacant, is it a residence, or is the area in issue a smaller ‘boundary’ claim. 3. Determine whether the possessor has satisfied the requisite intention test. Students need to discuss whether the possessor has occupied the land without the consent of the paper title owner and is acting as if they were the paper title owner by carrying out acts which reveal an intention to exercise exclusive control. Relevant factors to consider include: has the possessor taken full and complete control of the property; can third parties walk on the property or is it enclosed; has the possessor constructed, maintained or repaired fencing around the claimed area; has the possessor paid rates over the claimed area and has the possessor managed the claimed area and used it in a manner akin to that of a paper title owner. An holistic examination of the circumstances is vital. The possessor need not actually know that they are adversely possessing the land as long as their acts evince an intention to control and this control is exercised against the world at large. It is not necessary to prove that the actions of the possessor are directly inconsistent with the intentions that the true owner might have for the land because the relevant intention is that of the possessor and not the paper title owner. 4. Once established, students need to investigate the effect of an adverse possession defence. Does the defence operate against a registered titleholder? Does the defence operate against future interest holders? If not, determine when, how, or if the defence may operate against such titleholders. Consideration must be given to the operation of the registration frameworks. Is the adverse possession enforceable against a registered title? Different provisions apply depending upon which state the adverse possession claim is brought. 232

Chapter 5

The Doctrine of Tenure and Estates English Feudal Tenure 5.1 What is tenure? 5.1 English feudal history 5.2 Case: Feudal Tenure and Native Title: Revising an Enduring Fiction 5.3 Revision Questions 5.4 Australian Tenure 5.5 Case: Feudal Tenure and Native Title: Revising an Enduring Fiction 5.6 Revision Questions 5.7 Tenure and Radical Title 5.8 Case: Disinterested Truth: The Legitimation of Feudal Tenure Post Mabo 5.9 The doctrine of estates 5.10 Freehold estate 5.11 Fee simple 5.12 Extract: Conveyancing Act 1919 (NSW) — s 47 5.12 Extract: Electronic Conveyancing (Adoption Of National Law) Act 2012 — Appendix 9 Status of Electronic Registry Instruments 5.12 Life estate 5.13 Future interests: remainder and reversion 5.14 Vested and contingent interests 5.15 Determinable or conditional? 5.16 Case: Zapletal v Wright 5.17 Commentary 5.18 Legal contingent remainders 5.19 Legal remainder rules 5.20 Overview of Estates 5.21 Revision Questions 5.22

233

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English Feudal Tenure What is tenure? 5.1  The feudal doctrine of tenure represents the foundation of Australian land law. It is a framework inherited from English common law upon colonisation. It first emerged during English feudal society, where the primary social force was the relationship between the lord and his tenant. The social dynamic underpinning English feudal tenure was reciprocity. The lord, as paramount owner of the land, would issue a land grant to a tenant in exchange for some form of service, fee, or obligation. The term ‘tenure’ referred to the land grant received by the tenant and different types of tenures could be issued. Within a tenure relationship, the lord was always the absolute owner of the land and all rights acquired by the tenant were derivative. Tenure is therefore the opposite of absolute allodial title because it indicates that the land is held from another in accordance with defined obligations. Importantly, tenure describes the relationship between the tenant and the lord rather than the relationship between the tenant and the land. It is implicit in the tenure relationship that both lord and tenant acquire an interest in the land, albeit fundamentally different in character; the Crown holds ‘dominium directum’, while the tenant holds ‘dominium utile’. The nature of feudal tenure was described by William Blackstone as follows: … 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 feudal 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: Commentaries on the Laws of England, 12th ed, University of Chicago Press, Chicago, 1979, Bk II, Ch 4, pp 50–1.

English feudal history 5.2  Modern land law developed out of the institutions of English feudalism, which were established after the Norman Conquest in 1066. Historically, at some time after the Norman Conquest, the king became paramount lord of all the land in the Kingdom. According to English history, 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 surrendered or forfeited to William. In this context, the monarch was theoretically the ultimate owner over all conquered land. In practice, however, customary ownership continued to endure over particular areas of land. Those who held a tenurial grant from a lord owed specific obligations that had the effect of determining their social status. Early tenures were basically classified as either free or unfree. Unfree, or ‘servile’, tenure was generally that of the villein who, under the manorial system, became a tenant at will of the lord in exchange for the performance of menial services. When servile tenures were eventually recorded in the copy rolls (parchment records) of the manorial court, the villein became a copyhold tenant. Free tenure, on the other hand, generally involved the issue of a landholding in exchange for a particular service. Eventually these tenures came to be known as ‘socage’ tenure. Significantly, socage tenure was the only form of tenure ever adopted by Australian colonies. The types of socage tenure that initially emerged in England included: military service, which was encapsulated under knight tenure; frankalmoign tenure, which involved the 234

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issuing of landholdings to religious bodies in exchange for spiritual welfare; and serjeanty tenure, which existed so that the king would have sufficient official and personal services. There were many different varieties of socage tenure; these grants were commonly called fees, and this meant that they were inheritable. In 1290, the Statute of Quia Emptores conferred upon a tenure holder the right of free alienation, which was essentially the right to deal with their tenure grant. This right came to represent the cornerstone of tenurial title because it meant that titles became transferable. Subsequently, in 1540 the Statute of Wills conferred upon tenure holders the right to dispose of their tenure by will upon death. If the tenant had no heir, the tenure would revert to the lord under what was known as an escheat. 5.3  The following extract outlines the history and character of English feudal tenure.

—  Feudal Tenure and Native Title: Revising an Enduring Fiction  — S Hepburn (2005) 27 Sydney Law Review 49 In medieval feudal society, tenure was a vital component of an interdependent social structure. Feudal tenure in Norman England provided much needed social cohesion and was economically and geographically suited to the landscape and community of the time. Feudal tenure, was, in essence a social phenomenon of the feudal society that existed in Norman England; it represented a synthesis of ‘primitive decentralisation and imperial order’ and stratified society on the dual grounds of tenure and fealty. More specifically, Maitland defines feudalism as: A state of society in which the main social bond is the relation between the lord and man, a relation implying on the lord’s part protection and defence; on the man’s part protection, service and reverence, the service including service in arms. This personal relation is inseparably involved in a proprietary relation, the tenure of land — the man holds of the lord, the man’s service is a burden on the land, the lord has important rights in the land, and (we may say) the full ownership of the land is split up between man and lord. [The Constitutional History of England, 1955, p 143] It is generally accepted that medieval feudalism commenced with the invasion of England by the Normans, whilst feudalism itself can be traced back to Norman custom. English feudalism flourished with the administrative aptitude of the Normans following the conquest of England in 1066. Feudal society was not unique to England — being a very old system that, with particularised differences, has existed in three-quarters of the hemisphere. Feudalism had its origins in the decline of the Roman Empire — which in turn sent much of Western Europe into chaos and disorder. In such an environment the desire for peace and security was an important contribution to the successful acceptance of feudalism. English feudalism could be distinguished from that which had developed in European cities because of its sweeping and universal application: the conqueror was the paramount lord over all of the land — meaning that in theory, no allodial or ‘free’ land remained. Contemporary perceptions of English feudal society tend to focus upon the pyramid nature of the power infrastructure with power and title to all land emanating from the king who was at the peak of the pyramid — his powers coming in turn from the divine authority of the Church. Whilst this depiction is accurate, the essence of feudal society was deeper and more complex in nature, having legal, political and social manifestations. Feudal society was firmly embraced by the Normans and the Saxons because it was perceived as the best way of ensuring protection in circumstances where bonds of kinship were inadequate and the power of the State had not developed. Feudal society was based upon social classification and interdependence — being structurally unequal rather than hierarchical 235

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in nature. It was a system enunciated by the sovereign lord as a means of reinforcing and retaining ultimate power. In this sense, feudalism represented, in essence, the culmination of co-ordinated power. The primary method in which such power was acquired was via the granting of landholdings from the sovereign lord. The mode of holding or occupying land from the sovereign lord became known as ‘tenure’. In accordance with the principles of tenure all lands in the hands of subjects were held of some superior, and mediately or immediately of the Crown. The possessor of the land is known as a tenant; the manner of his possession is known as tenure and the extent or duration of his interest is as an estate. Every tenure contained tenurial incidents. In medieval England, the incidents of tenure included: military service; homage, fealty and suit of court; wardship and marriage; relief and primer seisin, aids and escheat and forfeiture. Most tenurial incidents were abolished in England by the combined effect of the Statute of Quia Emptores, the Tenures Abolition Act 1660 and the Property Acts of 1922 and 1925 respectively. Despite the numerous complex divisions of tenurial arrangements in existence within feudal England, feudalism was far more than simply a landholding system. It was a social configuration which defined both the power infrastructure and social network underlying the entire community. In a legal sense, feudal tenure was an institution with defined tenurial forms and obligations. However, in a broader sense, it was the manifestation of a social archetype. To gain a greater understanding of the operation and social character of feudal tenure it is necessary to imagine the ingrained texture of power, hierarchy and personal relations. Ultimately, the framework of institutions which regulate a society can only be fully understood through a better appreciation of its human environment. In the feudal society of Norman England, land was regarded as the source of all privilege and the basis of civil rank. One of the reasons for this was because under the feudal regime, the sovereign lord owned all land and decided when and how a land grant should be issued. Consequently, land became a valuable commodity and a tenurial grant conferred social prestige and acceptance. Rank, social status and military power were important social requirements within English feudal society. In order to retain military strength and ensure the proper protection of English boundaries, a large army was vital. The sovereign lord acquired much military power by exchanging vows of military loyalty in exchange for land grants. Tenants, or vassals to the land, were committed to support and protect the sovereign lord and in return, received a guaranteed possession over their estate. Under such a system, the sovereign lord became the ultimate benefactor: rewarding his vassals with land and rank in return for loyalty and military allegiance. The process of allowing the king’s vassals to ‘sublet’ to their own vassals later became known as subinfeudation — and theoretically the feudal chain was infinite. Each intervening holder was known as a ‘mesne lord’ and during the thirteenth century, as many as six or seven mesne lords could be interposed between the sovereign lord and the actual tenant in possession. Subinfeudation became the cornerstone of the medieval feudal framework. Its abolition by the Statute of Quia Emptores (1290) changed the whole perspective of tenure, as it dissolved the feudal pyramid. When Australia adopted feudal tenure, subinfeudation was no longer possible and all land was held directly of the Crown. This is a significant distinction given the fact that in medieval England the primary rationale for absolute Crown ownership was the legitimation of subinfeudation landholdings which had not emanated from the king. If the king was the paramount lord, the law could presume that all land titles were, ‘fictionally’ held by the king’s subjects through a Crown grant. A system that did not recognise subinfeudation had no need for this ‘fictional’ assumption of control. Feudalism in medieval England revolved around a complicated system of interdependence. A man’s standing in feudal society came to be judged by the rights he enjoyed in his grant and the ranking of the lord from whom he received such rights. Within such a system, the state had little to do with social regulation: all feudal arrangements were essentially private in nature. 236

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Feudal society was bound together by the personal oaths of individual men to individual lords rather than by a sense of communal obligation to the state. The service that a vassal owed in return for a grant was particularised — each vassal’s ‘tenurial incidents’ were based upon individual convention or tradition. The continuing obligation of the vassal to perform the tenurial services highlighted the reciprocal nature of the relationship. It also emphasised the limited nature of the grant. During feudal England it was very clear that the vassal held the land of the lord. The continuity of the tenurial obligations and the active presence of the lord provided clear and unequivocal evidence of the mutual acceptance of universal sovereign ownership. Structured power and social relations provided a strong sense of unity and a greater assurance for the Saxons than had existed in the relative ‘anarchy’ prior to the Conquest. In this respect English feudalism gave the ‘whole people, one common interest, one common sentiment and one common design’. Upon taking the throne after the Battle of Hastings, King William swore an oath to govern two sets of people under equal laws. This ‘social’ duality within Norman England meant that the Saxons never truly regarded themselves as ‘assimilated’ with the Normans. The direct recognition of ‘equal laws’ for both the Normans and the Saxons stirred the Saxons to incessantly claim their special right to be regulated according to the Saxon laws of Edward the Confessor. Feudal society within Norman England proved it was capable of recognising the existence of two distinctive groups. However, this binary culture was not reflected in the operation of the tenurial system. Nevertheless, it is significant to note that the customary law that existed prior to feudal tenure continued to be recognised and enforced under the manorial system — in accordance with the individual custom of the particular manor — such relations being subsequently described as ‘copyhold tenure’. The continuing enforceability of copyhold tenure within the feudal system indicated the willingness of the common law to recognise and enforce well-established customs existing outside the tenure infrastructure. If the local custom could be proven to have been a ‘local law before the time of legal memory’ then it was recognised by common law. The feudal society that emerged after the conquest of the Normans was primarily a reaction to the specific needs and objectives of the social environment and culture in existence at the time. Universal ownership of land by the sovereign lord was a characteristic unique to feudal tenure, allowing the accumulation of great military strength by the sovereign lord and encouraging the creation of complex chains of social interdependence. Significantly, universal ownership within feudal tenure was a lively dynamic: the sovereign lord actively upheld title in order to implement tenurial obligations. This stands in stark contrast to the artifice of a ‘stagnant’ sovereign holding a ‘fictional’ ownership in subsequent tenurial adaptations within the Australian land system. Feudal tenure was an integral component of the social filament of Norman England — it flourished because it responded to social demands. The same could never be said of an Australian feudal tenure regime; there was no nexus between the social construction of colonial Australia and feudal tenure. The conspicuous absence of any feudal society within the annals of Australian history made it clear that unlike the feudal tenure that existed during Norman England, Australian tenure was not a social archetype and had little connection with the circumstances of colonial life. The adoption of English feudal tenure and the assumption of absolute Crown ownership in Australia were, therefore, from the very beginning, abstracted and artificial — a clear contrast to its organic evolution within Norman England.

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Revision Questions

1. What is the difference between ‘dominium directum’ and ‘dominium utile’? 2. Under a feudal tenure system must all title be derived from the Crown? 237

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3. Colonial Australia effectively endorsed a strictly feudal version of the doctrine of tenure despite having no history or experience of feudal society. In the words of A R Buck: The development of Australian real property law was characterised by a paradox. The colonial social context saw the emergence of new ideas of, and expectations upon property, which were divorced from its feudal past, yet which paradoxically developed within a body of law inherited from a feudal past: ‘Attorney-General v Brown and the Development of Property Law in Australia’ (1994) 2 Australian Property Law Journal 128.



Why do you think colonists adopted the English doctrine of tenure as a founding land system for Australia?

Australian Tenure 5.5  Upon colonisation, Australia inherited English common law and part of that common

law was the feudal tenure system. This land system was endorsed by colonial lawmakers in Australia with little objection. There are a range of different ideological, social and political reasons underlying this process. Australian colonists, unlike their American counterparts, did not perceive themselves as being charged with the responsibility of a new land and therefore did not appear to crave a new land system amenable to the particular social and geographical circumstances of the Australian landscape. Rather, early colonists were prepared to endorse the English prototype of land tenure despite the lack of a feudal history within Australia and despite the fact that feudal tenure was unfamiliar with Indigenous interests and Eurocentric in its proprietary assumptions. It is arguable that the endorsement of feudal tenure within colonial Australia was really the consequence of an unexamined application of the ‘settlement’ principle. As illustrated in the conclusions of Drummond J in Cooper v Stuart (1889) 14 App Cas 286 at 288, English law was ‘applicable to the conditions of the infant colony’ and ‘as the population, wealth and commerce of the Colony increased, many rules and principles of English law, which were unsuitable in its infancy were gradually … attracted’. The courts assumed the land was uninhabited and a terra nullius territory was amenable to a full replication of English land law. This enabled the Crown to acquire absolute ‘dominium’ over all land so that individual tenants held from the Crown. The fact that the land was already inhabited by indigenous occupants was ignored by early colonial courts. The feudal system provided an appropriate means for the Crown to assert full beneficial ownership over the land despite the existence of Indigenous inhabitants. In this respect, the inherited feudal framework can be viewed as a convenient ‘device’ for the assertion of Crown title. 5.6  The difficulty of perpetuating a feudal framework in a different social and geographical context was particularly apparent following the recognition of native title both at common law and under the Native Title Act 1993 (Cth). Feudal tenure cannot properly embrace native title because it is not a title that is derivative of the Crown. In Scotland, the feudal doctrine of tenure has been abolished; see The Abolition of Feudal Tenure Act 2000 (Scotland). This Act represented the final stage in the abolition of relations between superiors and vassals in Scottish land law. It abolished feudal tenure by holding that the Crown no longer retained a superior title and all existing ‘vassals’ or ‘tenants’ became absolute owners of the land. Further, the legislation precluded any feudal relationship from being created in the future. Australia has retained feudal tenure as the framework of the land system, although its deficiencies within a pluralist system are becoming apparent. The following extract considers some of the political and sovereignty 238

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motivations underlying the perpetuation of feudal tenure in Australia and the problems of retaining such a framework post-native title.

—  Feudal Tenure and Native Title: Revising an Enduring Fiction  — S Hepburn (2005) 27 Sydney Law Review 49 Tenure in early Australian colonies (a)  A paradoxical culture When the doctrine of tenure was applied to Australian colonies there was no legal or social imperative commanding it to emulate the feudal model that had existed within Norman England. Certainly, Australian tenure differed from that which had actually functioned during Norman England. In Australia free and common socage was the only form of tenure that ever existed. Nevertheless, the feudal character of Australian tenure was apparent in the sovereignty presumptions it endorsed rather than its similarity to particular forms of feudal grant. There are good reasons for suggesting that, strictly speaking, the feudal notion of absolute Crown ownership has no relevance to any society other than Norman England. This was specifically recognised by Brennan J in Mabo (Mabo v Qld (No 2) (1992) 175 CLR 1 at 35) when he noted that ‘universality of tenure is a rule depending on English history and that rule is not reasonably applicable to the Australian colonies’. Certainly, the lack of a clearly defined and properly structured central sovereign within the colonies meant that there was little logic in adopting a feudal regime founded upon the interchange of land for loyalty and services. Australian colonists wanted to acquire land, apply ownership rights to it then cultivate, irrigate, build on the land and establish an agricultural and pastoral industry. This desire highlighted the perception that land grants issued in colonial Australia were more absolute in nature than traditional feudal tenures. The attitude, endemic within such a vast and inscrutable colony, was that land was ‘theirs for the taking’. As noted by Crispin J in Re Thompson; Ex parte Nulyarimma: … the early settlers displayed a seemingly insatiable demand for vast tracts of land. The chance to build up flocks of sheep unrestrained by the familiar confines of the small farms of England held out the lure of real wealth. Few seemed to have been deterred either by their own lack of title or by the rights of the traditional owners ((1998) 136 ALR 9 at 15). This acquisitive instinct accorded with the cultural imperatives of early settlers: survival and elimination. Logically, feudal tenets should have been adapted to accord with the practical expectations of a colonial environment. Accepting for the moment that the assumption of feudal tenure within colonial Australia was valid, there was no legal impediment to a formal ‘revision’ of its tenets to better accommodate the unique demands of a different social context. Indeed, it is arguable that revision and modification of this kind is crucial for the survival of any ‘adopted’ infrastructure. Instead of presuming the validity of a moribund feudal regime it would have been more proactive for colonial jurists to have recast tenure as a colonial phenomenon — capable of adapting to the specific demands of a new social, geographical and cultural atmosphere. In retrospect the failure to develop an inherently responsive Australian land system was regrettable given the unique opportunity that the settlement of a new colony provided. The failure of colonial lawmakers to even address the suitability of English feudal tenure illustrates one of the central paradoxes of Australian settler colonialism: the subversion of a reactive colonial politic into the cumulative narrative of British imperialism. The first Australian settlers were ‘already horizoned with precedents, conventions and expectations’. The approach taken by Australian colonists in this regard can be starkly contrasted with that of their American 239

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counterparts, encapsulated in the claims by Thomas Jefferson that each generation holds a usufructuary right to land and is free to create its own social order without constraint from the actions of past generations.

(b)  Fact versus fiction: statutory and feudal tenures in colonial Australia The progression of the colonies, following the inception of the Imperial Land Act 1831, produced a period of intense ‘land commerce’. Settlers became increasingly interested in the acquisition of land with the aim of establishing pastoral enterprises. The early days of Australian colonial life were particularly strife-ridden. Formal legislative authority was introduced in the colony of New South Wales in 1823 following the introduction of The New South Wales Act (1823) 4 Geo IV c96. Judicial authority followed close behind with the introduction of The Australian Courts Act 1828 9 Geo IV c83. The colonial secretary was authorised to supervise the granting of land. Small grants of land of approximately 50 acres or less were generally issued as freehold estates and were regulated appropriately by the land authorities. However, as the settlers began to push for more and more land to feed an economy which was essentially pastoral in nature, proper control and regulation became difficult if not impossible. The conferral of broad, unregulated discretion upon the grantees to deal with the land as they saw fit became common. This discretion was frequently set out within a statutory land grant, as the format was better suited to the detailed nature of pastoral land grants. Furthermore, the utilisation of statutory tenures avoided the problems associated with the regulation of large areas of land by a difficult and immature government administration. The early Governors had express powers to issue grants of land and, until granted, such land formed a royal demesne. Land that was not granted from the Crown was considered to amount to ‘waste land’. Up until 1859, with the introduction of representative government in New South Wales, imperial authorities assumed control over Crown lands and sought to maximise revenue via the settlement and sale of wastelands. Section 2 of the Constitution Act  1855 (NSW) vested the control and management of Crown waste lands in the New  South  Wales legislature and allowed the colonial government to regulate the sale and disposal of such lands. The physical character of the Australian landscape was not easy to ignore. Huge tracts of unexplored, dense, harsh scrubland was supposed to have vested in the Crown and therefore to be subject to Crown regulation. English authorities could not possibly hope to regulate such large and inaccessible areas of land under the formal auspices of feudal tenure. Consequently, the colonial government began to assert greater regulatory control through the issue of statutory grants and despite the feudal rhetoric, Australian land grants gradually developed a distinct perspective. The statutory tenure emerged as an identifiable and unique feature of Australian land law quite unlike anything that had been conceived or recognised previously within feudal England. The fundamental distinction between statutory grants and traditional feudal tenures lay in the fact that they had been specifically created whereas the feudal relationship was more ambiguous and amorphous. The particularisation of rights was, as noted by the High Court in Wik Peoples v Queensland ((1996) 187 CLR 1), a new ‘institutional form’ far better suited to the local circumstances of the Australian landscape. This was primarily because each statutory tenure could uniquely adapt its provisions and amend its ‘bundle of rights’ to accord with the requirements of the particular region. Statutory tenures enabled colonial administrators to ‘transcend traditional concepts and develop innovative forms of tenure which balanced a range of competing interests. This demonstrated the capacity of the legal system to adapt to particular circumstances as part of the continued viability of that system’. Colonial law-makers were prepared to diverge from strict feudal assumptions in their desire to develop and adapt the land infrastructure to the evolving resource economy. In the words of Toohey J in Wik Peoples v Queensland: To approach the matter by reference to legislation is not to turn one’s back on centuries of history nor is it to impugn basic principles of property law. Rather, it is to recognise historical development, the changes in law over centuries and the need for property law to accommodate the very different situation in this country ((1996) 187 CLR 1). 240

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This is not to deny the patent difficulties that the colonial legislators experienced in the granting and regulation of statutory tenures and the fact that large areas of land covered by the pastoral leases were unsurveyed and the activities of the squatters uncontrolled. Gradually, the land of the colony was divided into settled and unsettled areas. The difficulty in policing unsettled areas eventually resulted in statutory intervention in the form of the New South Wales Crown Lands Occupation Act and the Crown Lands Alienation Act both in 1861 that were intended to regulate the occupation and sale of unalienated Crown land. Whilst the aim of the legislation was to introduce a structured range of statutory tenures relevant to particular rural areas, the reality was far different. The legislation authorised the creation of a ‘seething trough of tenures of capricious incidents and impenetrable obscurity with little clarity, logic or consistency’ as colonial legislators attempted to reconcile tenurial estates with the physical and economic reality of Australian land holdings. The diversity, preponderance and ‘bewildering multiplicity of tenures’ was not restricted to rural areas of the New South Wales colony. In Queensland for example, 70 different kinds of Crown leasehold and Crown perpetual leasehold tenures existed. These difficulties were referred to by Gummow J who, in Wik Peoples v Queensland, pointed out that when colonial legislators assumed control over Crown waste lands a proliferation of new forms of statutory tenure ensued, teeming with ‘proverbial incongruities’ and premised upon the assumption that the local common law did not recognise any ‘allodial species of estate which was held independently of any grant by the Executive Government or of any grant by or pursuant to statute’ ((1996) 187 CLR 1). The statutory tenure was, despite its rapid escalation, a distinctive innovation that clearly distinguished colonial tenure from the classical feudal narrative. There were many other emerging peculiarities within colonial tenure. Australian land grants, unlike their feudal ancestors, were never held of any intermediate or mesne lord because no subinfeudation existed. Furthermore, unlike feudal tenures, most statutory tenures contained express reservations, giving the Crown an enforceable right to the minerals and natural resources existing below the surface of the land. This type of tenure was far removed from rights conferred under traditional feudal tenures that attached services and incidents but never reservations. The use of reservations within Australian land grants created a different relational perspective. The character of the obligations that the tenant owed to the overlord — the essence being social interaction and exchange — essentially defined feudal grants. By contrast, the statutory tenures that emerged within the colonies were more akin to an individualised land grant with specified restrictions. The grantee had full control of the land in most situations except for the fact that the Crown retained the right, generally, to exploit valuable mineral resources. Other distinctions in the colonial apparition of feudal tenure flowed from the absence of historical circumstance. For example, copyhold tenure was unknown as there was no such thing as ‘manors’. Furthermore, the ‘modernity’ of feudal tenure within colonial Australia meant that original Crown titles were freshly issued and directly traceable whereas in England, it is largely impossible to trace title back to the original Crown grant. Hence, in England, feudal tenure presumes a ‘notional, yet largely untraceable-out-of-mind infeudation’, whereas in colonial Australia, most grants remain capable of direct and authentic examination (Edgeworth  B, ‘Tenure, Allodialism …’ (1994) Anglo-American LR 23, p 409). Each ‘colonial’ variation highlights the fact that Australian land grants have always been far more individualistic than those which characterised Norman England. Statutory tenures, particularly fee simple grants, were express and comprehensive and lacked the overt sense of any relational interchange between Crown and tenant that characterised feudal tenures. Given the unique social circumstances and isolated geographical context of Australia as a colonial outpost, it was practically impossible to emulate the strict binary dynamic of feudal tenure, hundreds of years after the cessation of feudalism. 241

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In such circumstances an increasingly allodial perspective towards land ownership was, despite the feudal rhetoric of the colonial courts, inevitable. A similar process occurred within the United States; as noted by Chancellor Kent, in 1828: 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. (Commentaries on American Law Vol 3 at 412) In hindsight then, an increasing disparity emerged between the fiction of an inherited feudal tenure, perpetuated by colonial jurists and the fact of an Australian landscape populated by individualistic statutory tenures. In light of this, it seems ludicrous that colonial jurists consistently upheld the feudal conception of the Crown as paramount lord. Kirby J in Wik v Queensland expressly noted the absurdity of importing ‘notions of the common law apt for tenurial holdings under the Crown in medieval England’ ((1996) 187 CLR 1 at 280) into a land system founded upon distinctive expressions of statutory grant. This situation highlights two significant points underlying the existence of feudal tenure within Australia: first, the formal tenets of Australian feudal tenure endured despite the evolving social dynamic. Second, the feudal orthodoxy had no impact upon the character of the land grants issued. The emergence of highly evolved and particularised statutory grants bore no connection to the reciprocal grants which had populated feudal England. In this respect, the primary purpose of feudal tenure was to provide constitutional supremacy to the parliament. As outlined by Dr Fry: A century of subsequent legislation by the various legislatures of Australia has developed a new system of land tenures in the various Australian States and Territories so that it is now possible to say, with a very high degree of accuracy, that the constitutional supremacy of Australian Parliaments and the Crown over all Australian lands, as much as the feudal doctrines of the Common law, is the origin of most of the incidents attached to Australian land tenures (‘Land Tenures in Australian Law’, 1946–1947 Res Judicatae 158.)

(c)  Imperial ideology: a culture of constraint Colonial jurists consistently upheld the inherited version of feudal tenure despite the highly localised evolution of Australian tenure. In particular, the courts adhered to the feudal presumption of absolute Crown ownership. In the classic words of Isaacs J in Williams v Attorney-General for New South Wales: It has always been a fixed principle of English law that the Crown is the proprietor of all land for which no subject can show a title. When Colonies were acquired this feudal principle extended to the land overseas. (16 CLR 404 at 439) This ‘purely technical and antiquarian fiction’ was maintained despite the social and systemic difficulties associated with the importation of feudal tenure. As noted by Professor Jenks, there was ‘no statute, no struggle, no heated debate’ (A History of the Australasian Colonies (1896) p 59) the Crown quietly assumed the ownership of Australian land under the auspices of feudal tenure. The adoption of one universal sovereign did have cultural undertones. Colonial Australia had a very strong imperial allegiance that was nurtured on convention, orthodoxy and constraint. The first settlers were imbued with a keen appreciation of English tradition and regarded themselves as inextricably bound by inherited English law. As noted by Bruce Kercher: For more than a hundred years after the mid-nineteenth century, most of the judges of the Australian courts subscribed to a combination of imperialism and formalism, under which the law was assumed to derive from England both in its authority and in its detailed content (An Unruly Child: A History of Law in Australia, 1995, p 203). 242

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The strong sense of imperial loyalty that pervaded the colonies meant that many settlers did not actually perceive themselves and their landscape in an individualistic sense. England had bequeathed a cultural homogeneity; early settlers ardently regarded themselves as an imperial outpost, fundamentally obliged to adopt all of the prescriptive tenets of English land law. In this role, the settlers chose to reinforce the history drenched ‘English prototype’ of land grants regulated by one paramount lord. There is no clear rationale for the overwhelming sense of obligation and duty displayed by early Australian settlers towards imperial England. Possibly, the sense of isolation and despair experienced by many new settlers in a new and demanding landscape, led them to seek solace, security and a sense of belonging from the traditions of the ‘motherland’ instead of seeking ideological revolution. Feudal tenure and absolute Crown ownership acquired automatic legitimacy as, inherited from England, they were perceived to be a valid component of the established, socially institutionalised discourse. On an economic level feudal tenure was consistent with ‘capitalist colonisation’ and therefore the basic economic imperative was to reconstitute a social structure that accorded with the overriding requirements of capitalism. This produced an interesting friction between imperial culture and colonial context. As the Australian economy evolved, a tension developed between the perceived economic benefit of the feudal structure and the practical demands of regulating a large, progressive pastoral industry. The ideological constraints which characterised early Australian colonists can be starkly contrasted with the individualistic, revisionist ardour of erstwhile American colonists. American settlers perceived themselves as founders of a new and distinctive land, at liberty to develop a free and independent set of landholding rules to suit the individual character of the land and its people. It is clear from the early writings of Thomas Jefferson, that the American settlers regarded the new country as a form of political independence: a victory in the pursuit of libertarian and egalitarian ideals. The sense of self-worth and autonomy that was associated with many American colonists meant that they were more readily able to overthrow the social and legal vestiges of English feudalism and proclaim the feudal origins of land law to be irrelevant to the circumstances of American colonies. In New York, the legislature expressly abolished feudal tenures of every description, with all their accompanying incidents, and declared that all lands within that State were allodial. The desire to move away from feudal tenure and to re-establish an allodial title is patently clear from the express words of s 11 of the Constitution which states: The people of this State, in their right of sovereignty, are deemed to possess the original and ultimate property in and to all lands within the jurisdiction of the State: and all lands the title to which shall fail from a defect of heirs, shall revert, or escheat to the people. The progressive temperament of American colonists led to the development of a more regionalised land system whereby land interests mirrored the social environment in which they were regulated. This distinctive cultural environment encouraged proprietary adaptability over the hierarchical narrative of feudal tenure.

(d)  Tenure as a political device: sovereignty, tenure and colonial imperialism Apart from the obvious cultural constraints faced by Australian settlers, there was a deeper, political motivation underlying the adherence to feudal fiction. Adoption of the direct tenets of feudal tenure meant that theoretically, the Crown would become the universal owner of all land to the exclusion of indigenous occupants. This was a convenient consequence for imperial authorities. It provided an absolute rationalisation and legitimacy for Crown ownership as against any claim that indigenous occupants might seek to make. It appeared to represent a solution to the possible problem of prior indigenous possession and occupation of the land even though the application of feudal absolutes in such circumstances is questionable. The core political motivations underlying the adoption of feudal tenure make it more accurate to define Australian feudal tenure at this time as ‘sovereignty tenure’. Colonial administrators 243

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assumed the primacy of the feudal regime, in spite of its obvious practical inadequacies and deficiencies, in order to rationalise the assumption of a full sovereign title by the Crown. Sovereignty tenure functioned as an apparatus for colonial imperialism because it allowed the Crown to take complete control and possession of all land in the colony without having to take into account the interests of indigenous occupants. Sovereignty tenure was assumed rather than rationalised. It was a product of political aspiration, adopted by colonial jurists without debate, analysis or revision. This represents a stark contrast to the evolution of feudal tenure during Norman England where it was an inextricable component of a comprehensive social revolution. There was certainly no legal compulsion behind the adoption of sovereignty tenure within colonial Australia. British law did not require the feudal doctrine of tenure to be applied in territories acquired outside England. The supposition that sovereignty tenure automatically applied to Australian colonies is, in the words of Holdsworth, a ‘purely English phenomenon’ (History of English Law Vol 2 (1936) p 199), and therefore a product of an expansive English homology. Indeed, the legal foundation underlying the adoption of sovereignty tenure within colonial Australia contained many inherent deficiencies. One of the most disturbing was its assumed application to land which was, in clear and unequivocal terms, an inhabited land, occupied by indigenous aboriginals since time immemorial. The legal dilemma faced by the Australian settlers was accurately outlined by Henry Reynolds who noted that: The presence of the natives was an inescapable political, geographic and legal reality. While the settlers could appeal to ancient principles of law and argue that all property rights must emanate from the sovereign, the natives could stand on an even older and much more ubiquitous legal principle — the rights of immemorial possession (The Law of the Land (1987), p 45). Colonial lawmakers were able to avoid the legal questions associated with prior possession by ignoring the existence of indigenous inhabitants and presuming that such silence sustained the legitimacy of settlement. Had there been a legal examination or judicial inquiry, English common law would undoubtedly have supported the rights of the indigenous inhabitants to the land as prior possessors. However, no such legal inquiry ever occurred; sovereignty tenure applied because colonial jurists chose to assume that indigenous occupants did not exist and that the application of English law was automatic. The High Court in Mabo describes this ‘choice’ of the colonists as an application of enlarged terra nullius but this is probably a retrospective legal validation of a racially discriminatory assumption. The silent acceptance of sovereignty tenure by colonial jurists and the assumption that they had the power to make such a ‘choice’ in the first place is an innate characteristic of imperialism and its deeper hypothesis: cultural superiority. Recognition of the existence of indigenous occupants was directly antagonistic to established imperial expansionist goals. It is nevertheless difficult to understand the unquestioned application of such a legal polemic. Perhaps colonial law-makers feared that without absolute sovereignty, the physical actuality of indigenous occupation might prevail. The early colonial courts were certainly very keen to reinforce a vision of a sovereignty that assumed an unqualified conferral of imperium and dominium to the Crown. In the words of Brendan Edgeworth, in colonial Australia: … the foundational feudal principle of real property law that characterised ownership as coextensive with sovereignty was held to apply in its entirety in Australia (op cit, p 412). Universal ownership was adhered to with an imperturbable conviction by colonial law-makers despite the physical and historical singularity of the Australian landscape. In Attorney-General v Brown ((1847) 2 Legge 312), Stephen CJ held that ‘the wastelands of this Colony are, and ever have been from the time of its first settlement in 1788, in the Crown’. The ‘fiction’ of original Crown ownership operated to vest the property in waste lands in the Sovereign. 244

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This is not to suggest that absolute Crown ownership of all land was a necessary and enduring feature of English feudal tenure. Indeed, in Norman England, many land holdings were left undisturbed after the conquest of William I. The Crown acquired power as a sovereign to grant land to others rather than universal ownership over all land. Many Saxons continued to retain allodial ownership over unalienated land. There was nothing particularly unusual about this as the common law has an established history of upholding the validity of customary law and practices that have been undertaken since time immemorial. Furthermore, it was well established that the mere assumption of sovereignty should not necessarily disturb established proprietary principles. Hence, the interconnection between feudal tenure and absolute ownership is a peculiarly colonial expression. This point was raised by Gummow J in Wik Peoples v Queensland who noted that the: … concept of ownership by the Crown over all land is a modern one, and its adoption in legal theory may have been related to Imperial expansion … well after the decline of feudalism (at 106). Similarly, the Federal Court in Lansen v Olney noted that: … territorial sovereignty may not equate, even under the common law doctrine of tenure, to absolute beneficial ownership, the latter being arguably alien to the medieval cast of mind ((1999) 169 CLR 49 at 63). It is arguable that the idea, perpetuated by colonial jurists, that the adoption of feudal tenure necessitates the assumption of absolute beneficial ownership is essentially a contrivance — an extension of the political agenda which transcended the scope of British imperial constitutional principles. The failure of colonial jurists to properly rationalise the connection between absolute ownership and feudal tenure emphasised the artificiality of the colonial presumptions. It came to be accepted in an environment where ‘irrational realities are substituted for rationalised fictions’. This was aptly summarised by Kent McNeil when he notes: The fiction that the Crown once owned all the lands in England, some of which it then granted to subjects, was a device invented by common law jurists to justify the feudal concept of the Crown’s paramount lordship over lands held by subject ((1990) 16 Monash Law Review 91). The colonial courts did, however, attempt to legitimate the assumption of universal Crown ownership on other grounds. Where territory was uninhabited, British constitutional law entitled the Crown to acquire title by occupancy. Occupancy title was discussed by Stephen CJ in Attorney-General v Brown who insisted that title by occupation over waste lands was ‘no fiction’ and did in fact confer a real and actual title upon the Crown. The acquisition of occupancy title could, however, only be legitimated in areas actually occupied by the Crown. The difficulty with this argument is that this level of occupation was simply not possible given the physical characteristics of the landscape. Hence the assumption of absolute Crown ownership could not be rationalised under the ‘occupancy principle’ alone. Ultimately, the legitimacy of absolute Crown ownership was dependent upon the presumptions connected to the colonial construct of tenure. Sovereignty tenure legitimated Crown ownership. Whilst the traditional version of English feudal tenure would only assume absolute Crown ownership over land which was the subject of a tenure grant, sovereignty tenure assumed that it was the tenure system itself which conferred ownership upon the Crown. Hence, sovereignty tenure imposed Crown ownership despite the absence of a Crown grant. This was legal fiction in its purest form. Nevertheless, the colonial courts consistently upheld it. In Attorney-General v Brown the court categorically concluded that feudal tenure was ‘the foundation of the original

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title of the Crown’ and the source for all other land titles in Australia. In Williams v AttorneyGeneral for New South Wales Isaacs J stated: It has always been a fixed principle of English law that the Crown is the proprietor of all land for which no subject can show a title. When Colonies were acquired this feudal principle extended to the lands overseas ((1913) 16 CLR 404 at 439). In the same case, Barton ACJ observed that upon acquisition of territory under the feudal principles, ‘The whole of the lands of Australia became the property of the King of England’. Nearly sixty years later, in Milirrpum v Nabalco Pty Ltd ((1971) 17 FLR 141), Blackburn J continued this judicial tradition concluding that ‘every square inch of territory in the colony became the property of the Crown. All titles, rights and interests whatever in land which existed thereafter in subjects of the Crown were the direct consequence of some grant from the Crown’. The sovereignty agenda of feudal tenure has ultimately obscured its practical relevance to the colonial landscape. In their haste to promote the notion of ‘universal ownership’ colonial lawmakers failed to examine its contextual importance. English law expressly anticipated that colonists would only take ‘so much of the law as is applicable to their own situation and the conditions of the infant colony’. This approach was categorically endorsed by Sir Kenneth Roberts-Wray, noting that the doctrine of tenure must: … be applied subject to local circumstances; and in consequence, English laws which are to be explained merely by English social or political conditions should have no operation in a colony (Commonwealth and Colonial Law, Stevens and Sons, 1966, p 626). As the population of the Australian colonies gradually expanded, the courts presumed that sovereignty tenure would gain greater utility. In Cooper v Stuart, Drummond J noted that English law was applicable to the conditions of the ‘infant colony’ and ‘as the population, wealth and commerce of the Colony increased, many rules and principles of English law, which were unsuitable in its infancy were gradually attracted’ ((1889) 14 App Cas 286 at 292). However, the evolution of the Australian colonies showed no such thing. As the colonies grew in size and commerce, colonial administrators were forced to rely increasingly on legislative innovation and were forced to abandon the strict tenets of the feudal regime. The constitutional right of the colonial governments to create whatever tenure was appropriate for the context resulted, as outlined by Millard, in a ‘bewildering multiplicity of tenures’. In the words of Fry, gone was the ‘simplicity’ and ‘senile impotence of the emasculated tenurial incidents’ of English law were abandoned (T P Fry, ‘Land Tenures in Australian Law’  (1946) 3  Res Judicatae  158). In its place, multiple, complex Crown tenures were implemented, particularly in Queensland and New South Wales. The utilisation of legal history, and in particular the misappropriation of feudal conceptions of sovereignty was the direct product of an imperial framework. In Wik Peoples v Qld, Gummow J concluded that any methodology which attempts to regulate the use of history in the formulation of legal norms might be said to be ‘but a rhetorical device to render past reality into a form useful to legally principled resolution of present conflicts’ ((1996) 187 CLR 1 at 105). This issue was powerfully addressed by Henry Reynolds who stated: Australian jurists didn’t have to keep Australian law in the straight-jacket forged by the eleventh and twelfth century legal armourers. They chose to do so. Whether by design or not it gave them a powerful weapon to use against the Aborigines (The Law of the Land, 1987, p 44). The unquestioned judicial acceptance of sovereignty has, over the years, imbued it with an almost inviolate character. The weight of time and habit has increased the perception that the doctrine of tenure has become an immutable component of our property ideology and this has inured it against critical reassessment. This belief is clearly apparent in the comments of Brennan J in Mabo (at 187), who concluded that the doctrine of tenure is an ‘essential principle of our land law’ and that it was ‘far too late in the day to contemplate an allodial or other system of land ownership’. The courts are reluctant to disturb tenure and will generally do whatever they 246

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can to maintain the status quo. Nevertheless, the historical reassessment that the recognition of native title necessitated has, it is argued, changed the position so fundamentally that the abolition of sovereignty tenure has become an imperative.

5.7

Revision Questions

1. What were some of the physical and constitutional difficulties underlying the adoption of English feudal tenure within colonial Australia? 2. Explain some of the political imperatives motivating the adoption of English feudal tenure within colonial Australia. 3. Do you think Australian tenure, as adopted from England, is appropriate as a representative framework for all forms of land interests currently acknowledged by the common law? 4. In colonial America, Chancellor James Kent (1763–1847), (Commentaries on American Law, Bk 2, O Halstead, New York, 1827 at 265) made the following comments following the full and complete abolition of the feudal doctrine of tenure: In England, the right of alienation of land was long checked by the oppressive restraints of the feudal system and the doctrine of entailments. All those embarrassments have been effectively removed in this country; and the right to acquire, to hold, to enjoy, to alien, to devise and to transmit property by inheritance … is enjoyed in the fullness and perfection of the absolute right. Every individual has as much freedom in the acquisition, use and disposition of his property, as is consistent with the good order and reciprocal rights of others.



Do you think that Australia should follow the broad aims of the republican land model introduced in colonial America? Are there any legal or constitutional impediments to the abolition of the feudal doctrine of tenure in Australia?

Tenure and Radical Title 5.8  The decision of the Australian High Court in Mabo v Queensland (No 2) (1992) 175 CLR 1 (Mabo) recognised native title as a valid form of proprietary title. In order to incorporate native title into the existing feudal framework, however, a significant structural shift was required. To achieve this, the High Court revised the foundations of the settlement principle and the rudimentary assumptions of feudal tenure. In particular, the doctrine of enlarged terra nullius was rejected. This doctrine assumed that Australia was uninhabited and therefore capable of settlement because the Indigenous inhabitants that occupied the land were barbarous and uncivilised and were therefore denied any legal identity. Brennan  CJ in Mabo rejected the enlarged doctrine of terra nullius as discriminatory and founded upon racist assumptions making it inappropriate in light of the advancements in the international community. Nevertheless, his Honour did not go as far as to reject the feudal land system that complemented the terra nullius doctrine. Brennan CJ concluded that feudal tenure functioned as the skeleton of Australian land law and that it was too ‘late in the day’ to abolish it. Despite this decision, the rejection of terra nullius altered the traditional presumptions underlying feudal tenure. Once the court rejected the ‘fiction’ of an uninhabited territory, it had to accept the validity of Indigenous existence. This meant that it was not possible for the Crown to claim full and absolute 247

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ownership over all land; it could not own land that Indigenous inhabitants occupied at the point of colonisation and that remained subject to native title rights and interests. British constitutional principles would not validate such a proprietary assumption. The rejection of the terra nullius doctrine meant that the Crown could no longer claim absolute beneficial ownership over all land. Rather, it retained a radical title that could be burdened by the native title encumbrance and that could be elevated to full and absolute ownership where native title was extinguished. In the Mabo decision, Brennan CJ separated what he called ‘sovereignty of power’ (imperium) from ‘sovereignty of title’ (dominium), concluding that upon settlement the Crown assumed sovereignty of power (imperium) over all land but only acquired sovereignty of title (dominium) over those lands not already inhabited by Indigenous occupants. Where the land was occupied by Indigenous inhabitants, the Crown retained a radical title encumbered by native title interests. Brennan CJ made the following comments: 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 … 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: Mabo at 48.

Thus, in Australia, feudal tenure applies to every Crown grant of an interest in land, but, significantly, not to Indigenous rights and interests that do not owe their existence to a Crown grant. Radical title is less absolute than the beneficial ownership that characterised Crown ownership under the English doctrine of feudal tenure. Radical title is a diminished form of ownership that is capable of being burdened by a native title encumbrance. In Commonwealth v Yarmirr (2001) 208 CLR 1, at [47] the majority of the High Court described radical title as a legal tool of analysis, explaining that ‘when the Crown acquired sovereignty over land it did not acquire beneficial ownership of that land … What the Crown acquired was a “radical title” to land’ (Gleeson CJ, Gaudron, Gummow and Hayne JJ). The character and scope of radical title was explored by U Secher, ‘The Meaning of Radical Title: The Pre-Mabo Authorities Explained — Part 1’ (2005) 11 Australian Property Law Journal 179, who concluded at 196: Although the phrase ‘radical title’ first appears in Attorney-General (Quebec) v AttorneyGeneral (Canada), when used by the Privy Council to describe the Crown’s interest in land which is subject to pre-existing aboriginal title, it has its origins in St Catherine’s Milling and Lumber Co v The Queen. As a result of subsequent Privy Council approval in Amodu Tijani v Secretary, Southern Nigeria, St Catherine’s has profoundly influenced judicial understandings of both the nature of the Crown’s title to land which is subject to pre-existing aboriginal title and the character of the aboriginal title itself. Indeed, the generally accepted view is that Privy Council decisions prior to Mabo consistently held that radical title is a ‘substantial and paramount estate, underlying the [native] title, which became a plenum dominium wherever that title was surrendered or otherwise extinguished’.

Radical title has proven to be a useful tool for the acknowledgment of native title, although it has no application to the territorial sea because the radical title of the Crown does not extend to support property rights to the territorial sea: Commonwealth v Yarmirr (2000) 101 FCR 171. See also U Secher, ‘The Crown’s Radical Title and Native Title: Lessons from the Sea Part 1’ (2011) 35(2) Melbourne University Law Review 523. The absence of radical title in the territorial sea is a consequence of the fact that sovereignty rights in this zone occurred by operation of international law and were therefore subject to the evolving 248

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qualifications of international law: Akiba v Commonwealth (2013) 250 CLR 209,  [21]; Akiba v State of Queensland (No 2) (2010) 270 ALR 564 at [714]; S Hepburn, ‘Native Title Rights in the Territorial Sea and Beyond: Exclusivity and Commerce in the Akiba Decision’ (2011) 34(1) UNSW Law Journal 159. The conclusion by the High Court in Mabo that the Crown holds a radical title in land, rather than a full and absolute beneficial ownership over all unalienated land, paved the way for the incorporation of native title into the tenure framework; this recalibration made it possible for native title to burden pre-existing or ‘underlying’ Crown title. As outlined by Keane J in Love v Commonwealth of Australia; Thoms v Commonwealth of Australia, ‘It is important to be clear that in Mabo [No 2] it was recognised that under the common law of Australia, absent the inconsistent exercise of sovereign power, the radical title of the Crown to land was subject to the customary rights and interests of Aboriginal groups’ ([2020] HCA 3 at 205). Radical title was, therefore, a convenient device connecting Indigenous title to a common law system. This is not to suggest that radical title is consistent with colonial assumptions regarding feudal tenure. Indeed, it is arguable that the acceptance of radical title destroys the feudal presumptions upon which Australian land law is founded. 5.9  The purpose and utility of radical title as a device for connecting feudal tenure and native title is discussed further in the following extract.

—  Disinterested Truth: The Legitimation of Feudal Tenure Post Mabo  — S Hepburn (2005) 29 Melbourne University Law Review 1 … In addition to the absence of a legal mandate justifying the continuation of feudal tenure within Australia, it may also be argued that it is simply not possible to perpetuate a tenure system following the recognition of what the High Court in Mabo describes as ‘radical title’. In order to uphold native title and validate indigenous possession of the land, the High Court concluded that Crown ownership was not universal and absolute in all areas. Rather, it held that the Crown only held absolute ownership over those lands which were not already inhabited by indigenous occupants and subject to valid native title claims. The High Court accepted that the Crown was not the universal and absolute owner of all land in Australia. Instead, the court described Crown title, which was capable of being burdened by native title rights as ‘radical’. In the words of Brennan J: 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 … 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 (Mabo (No 2) (1992) 175 CLR 1 at 29). Radical title is presented in the Mabo decision as a title which is capable of legally supporting native title rights. Radical title anticipates that native title, where properly established, will reduce the ownership rights of the Crown. If native title is extinguished by the fallacy of ‘equating sovereignty and beneficial ownership of land’ then clearly native title can only exist if the Crown does not hold absolute, beneficial ownership over all land. Radical title acknowledges the fact that the Crown must necessarily hold an inferior title in areas where native title is enforceable. The concept of a Crown holding radical title was not a new one. The judgment of Brennan J in Mabo refers back to the Case of Tanistry ((1608) Dav 28; 80 ER) one of the first cases to consider the relationship of customary law with the common law within a colonial context. The 249

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Tanistry decision held that the Irish Brehon custom of tanistry was not recognised because it was based in violence and its scope was uncertain. Nevertheless, the Tanistry decision did conclude that native inhabitants and their heirs could hold title without any grant or confirmation by the conqueror. It was clear in the Tanistry decision that the only customary title which the common law would uphold was one perceived to be consistent with basic common law tenets. Brennan J concluded that it was time to develop an exception to the strict consistency requirements outlined in Tanistry so that customary native title could be enforceable, even where it was inconsistent with common law assumptions. The enforcement of such customary title was possible with the acceptance of a radical Crown title. Radical title was, in the words of the Privy Council in Amodu Tijani v Secretary Southern Nigeria ([1921] 2 AC 399, 404), a ‘title, which was capable of being burdened by indigenous title’. However, the Privy Council made it very clear that ‘much caution’ had to be taken in rendering indigenous title ‘conceptually in terms which are appropriate only to systems which have grown up under English law’. Viscount Haldane described the title of the indigenous occupants in a ceded territory as presumptive. His Honour held that it was a title based upon the assumption that the Crown has accepted the indigenous occupants as subjects and the indigenous occupants, in turn, have agreed to be bound by the new rule of law. In this way, the title of indigenous occupants was communal and usufructuary in character but could ‘assume definite forms analogous to estates, or may, where it has assumed these, have derived them from the mere analogy of English jurisprudence’. It is important, however, to distinguish the form of radical title adopted within Amodu Tijani from that which emerged in the Mabo High Court. The acceptance of a ‘presumptive’ title within a ‘ceded’ territory differs dramatically to a customary title endorsed within a settled territory. Australian native title is not actually or presumptively a derivation of the Crown. How could it be when settlement presumes the non-existence of indigenous inhabitants? The patent estrangement of indigenous inhabitants makes it difficult to even consider the existence of an implied ‘reciprocal agreement’ between the Crown and indigenous occupants in the form that occurred within Amodu Tijani. It was clearly assumed that upon the settlement of Australia and the adoption of feudal tenure, the Crown automatically became the absolute owner of all land. Australian native title does not manifest itself as a presumptive Crown grant that exists within the common law framework, but rather as an externalised Crown encumbrance which exists outside the common law framework. Australian radical title is, therefore, a deteriorated title. It represents a necessary postulate for native title, however the proprietary identity of native title is not dependent upon it. For example, native title was recognised in land below the low-water mark in Commonwealth v  Yarmirr ((2001) 208 CLR 1, 50–2) even though the Crown held no radical title in it. Australian native title is not a creature of the common law; it is both culturally and conceptually extraneous to the feudal framework. In this sense, the radical title accepted by the Australian High Court is quite different to that endorsed by the Privy Council in Amodu Tijani. Australian radical title endows the Crown with absolute ownership subject to enforceable native title encumbrances which may be extinguished in circumstances where the Crown has issued an inconsistent land grant. Australian radical title can, where native title is effectively established, have the effect of significantly reducing the ownership status of the Crown. By contrast, radical title in Amodu Tijani endowed the Crown with absolute ownership including the presumptive capacity to issue indigenous land titles. Hence, when Viscount Haldane in Amodu Tijani described the radical title as ‘a pure legal estate, to which beneficial rights may or may not be attached’ he refers to the capacity of the Crown to issue title rather than its capacity to be burdened. Whilst the character of Australian radical title is vital for the recognition of native title, it is arguably fundamentally inconsistent with traditional feudal tenure principles. English feudal tenure is based upon the assumption that the Crown was the paramount lord over all 250

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conquered land. This title gave the Crown the power to issue land tenures. As outlined by William Blackstone, absolute Crown ownership was an essential postulate: … (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’ … (op cit vol 2, p 51) Despite the argument that paramount ownership was a peculiarly English phenomenon, Australian courts expressly promoted this ‘modernised’ characteristic of tenure so that it became an ingrained aspect of the Australian ‘sovereignty’ tenure system. In the classic words of Forbes J: By the laws of England, the King, in virtue of his Crown, is the possessor of all unappropriated lands of the Kingdom … The right to the soil, and of all lands in the colony, become vested immediately upon its settlement, in His Majesty, in the right of the Crown, and as representative of the British Nation (R v Steel (1834) 1 Legge 65, 68–9). The transformation of such a deep-rooted feudal perspective is, arguably, impossible without significant systemic revision. Indeed, it is arguable that a sovereignty tenure system simply cannot function in the absence of absolute Crown ownership. It reduces the character of the ownership which would otherwise have vested in the Crown and therefore qualifies the power of the Crown to issue tenure. Kent McNeil has argued that any interpretation suggesting that the doctrine of tenure requires absolute ownership is: … based on a misunderstanding of the effect of the doctrine of tenures. The doctrine is concerned primarily with feudal relations. It would not give the Crown an original title to lands in demesne, even in a settlement that was uninhabited when acquired (Common Law Aboriginal Title (1989), 21, pp 241–2). Whilst this was certainly true for English feudal tenure, where the Crown only held absolute ownership over alienated land, Australian courts have consistently rejected this, promoting the notion that tenure conferred absolute ownership over all alienated and unalienated land. Whilst this represents a colonial interpretation of the feudal principles, based more on political expediency than doctrinal purity, the established version of Australian tenure is directly inconsistent with the radical title espoused by the Mabo High Court. Brennan J in the Mabo decision argues that the ‘fallacy of equating sovereignty and beneficial ownership’ resulted in the extinguishment of native title following the acquisition of sovereignty. He overlooks the fact, however, that this ‘fallacy’ became the cornerstone of Australian tenure. Australian radical title may well be a device, or ‘a postulate to support the exercise of sovereign power within the familiar feudal framework of the common law’, however it fundamentally shifts the character of Australian tenure. The new ‘radical tenure’ shift anticipates the existence of a fundamentally distinctive land title, without conducting any explicit systemic revision. Native title arises where proof of a continuing cultural connection with the land can be established. It does not emanate from the Crown. The bi-cultural property system that Australian radical title envisages was well beyond the scope of English feudal tenure, nurtured as it was upon monistic ownership assumptions. Whilst it is true that allodial Saxon title endured beyond the Norman Conquest, it existed as an externalised entity. It was never anticipated that feudal tenure could embrace two different proprietary forms. The Mabo High Court did not address this problem. It was assumed that the shift to radical title could be accommodated within the existing feudal narrative. This assumption has proven to be short-sighted. The fundamental difficulty is that a system founded upon an amalgam of feudal and indigenous concepts cannot resolve the basic collision point: traditional tenured 251

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estates are derived from a Crown grant whereas indigenous customary title is not. Retaining the feudal fiction ultimately prevents the common law from developing a more culturally neutral framework. Customary native title will always be divergent to the ‘feudal imagery of English constitutional theory’. As explained by Beaumont, Van Doussa and North JJ in Western Australia v Ward ((2000) 99 FCR 316, 349): Native title rights and interests thus give rise to jural rights which are artificially defined under the common law because they arise from the acknowledgement and observance of traditional laws and customs under a different legal system. The common law affords a status to, and permits enforcement of, those rights according to common law principles. The artificiality is a consequence of the intersection of the common law system of law with traditional laws and customs of the indigenous peoples. The attempt to ‘blend’ fundamentally incompatible concepts has created an artificial environment and stifled the capacity of native title to be accepted as a valid common law proprietary interest in its own right. In the words of Lisa Strelein: Native title is not simply the incorporation of Aboriginal law into the colonial legal system, it is a common law title. The courts have limited and re-defined native title in ways that make it more familiar to the colonial legal system and take it further away from Aboriginal law ((2001) 93 Sydney Law Review 95). Radical title is a means to an end. It exists purely because it is the only way that native title could ‘fit’ into a tenure infrastructure. Its existence foreshadows the eventual destruction of tenure in Australia primarily because it is the constitutional and political foundation for the enforcement of native title rights and a non-homogeneous proprietary culture. If the Crown can no longer be correctly described as the paramount lord, then the whole purpose underlying the assumption of the feudal fiction in Australia no longer exists. The ‘received idea’ of Australian feudal tenure has become an illusion.

The doctrine of estates 5.10  The doctrine of estates is a natural extension of the tenure regime. The status of each

land tenure issued by the Crown is defined and categorised by the doctrine of estates that functions as an organising principle for the different tenurial grants enforceable against the land. The nature and scope of the doctrine of estates was outlined by the High Court in Western Australia v Ward (2002) 213 CLR 1 at 106, as a doctrine premised upon ‘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’. The doctrine of estates encompasses estates where title and possession are vested as well as interests where title is conferred but possession is deferred until a future date. The central organising principle underpinning the doctrine of estates is time. All estates and interests are categorised according to their duration in time. In his chapter on ownership and possession in The History of English Law Before the Time of Edward I, Vol 2, Cambridge University Press, Cambridge, 1895, Professor F Maitland stated that the ‘most salient trait of our English land law’ is that ‘proprietary rights in land are … projected upon the plane of time. The category of quantity, of duration, is applied to them.’ The main division lies between those estates that exist indefinitely (freehold estates) and those interests that exist for a defined period of time (non-freehold estates). Native title is not a common law estate because it is not derived from the Crown even though it is recognised by the common law. In a broad sense, a reference to an estate is a reference to

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any corporeal property interest in land; however, in a narrow sense, estates refer only to the grants issued by the feudal lord to the tenant. The position has been well summarised by the Queensland Court of Appeal in Road Australia Pty Ltd v Commissioner of Stamp Duties [2001] 1 Qd R 327 at [8]: The word estate has two meanings in law, one narrow and the other broad. The narrow meaning is the 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: ‘Any property whatever. Under the narrow meaning the only interests caught are the fee simple … Under the broad meaning, any proprietary interest in land would be treated as an estate’.

All estates under the tenure system are derivative of the Crown and therefore all estates are recognised and regulated by the common law. The doctrine of estates only applies to land interests because, as Carol Rose has stated, ‘land has a peculiar affinity to doctrinalism. By virtue of its durability, land invites an intricate layering of rights over time … Land offers a goldmine of doctrinal variation, a subject on which taxonomic exactitude is the central effort’: C M Rose, ‘Canons of Property Talk or Blackstone’s Anxiety’ (1998–1999) 108 Yale Law Journal 601 at 614.

Freehold estate 5.11  The freehold estate originated from feudal England where it referred to land held by a ‘freeman’ that was subject to the services and incidents appropriate to his status. Under the doctrine of estates, freehold estates are enduring because their duration is uncertain. The holder of a freehold estate is seised of the estate in the sense that the holder retains both title and possession. There are two primary forms of freehold estates that remain relevant to modern common law: the fee simple estate and the life estate. There used to be a third estate known as the fee tail; however, legislation has now abolished the fee tail and any attempt to create such an interest is generally read down as an attempt to create a fee simple: see Property Law Act 1958 (Vic) s 249; Conveyancing Act 1919 (NSW) s 19A; Property Law Act 1969 (WA) s 23; Property Law Act 1974 (Qld) s 22; Law of Property Act (NT) s 22.

Fee simple 5.12  A fee simple is the highest and most absolute form of freehold estate that is legally

recognised. It endures indefinitely and is freely inheritable. As outlined by Kiefel CJ, Bell, Keane, Nettle and Gordon JJ in Northern Territory v Griffiths (2019) 364 ALR 208 at [67]: ‘At common law, freehold ownership or, more precisely, an estate in fee simple is the most ample estate which can exist in land. As such, it confers the greatest rights in relation to land and the greatest degree of power that can be exercised over the land; and, for that reason, it ordinarily has the greatest economic value of any estate in land. Lesser estates in land confer lesser rights in relation to land and, therefore, a lesser degree of power exercisable over the land; and, for that reason, they ordinarily have a lesser economic value than a fee simple interest in land.’ The word ‘fee’ comes from the feudal system and refers to the inheritability of the estate. The word ‘simple’ indicates that the inheritable status is unrestricted. A fee simple estate may therefore be inherited by anyone. A fee simple estate may be created where the transferor holds such an estate and intends to transfer it to the transferee. Usually, the transfer documents will indicate that the transferor is conferring a fee simple estate 253

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and appropriate words of limitation will make this clear. However, in the absence of any words of limitation, legislative provisions may raise presumptions. In Queensland, the Property Law Act 1974 (Qld) s 29 makes it clear that in the absence of words of limitation,  a  disposition of freehold land shall confer upon the transferee ‘the whole interest which the disponor had power to dispose’, and therefore presuming an intention to transfer a fee simple. In other states, in the absence of words of limitation it is initially presumed that the transferor intended to transfer a fee simple estate and the presumption may be rebutted  by evidence of a contrary intention in the conveyance.  See  Property Law Act 1958 (Vic) s  60;  Property Law Act 1969 (WA) s  42; Property Law Act 1974 (Qld) s 29; Law of Property Act 1936 (SA) s 37; Law of Property  Act (NT) s 29; Conveyancing  and  wLaw of Property Act 1884 (Tas) s 75; Conveyancing Act 1919 (NSW) s 47 extracted below. EXTRACT Conveyancing Act 1919 (NSW) — s 47 47  Words of limitation in fee (1) In a deed it shall be sufficient in the limitation of an estate in fee simple to use the words in fee or fee simple without the word heirs, or in the case of a corporation sole without the word successors, or to use the words in tail or in tail male or in tail female, without the words heirs of the body, or heirs male of the body, or heirs female of the body. (2) Where land is conveyed to or to the use of any person without words of limitation, such conveyance shall be construed to pass the fee simple or other whole estate or interest the person conveying had power to dispose of by deed in such land unless a contrary intention appears by such conveyance. (3) This section applies only to deeds executed after the commencement of this Act.

Section 47 of the Conveyancing Act 1919 (NSW) will only apply to a fee simple created in a deed: s 47(3). Thus, the question of whether or not an equitable interest, created in the absence of a deed, was intended to confer a fee simple or otherwise, must necessarily depend upon an assessment of the transferor’s intentions and is not subject to any statutory presumption: Sexton v Horton (1926) 38 CLR 240. The Electronic Conveyancing (Adoption of National Law) Appendix 2012 (NSW) now sets out in s 9 that a registry instrument that has been digitally signed will take effect as if it is in writing and has complied with all of the legal requirements relating to execution, signing, witnessing, attesting or sealing. This means that a fee simple may now be created by a digitally signed registry instrument. Section 9 is extracted below: EXTRACT Electronic Conveyancing (Adoption Of National Law) Act 2012 — Appendix 9 Status of Electronic Registry Instruments (1) A  registry instrument  that is in a form in which it can be lodged electronically under section 7 has the same effect as if that instrument were in the form of a paper document. 254

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(2) A registry instrument that is digitally signed by a subscriber in accordance with the participation rules applicable to that instrument has the same effect as if a paper document having the equivalent effect had been executed by: (a) if the subscriber signs under a client authorisation, each person for whom the subscriber signs in accordance with the client authorisation, or (b) the subscriber in any other case. (3) If a registry instrument is digitally signed in accordance with the participation rules applicable to that instrument: (a) the instrument is to be taken to be in writing for the purposes of every other law of this jurisdiction, and (b) the requirements of any other law of this jurisdiction relating to the execution, signing, witnessing, attestation or sealing of documents must be regarded as having been fully satisfied.

Life estate 5.13  The second type of freehold estate legally recognised is the life estate. A life estate

will endure for the duration of a life — whether that life be the life of the grantee or the life of a third party (such as the grantor). A life estate will arise where clear words of limitation are included within a transfer that indicate that the transferee is to retain ownership of the land for the duration of a human (as opposed to corporate or animal) life. A life estate sa vie will arise where the life estate is to exist for the duration of the grantee’s life: for example, ‘To A for life’. A life estate pur autre vie will arise where the life estate is to exist for the duration of a life other than that of the grantee: for example, ‘To A during the life of B’. One of the difficulties with the life estate pur autre vie is that, as it is not a fee estate, it is not inheritable. Thus, if the grantee dies but the life upon which the estate is based is still alive and the estate is continuing, there is no provision, under common law, for the holder to pass the life estate on. In this situation, it used to be the case that the estate was acquired by the first person to obtain seisin by occupation. This was known as a ‘general occupancy’. These difficulties are now largely resolved by legislation which specifically allows the life estate pur autre vie to be passed with the rest of the estate to those entitled under the will: see, for example, Wills Act 1997 (Vic) s 4; Wills, Probate and Administration Act 1898 (NSW) s 5; Succession Act 1981 (Qld) s 8. The grant of a life estate is not inconsistent with the recognition of a fee simple. The two estates are different. Once a life estate expires, the land may revert to the grantor or to another. During the currency of the life estate, the fee simple will exist as either a reversion or a remainder interest (see 5.16). The holder of each is free to deal with their respective separate and distinct interests as they see fit, and may hold those interests subject to any number of personal rights arising from those dealings (Isin v Ozen [2017] NSWCA 316 at [60] per White JA). Restrictions apply to all life estate holders that govern the way in which the land must be managed. The purpose of these restrictions is to ensure that the life estate holder does not unduly depreciate or damage the interests of the remainderman or reversioner. The primary restriction lies in the fact that a life estate holder is liable under what is known as the doctrine of waste for any voluntary waste (positive acts of injury to the land: see Imperial Acts Application Act 1969 (NSW) s 32) or equitable waste (the unconscientious exercise of legal ownership rights) unless expressly exempted under the instrument creating the interest. The doctrine of waste seeks to balance the desires of the life tenant to make productive use of property against the remainderman’s desire to receive the property in 255

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substantially unimpaired condition. As a general principle, the doctrine of waste requires that the life tenant not cause or permit material decrease in the value of the property. The action for waste has always been preventive in nature. In order to deter tenants from harming the interests of absent owners, the Statute of Gloucester 1278, provided that the absent owner could recover treble damages against the tenant for committing waste. Waste comes in three varieties: permissive, voluntary and ameliorative. Permissive waste is a form of nonfeasance. Hence if the nonfeasance of the life tenant harms the remainderman’s interest in the property, the action may be raised. Voluntary waste is a form of misfeasance. If the life tenant’s misfeasance causes positive damage to the property and therefore the interest of the remainderman it may be raised. Ameliorative waste is the least common form of waste and arises in circumstances where changes are made to the land; however, it is unclear whether the changes will add or detract from the value of the property. For example, if a life tenant decides to remodel property into a warehouse conversion it may be unclear whether this development should be approved. The reasonableness of the alteration must be taken into account: As outlined by Lord Coleridge CJ in Manchester Bonded Warehouse Co Ltd v Carr (1880) 5 CPD 507 at 512, ‘… any use of [the demised premises] is in our opinion reasonable provided it is for a purpose for which the property was intended to be used, and provided the mode and extent of the user was apparently proper, having regard to the nature of the property and to what the tenant knew of it and to what as an ordinary business man he ought to have known of it’.

Future interests: remainder and reversion 5.14  A future interest differs to a freehold estate because it is not vested in possession.

A future interest confers immediate title; however, possession is deferred until a future date. Future interests arise to deal with the surplus that exists when life estates and leasehold interests are created. The limited duration of some land interests (eg, life estates and leases) makes it necessary to establish a framework to regulate what happens to the land upon the expiration of those interests. Title to the future interest will vest at the point when the life estate or leasehold interest is created; however, possession will not vest until the expiration of those interests. Hence, when the life estate or the leasehold interest expires, the future interest is elevated into a full estate. There are two forms of future interests: the remainder and the reversion. The remainder interest arises where a grantor expressly sets out that the remainder of the estate is to pass to a third party and should be created by the same instrument that creates the underlying life estate. The reversion interest will arise presumptively in circumstances where the grantor does not set out in whom the estate is to vest. The primary distinction between each form of future interest is that the remainder is expressly created whereas the reversion operates presumptively. This necessarily means that a reversion interest is presumed to vest in the original grantor and to constitute the same estate as was originally held by the grantor. By contrast, as the remainder is expressly created, it can vest in any third party provided the appropriate deed is executed and the remainder can constitute either a fee simple or a life estate, whatever the words of limitation indicate. As outlined by Justice Palmer (Fairbairn v Varvaressos (2010) 78 NSWLR 577 at [90]): Estates in reversion arose when the holder of an estate made a grant of an estate that did not exhaust his own estate — at the conclusion of the estate that had been granted, the seisin in the land would revert to the grantor (or his heirs or assigns) for the time that represented the balance of the grantor’s estate. Estates in remainder arose when, after the grant of one estate, a grantor granted a further estate that would entitle the holder to seisin at the conclusion of the

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first estate that had been granted — the seisin in the land would remain away from the grantor for the duration of that second estate.

The common law position regarding remainder interests has been modified by statutory provisions. Section 30 of the Property Law Act 1974 (Qld) and s 30 of the Law of Property Act (NT) set out that a future interest (defined to include legal contingent remainder interests and legal executory interests in land) that is validly created after the commencement of the Act, is to take effect as an equitable rather than a legal interest. EXAMPLE (i) A owns Greenacre. A grants a life estate to B during A’s life and the remainder to C absolutely. In this situation, provided the grant is effective, B will acquire a pur autre vie life estate that will endure for A’s life and C will acquire a fee simple remainder that is vested in title but that will only vest in possession (and be elevated to a full fee simple) when A dies. (ii) A owns Brownacre. A grants a life estate to B during A’s life and does not specify what is to happen when A dies. In this situation, B will acquire a pur autre vie life estate that is to endure for the life of A and A will acquire a fee simple reversion (fee simple because that is the estate A originally had) that will vest in title immediately. During A’s life, A will retain title to a fee simple reversion. When A  dies, B’s pur autre vie life estate will expire and the fee simple reversion will vest in possession and be elevated to a full fee simple estate with A’s estate, subject to the proper administration of probate.

Vested and contingent interests 5.15  All estates and interests expressly created may be subject to conditions or limitations

imposed upon them by the grantor. The effect such conditions have upon the vesting of title will depend upon their characterisation. In order to vest an estate or interest in land, it must be clear that the recipient of the estate or interest was intended to take it prior to the specified event occurring. Generally, where there is a doubt as to the time of vesting, there is a presumption in favour of early vesting and this is particularly true in the context of wills. A bequest making no reference to the time of vesting takes effect at the testator’s death unless this date would disturb provisions already made in the will, or unless there is a clear intention that the bequest shall operate at a later date. A will continues to be ambulatory until death, hence a testator cannot make a gift vest at a date earlier than his death.1 The grantee of a vested interest will be ‘immediately clothed’ with that interest: Fairbairn v Varvaressos (2010) 78 NSWLR 577 at [90]. A contingent remainder is therefore subject to a condition that must be complied with before title will transfer to the grantee. In the words of William Blackstone, a contingent estate is ‘an estate in remainder limited to take effect either to a dubious and uncertain person or upon a dubious and uncertain event so that the particular estate may be determined and the remainder never take effect’ (William Blackstone Commentaries Book 2 at p 169). Whether an estate is vested or contingent will depend upon how the conditions are worded and the intention of the grantor. Conditions that must be complied with before title may be granted are best characterised as conditions precedent. By contrast, conditions that are intended to regulate the way in which land is used, anticipate the vesting of title 1. See the outline in Williams on Wills, 9th ed, 2008, at 93.1. 257

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and are best characterised as conditions subsequent. Sometimes a condition will amount to determinable limitations. Unlike contingencies, determinable limitations define the boundaries of the estate. Hence, once a limitation has been met, the estate will expire and the land will revert to the grantor. The possibility of a reverter, which arises in the context of a determinable limitation, is characterised as a vested interest and therefore beyond the application of the rule against perpetuities: Crabb Foundation v Corbett-Jones [2006] NSWSC 495 at [42] per Brereton J; Freemasons Hospital v Attorney-General (Vic) [2010] VSC 373 at [109]. Where a condition is imposed and it constitutes a condition subsequent, a failure to comply will raise a right of re-entry in the grantor but will not automatically extinguish title. It can be difficult to determine the nature of a condition on title. If, in substance, the condition defines the estate and it is clear that the estate cannot vest until the condition is complied with, it will generally amount to a condition precedent. There is, however, a judicial preference favouring the construction of a grant of property rights in a way that results in early vesting. In Hume v Perpetual Trustees Executors and Agency Company of Tasmania Limited (1939) 62 CLR 242, Dixon J at 265 stated: ‘The rule for the guidance of the court in construing devises of real estate is that they are to be held to be vested unless a condition precedent is expressed with reasonable clearness’. See also Duffield v Duffield [1827] EngR 56; 6 ER 525 at 542. Alternatively, where the condition describes the mode of occupation or use for which the land should be put, it is more likely to constitute a condition subsequent because it anticipates the vesting of title. Finally, where the condition indicates that the estate is to endure until the point where a particular event or circumstance occurs, it is possible that the condition actually constitutes a determinable limitation and therefore defines the actual duration of the estate. Australian courts have indicated a strong preference for construing an estate to be vested rather than contingent. In Hume v Perpetual Trustees Executors and Agency Company of Tasmania Limited (1939) 62 CLR 242 at 265 Dixon J said: The rule for the guidance of the court in construing devises of real estate is that they are to be held to be vested unless a condition precedent is expressed with reasonable clearness [Bickersteth v Shanu] (1936) AC [290] at 299. As Warrington LJ in Re Blackwell [1926] 1 Ch 223 at 233 expressed it, ‘the court is inclined rather to hold an estate to be vested than contingent if the words of the will will allow it to do so’.2 EXAMPLE A owns Blackacre. A grants a life estate to B for A’s life and remainder to C when C turns 21. B gets a pur autre vie life estate. While A is alive, C acquires a contingent fee simple remainder. The condition attached to the fee simple remainder is an age requirement; C must turn 21 before it will be satisfied. Such a condition will generally constitute a condition precedent because it is clear that C must turn 21 before the remainder can vest in title. In this example there is a possibility that C will not turn 21 and the remainder will not vest. This means that until C turns 21 and the remainder vests in title, A retains the 2. For a more recent discussion of this see Fairbairn v Varvaressos (2010) 78 NSWLR 577, 234 at [73]–[76] per Campbell JA; Application by Elizabeth Marie Robinson [2015] NSWSC 1387 at [17] per Rein J. 258

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‘possibility of a fee simple reverter’. As soon as C turns 21, the remainder interest will vest in title as the condition precedent has been satisfied. When A dies the remainder will then vest in possession and C’s remainder interest will be elevated into a full fee simple.

Determinable or conditional? 5.16  An estate vests in title when there is either no condition precluding vesting or the

condition has been satisfied. A contingent estate is essentially an expectancy; the estate will vest in title when the condition has been complied with and/or the possibility of the estate being ‘divested’ will be lost where the condition is complied with. Whether an estate is vested or contingent will depend upon the nature of the condition. A condition precedent attached to an estate will prevent the estate from vesting until the condition is satisfied. By contrast a condition subsequent attached to an estate will allow the estate to vest subject to the right of the grantor to re-enter if the condition is not complied with. A reversionary interest will always be vested as it operates automatically. The ‘possibility of a reverter’ is akin to a conditional estate because it exists to manage the situation where a condition precedent is not complied with or where an estate is extinguished because a determinable limitation has been met. A conditional estate should be distinguished from a simple limitation as to time that is not conditional and is not expressed to be so. A determinable limitation, which can be attached to an estate, is essentially a consent for the estate to be used for a period of time in a particular manner. Usage of the estate will only endure so long as the subject land is used in that particular way. When that particular use ceases, so does the consent.3 An estate subject to a determinable limitation is vested; however, once the limitation is reached, the estate expires. In this sense, the limitation defines the boundaries of the estate. As outlined by Lord Collins in Belmont Park Investments Pty Ltd v BNY Corporate Trustee Services Ltd [2012] 1 AC 383 at [87]: ‘A determinable interest is an interest the quantum of which is limited by the stipulated event, so that the occurrence of that event marks the end of the duration of the interest, whereas a defeasible interest is one which is granted outright and then forfeited.’ In assessing the type of condition to which an estate is subject to, it is necessary to evaluate the words used and the overall context in order to determine the intention of the grantor. EXAMPLE (i) If A grants an interest to B for life with remainder to C when C turns 21, B acquires a life estate sa vie, and C acquires a contingent legal remainder that will vest when C turns 21. A retains nothing but the ‘possibility’ of a reverter if C does not turn 21 and satisfy the condition precedent. The possibility of a reverter floats while the condition has the potential to be complied with. It will crystallise once the condition fails. (ii) If A grants an interest to B for life with remainder to C provided C retains the land for agricultural purposes, B acquires a life estate sa vie, and C acquires a legal remainder that is subject to a condition subsequent. This means that the remainder interest is vested in title but capable of being divested at the option of either A or

3. See Adelaide Pistol Club Inc v District Council of Munno Para and Another (1981) 45 LGERA 119 at 124 per Wells J. See also Hilltop Planners Pty Ltd v Great Lakes Council [2003] NSWLEC 214 at [36] per Talbot J. 259

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A’s estate if the condition concerning agricultural use is not complied with. This is a condition subsequent rather than a determinable limitation because the activities it describes anticipate the vesting of title to land and it sets out an ongoing restriction rather than an event that defines the boundaries of the estate. (iii) If A grants a fee simple to B ‘until the land is re-zoned’, it is arguable that B will acquire a fee simple that is subject to a determinable limitation. The intention of the grantor was to confer a full fee simple estate; however, the re-zoning appears to define the boundary of the estate so that when the land is re-zoned, the estate will be extinguished and will revert back to the grantor. The grantor retains the possibility of a reverter until it is clear that the land will not be re-zoned. If the land is re-zoned, the possibility will crystallise and the land will revert to A.

5.17  The factors that are relevant to an assessment of whether a condition subsequent or

a determinable limitation exists are considered in the following decision. The disposition in question involved a gift that, on the facts, was held to be subject to a requirement that the plaintiff continue to cohabit with the defendant. Crisp J concluded that this requirement constituted a condition subsequent rather than a determinable limitation. During the course of the judgment, his Honour considered factors relevant to assessing whether an estate was subject to a determinable limitation or a condition subsequent.

  Zapletal v Wright  [1957] Tas SR 211 Facts: The plaintiff and the defendant were the registered proprietors of land as joint tenants at Bellerive. The defendant was separated from his wife and cohabited with the plaintiff for 15 years until 1955 during which time two children were born. The land was bought in 1951 by the defendant who agreed to put it in both names; however, the trial judge found that the defendant had intended to confer a conditional gift on the plaintiff. The condition was found to have been that the plaintiff continue to cohabit with him because the defendant had been concerned that the plaintiff might leave. The question for the court was whether this requirement amounted to a condition subsequent or a determinable limitation and further, what the consequence would be upon the plaintiff’s title of striking down such a condition. Crisp J: … 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. (Re Moore (1888) 39 Ch D, 116) … 260

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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. … In my opinion, therefore, the plaintiff took by way of gift as joint tenant in fee simple free from the condition which is void …

Commentary 5.18  The distinction between the condition subsequent and the determinable limitation

has been described as ‘extremely artificial’: Re Sharp’s Settlement Trusts [1973] Ch 331 at 340 per Pennycuick VC. The difference was explained by Gummow J in Cabouche v Ramsay (1993) 119 ALR 215, at 227 in the following way: … a distinction must be drawn between the grant of an absolute interest with a condition subsequent which attempts to terminate the interest and the grant of a determinable interest. The distinction, in the words of Professor Williams in his article ‘The Doctrine of Repugnancy’ (1943) 59 LQR 343 at 352, is ‘between a grant to A, but if he alienates then to B’, where the gift over is void, and a grant ‘to A until he alienates, and then to B, where the gift to A comes to an end if he purports to alienate it’. Criticism has been levelled at this doctrine on the grounds that distinctions such as this are purely semantic: see, for example, the article by Professor  Williams. However, the two cases described above are logically distinct and the difference between them is well-settled and fundamental. In the first case, the donor is attempting to take back something which he has given absolutely, something which is beyond his power. In the second case, the donor is merely defining the nature of that being given. It is necessary in each case to construe the instrument creating the proprietary interest in question to determine into which category the interest falls.

On the facts of Cabouche, Alan Bond was the sold member of a superannuation fund that purported to forfeit any benefit to which he was entitled if he should become bankrupt. The court concluded that this clause amounted to an interest subject to a condition subsequent rather than a determinable limitation, and that the condition was invalid, which allowed the superannuation entitlement to remain vested despite the bankruptcy of Mr Bond. Gummow J noted that the interest could not be defeasible because it was not defined to endure until the bankruptcy or other event, but rather was defined in terms of termination and forfeiture.4 Similarly, in Crabb Foundation v Corbett-Jones [2006] NSWSC 495 at [58] Brereton J described the ‘logical and conceptual difference’ between the condition subsequent and the determinable limitation, ‘namely that in the case of a determinable fee, the donor is defining and limiting what is being given, whereas in the case of a conditional fee, the donor is attempting to create a right, upon occurrence of the event, to take back what is otherwise given absolutely’. His Honour went on to note at [60] that typically, words included in but qualifying the grant — such as ‘while’, ‘during’, ‘as long as’, and ‘until’ — create a determinable fee, whereas separate clauses of defeasance — such as ‘provided that’,

4. See discussion by S Grattan, ‘Rehabilitating Repugnancy: Preserving that Piece of Medieval Lumber’ (2019) 42(3) Melbourne University Law Review 921. 261

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‘on condition that’, ‘but if ’, or ‘if it happen that’ — operate as a condition subsequent.5 The distinction between the two has been criticised as being unclear and grounded in uncertain verbal nuances; however, it is well established and, despite suggestions to the contrary, has not been abolished.6

Legal contingent remainders 5.19  Remainder interests are often contingent because a condition precedent commonly

exists that, until satisfied, prevents title in the remainder from vesting. Hargreaves and Helmore, An Introduction to the Principles of Land Law (New South Wales), Lawbook Co, Sydney, 1963, p 45 describe the contingent remainder in the following way: A contingent remainder has been defined as ‘a remainder limited so as to depend on an event or condition which may never happen or be performed or which may not happen or be performed till after the determination of the preceding estate’, or to quote Blackstone again, ‘an estate in remainder limited to take effect either to a dubious and uncertain person or upon a dubious and uncertain event so that the particular estate may be determined and the remainder never take effect.’ A contingent remainder is not an estate; at most it is a possibility that an estate may be acquired in the future. So, if land be given to A, a bachelor, for life, with remainder to his eldest son, it is clear that, despite the use of the word ‘remainder’, there is no one in whom an estate in remainder may vest. Again, in a grant to A for life with remainder to B if he attain the age of twenty-one, although there is a person in existence clearly identified by the grant, he is not intended to acquire his estate until he attains the given age. In both instances, not only is there a postponement of seisin, as in all remainders, but also no estate arises until the fulfilment of a contingency. As there is no present estate, there is no ‘thing’ entitled to a name, and perhaps the expression ‘contingent remainder’ is best reserved for the form of the grant, and not applied to the interest thereby created, though, having regard to the long established practice, this is probably a counsel of perfection.

In Fairbairn v Varvarassos (2010) 78 NSWLR 577, Campbell J at [98] concluded that a legal contingent remainder is not an estate in land, but a ‘a species of property’. In that case, Campbell JA (with whom Young JA and McFarlan JA agreed) argued that contingent remainder interests are ‘definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability’.7 The contingent remainder is capable in its nature of assumption by third parties, because it is assignable inter vivos and by will.8 Further, his Honour argued that an equitable contingent remainder is assignable in equity for value, provided the intent to assign is clear.

Legal remainder rules 5.20  Legal contingent remainder interests are remainder interests that, being subject to

a condition precedent, have not vested in title. These interests will not vest in title until

See also Re Tilbury West Public School Board and Hastie (1966) 55 DLR (2d) 407, 410–411; Freemasons Hospital v Attorney-General (Vic) [2010] VSC 373 at [74], noting that an interest which reverts at the end of a determinable limitation is to be characterised as ‘vested’ in nature. 6. The Victorian Law Reform Commission recommended that the distinction be abolished so that determinable fees simple be converted into conditional fees simple as it would better reflect the overall intention of the grantor: Victorian Law Reform Commission, Review of the Property Law Act 1958 (Final Report No 20, 29 October 2010) 70–3 [5.42]–[5.63]. 7. See also Lord Wilberforce, National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1248; Re Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 342 per Mason J. 8. See Perpetual Trustee Company (Ltd) v Scheiler (1948) 49 SR (NSW) 169. 5.

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the condition is complied with and up until this point are expectancies only. Both legal contingent remainders and legal remainders are subject to a range of specific common law rules that, where contravened, may result in the court holding that the remainder interest is void. These rules have evolved as logical constituents of the existing principles. The rules may be summarised as follows: (i) Remainder interest must vest, if at all, before or at the point of the expiration of the life estate. For example: A transfers to B for life remainder to C when she turns 21. B holds a life estate sa vie and C holds a contingent remainder. If C is 18 when B dies, and the contingency is not satisfied, the contingent remainder will be struck down under common law. Rationale: if the contingency is not satisfied (or capable of being satisfied) at the point when the life estate expires, seisin cannot vest and this is a vital characteristic for all freehold estates. The issue of where title is to vest cannot be uncertain otherwise common law will strike down the remainder. This common law rule is subject to a range of statutory exceptions. Section 16 of the Conveyancing Act 1919 (NSW) and s 25 of the Law of Property Act 1936 (SA) both set out that a contingent remainder interest is capable of taking effect, notwithstanding the want of a particular estate of freehold to support it, in the same manner as it would take effect if it were a contingent remainder of an equitable estate supported by an outstanding legal estate in fee simple. These sections suggest that the expiration of a life estate prior to the satisfaction of the contingency will not invalidate the remainder interest and it will be treated as supporting an equitable fee simple. Section 26 of the Property Law Act 1969 (WA) and s 191 of the Property Law Act 1958 (Vic) take a similar approach although the provisions make it clear that a contingent remainder may take effect notwithstanding the destruction of the preceding estate ‘in the same manner and in all respects as if the destruction or determination had not happened’. These provisions suggest that the expiration of the life estate prior to the contingency being satisfied will have no effect upon the continuing enforceability of the contingent remainder interest. (ii) Remainder interests cannot be created following a fee simple. For example: A transfers her fee simple to B and then transfers a remainder interest to C. The remainder will be invalid under common law because the entire estate has passed to B Rationale: the entire title has already passed to the holder of the fee simple; there is nothing left to pass under a remainder. (iii) Remainder interests cannot reduce a life estate. For example: A transfers a life estate to B and a remainder to C when B turns 50. If B is alive at 50, the contingent remainder cannot vest in possession. Rationale: a remainder cannot vest before the life estate expires because a remainder cannot diminish the scope of a freehold estate. (iv) Remainder interests can only exist where they are supported by an existing freehold estate. For example: A transfers a leasehold interest to B for 20 years, remainder to C. The remainder interest will be struck down at common law because it cannot support a leasehold estate. Rationale: remainder interests cannot be created over non-freehold (leasehold) interests because traditionally they only support the life estate. 263

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Australian Property Law

The scope of these rules illustrates some of the problems associated with estate planning under the common law and highlights one of the primary motivations for the evolution of the use, which eventually evolved into what is known in contemporary law as the trust. Increasingly, during the latter part of the fifteenth century and into the sixteenth century, land owners utilised the ‘use’ for estate planning. This meant that they transferred the land to a ‘feoffee to uses’ who was to hold that land for the use of the ‘cestui que use’. The entitlement of the cestui que use was enforceable by the Court of Chancery as a proprietary interest as it bound all those who acquired an interest in the land except those who were bona fide purchasers for value of a legal interest without notice of the existence of the ‘beneficial’ interest held by the ‘cestui que use’. This practice was considerably impacted by the introduction of the Statute of Uses in 1535, which set out that any person who was seised of lands to the use of any other person was to be deemed as holding a legal estate. In effect, this converted the beneficial interest back into a legal estate. This had a significant effect on Chancery practice and encouraged the development of what came to be known as a ‘use upon a use’, whereby land was given to X to the use of Y to the use of Z. The Statute of Uses vested the legal estate in Y but this did not affect the further creation of the beneficial interest in Z. The enforcement of the ‘use upon a use’ became common practice by the Court of Chancery in the late seventeenth century: see P Baker, ‘The Use upon a Use in Equity 1558–1625’ (1977) 93 Law Quarterly Review 33. The use upon a use eventually came to be known as the trust. The terminology changed so that the phrase ‘on trust for’ replaced ‘to the use of ’ and it indicated that the legal interest holder was to hold for the benefit of the beneficiary who acquired the proprietary title. Eventually, trusts could be created by conveying land ‘unto and to the use of ’ the trustee, ‘upon trust for’ the beneficiary. Today, the trust has become one of the most popular devices for estate planning as it confers legal ownership over the trust property to the trustee (feoffee to uses) for the benefit of defined beneficiaries (cestui que uses) who hold a separate beneficial entitlement that is enforceable in the equity jurisdiction. The Statute of Uses did, however, have a positive effect because it allowed land holders to avoid the common law restrictions associated with limitations on estates. The Statute of Uses assumed that where land was, for example, given to X to the use of Y when Y turns 21, legal title would remain in X as the grantor until it could shift or ‘spring up’ in Y, the beneficiary, upon Y turning 21. By vesting full legal title in X and then extinguishing that title upon the satisfaction of the limitation, the difficulty of upholding strict common law rules was avoided. Section 44(2) of the Conveyancing Act 1919 (NSW) subsequently made it clear that limitations which were made by way of a use, pursuant to the Statute of Uses, could henceforth be made without the intervention of uses. Section 30 of the Property Law Act 1974 (Qld) sets out that a future interest created after the commencement of the Act, defined as a legal contingent remainder or legal executory interest, shall take effect as an equitable rather than a legal interest. The Statute of Uses was, however, repealed by the Imperial Acts Application Act 1969 (NSW), which came into effect on 1 January 1971. Section 19A of the Property Law Act 1958 (Vic) makes it clear that interests in land that, under the Statute of Uses, were treated as legal estates, may now be capable of being created as equitable interests. See also Property Law Act 1974 (Qld) s 7.

264

The Doctrine of Tenure and Estates

5.21

EXAMPLE If A grants a life estate to B for his life, remainder to C when C turns 21, and B dies before C turns 21, C’s interest may be struck down under common law and the estate will revert to A. In equity, if B is trustee of the fee simple for C — then B retains legal ownership provided he complies with trustee obligations, for the benefit of C. The legal ownership of B arises from the transfer of the land to the trustee — which ensures that B acquires valid legal ownership. The equitable beneficial interest held by C arises because of the simultaneous execution of a deed of trust indicating that B is to hold that legal estate ‘on trust’ for C. These words of obligation confer an equitable duty on B that the equitable jurisdiction, in fairness and conscience, will enforce. These personal obligations form the foundation of C’s beneficial ownership in the trust property.

Overview of Estates 5.21  This overview is intended to provide a step-by-step guide to evaluating an estate

issue in an exam problem and pinpoints issues from other chapters that may also need to be examined. (i) What type of estate or interest is it? Freehold: Fee Simple; Life Estate

The first and most important question to consider is what type of estate the grantor intended to create. If a freehold interest was intended, the words of limitation or statutory presumptions must support this. The freehold estate exists for an indefinite duration of time and carries seisin. The fee simple is capable of being inherited, whereas the life estate is not an inheritable estate and ceases at the expiration of the life upon which it is based. The fee simple does not have to be created by specific words of limitation and may be presumed (provided the grantor has such an estate) in the absence of any evidence to the contrary by relevant statutory provision.

Life estate: sa vie; pur autre vie

If the estate is a life estate because words of limitation exist that limit the estate to a life, upon whose ‘life’ is the estate limited? If it is that of the grantee, it will constitute a life estate sa vie and will expire when the grantee dies. If it is based upon the life of a third party, it is a pur autre vie estate and will exist for the duration of the third party’s life. This means that the  estate may exist beyond the death of the holder if the third party is still alive at that date. As the life estate is not inheritable under common law, the life estate pur autre vie may, in these circumstances, be passed according to relevant succession legislation.

265

5.21 Non-freehold: Lease; Fixed; Periodic; at Will; at Sufferance

Australian Property Law A lease will arise where exclusive possession to the land has been conferred for a certain period of time and the lease is recognised either at law or in equity. Further consideration of the lease is given in Chapter 7. Consider also the status of the will as a fixed or periodic tenancy or a tenancy at sufferance or tenancy at will.

Future Interest: Remainder; Remainder: A future interest that is expressly created Reversion will vest in title but not possession. Possession is deferred until the expiration of the life estate. The remainder is a contingent remainder where a condition precedent is attached to it that must be satisfied before title to the remainder can vest. If a legal contingent remainder exists, the holder has no title but a mere expectancy. If the contingency is not satisfied prior to the expiration of the preceding estate (which must be a life estate), it will be void under common law but may be validated under relevant statutory provisions. Reversion: A future interest will arise presumptively where a surplus (following a life estate or a lease) is not dealt with or where a contingent remainder does not vest or where a determinable limitation has extinguished the estate. A reversion arises automatically and mirrors the primary estate held by the original grantor. (ii) Does the estate or interest comply with the legal formalities for creation? Have all the statutory requirements for the creation of a legal estate been complied with? If not, the estate or interest will be invalid. To validly create a legal estate in land, the interest must be executed by deed: see, for example, Property Law Act 1958 (Vic) s 52(1). Electronic conveyancing now sets out that a registry instrument that has been digitally signed in accordance with the participation rules is taken to be in writing, having satisfied the requirements for witnessing, attestation and sealing (Electronic Conveyancing (Adoption of National Law) Act 2012 (NSW) Appendix, s 9). A lease taken in possession for three years or less may be legally created without having to execute a deed because it is specifically exempted from the formality requirements: see, for example, Property Law Act 1958 (Vic) s 54(2). This is discussed extensively in Chapter 10 at 10.2 and is relevant to the proper creation of legal estates in law. Further, the Statute of Frauds requirements in each state require interests in land to be in writing if they are to be enforceable unless a recognised exception is established. Statutory formalities and the Statute of Fraud requirements are discussed further in Chapter 10. 266

The Doctrine of Tenure and Estates

5.21

(iii) Is the estate vested in possession? Is the estate vested in title or is it subject to a contingency? All expressly created estates may have conditions attached to them that prevent or affect the vesting of that title. A condition precedent will prevent the estate from vesting in title. A condition subsequent will allow the estate to vest in title but will be subject to a right of reentry by the grantor where the condition is breached. If the estate has a determinable limitation, the limitation will mark the boundary of the estate so that the estate will expire as soon as the limitation is met. Whether a title is subject to a condition precedent or to a condition subsequent or a determinable limitation will depend upon the words used and the overall intention of the grantor. Words such as ‘during’, ‘while’, ‘so long as’ and ‘until’ tend to indicate that the estate or interest is to vest but is conditional upon the satisfaction of a particular event. This would be consistent with a condition subsequent. By contrast, words or phrases such as ‘when’, ‘provided that’, ‘on condition that’, or ‘but if’ indicate an intention that title cannot vest until the event has occurred and this would be consistent with a condition precedent. Where the words used indicate the extent or boundary of the estate, such as ‘until’ or ‘upon this event happening’, it is possible to interpret the intention of the grantor as consistent with a determinable limitation which means that the estate will be extinguished when the event occurs. (iv) Reasons why a condition attached to an estate may be invalidated. There are a range of reasons why a condition that is attached to an estate or interest may be struck down as void or contrary to law. Where the condition is a condition subsequent and it is struck down it will not affect the vested title. Where the condition is a condition precedent and it is struck down no title will vest at all. Conditions may be struck down because they are: Void for public policy or because they are illegal or immoral. The scope of the contra bonos mores (against good conscience) principle was raised in Zapletal v Wright. A condition may also be struck down where it amounts to a restraint on alienation (see ‘doctrine of repugnancy’ rationale discussed in Chapter 6).

267

5.21 Have the legal contingent remainder rules been infringed?

Australian Property Law If a legal contingent remainder interest is created it is necessary to consider whether, on the facts of the problem, it offends the common law rule that requires the contingency to be satisfied at or before the expiration of the life estate. If this has not occurred, is it possible to save the remainder interest under relevant state legislative provisions that protect against such an event? Also, it may be necessary to consider whether the contingent remainder interest offends the Rule Against Perpetuities that is also discussed in Chapter 6.

5.22 Revision Questions 1. What is the difference between a remainder and a reversion interest? 2. Explain exactly what the ‘possibility’ of a reverter is. 3. Why was the condition in Zapletal v Wright held to be a condition subsequent rather than a determinable limitation and what was the effect of this conclusion? 4. If an interest is vested in title does that mean it must always be vested in possession? 5. What is the rationale for the common law rule that a contingency attached to a legal remainder must be satisfied before or at the expiration of the prior life estate? How, if at all, do the relevant statutory provisions protect against the effect of this rule?

268

Chapter 6

Restraints on Alienation and the Rule Against Perpetuities Scope and Purpose of the Rule Restraining Alienation 6.1 Case: Hall v Busst 6.2 Commentary 6.3 Case: Nullagine Investments Pty Ltd v Western Australian Club Inc 6.4 Commentary 6.5 Case: Elton v Cavill (No 2) 6.6 Commentary 6.7 Public policy and inalienability 6.8 Revision Questions 6.9 The Rule Against Perpetuities 6.10 Common law rule 6.10 Case: Cram Foundation v Corbett-Jones 6.12 Commentary 6.13 Scope of the common law rule 6.14 Life in being 6.15 Certainty requirements 6.16 Statutory rule against perpetuities 6.17 Class gifts 6.18 Class-closing rules 6.19 Case: Yeomans v Yeomans 6.20 Commentary 6.21 Case: Understanding the Rule Against Perpetuities: Adopting a Five Step Approach to a Perpetuities Problem 6.22 The Rule Against Perpetuities: An Overview 6.23 Revision Questions 6.24 269

6.1

Australian Property Law

Scope and Purpose of the Rule Restraining Alienation 6.1  Once an estate in land is created it confers fundamental rights upon the holder. Conceptually, each estate is viewed as conferring upon the holder a ‘bundle of rights’ and common law holds that there are some rights that are so fundamental that they cannot be removed. We know that it is possible for rights within the property ‘bundle’ to be temporarily removed. For example, an estate holder may confer the right to possession upon a third party, creating a lease and transforming the estate into a future interest for the duration of that lease. In this respect, we should not, as Epstein has stated, ‘think that the disaggregation of property rights counts as a disintegration of property rights that will somehow eliminate some irreducible core’.1 Most of the rights in the bundle may be utilised to create other rights without the fundamental property basis being affected. This process may produce confusion because the right that exists in the bundle may not always correspond with the interest that it creates. According to Penner, this is an inherent problem with the bundle of rights analysis because it generates a ‘profound confusion of potentiality with actuality’.2 There is, however, one right in the bundle that has always been treated differently. This  right is regarded as so intrinsic to the property interest that it cannot be removed or even restricted, whether absolutely or temporarily. That right is the right to alienate. Alienability is highly valued. It is derived from the Statute of Quia Emptores 1290, which conferred upon the holder of a tenurial grant the right to assign that grant to a third party. Since this time, the courts have consistently upheld the principle that alienability is so fundamental to land interests that any attempt to remove or restrict it will be struck down. A condition or covenant that has the effect of restraining the right of an owner of land to alienate their title is treated as ‘repugnant’ to the very nature of the land interest: Iniquum est ingenius homiurbus non esse liberam revum suorurn alienationem (it is wrong to free men to restrain the free alienation of their property). The position was summarised in the classic statement by Littleton: If a feoffment be made good upon this condition, that the feoffee shall not alienate the land to any, this condition is void, because when a man is infeoffed of lands or tenements, he has power to alienate them to any person by the law. For if such a condition should be good, then the condition should oust him of all the power which the law gives him, which should be against reason, and therefore such a condition is void. (See Co Lit: Coke upon Littleton (c 1628), being Lord Coke’s Commentaries upon Littleton’s Tenures (c 1841) at 223.)

It has also been outlined by C Sweet in his article, ‘Restraints on Alienation’ (1917) 33 Law Quarterly Review 236 at 236: One of the fundamental principles of law, as we are told on high authority, is that private property should be freely alienable: this principle cannot be infringed either directly, by an absolute owner of property being restrained from exercising his power of alienation, or  indirectly, by future interests being created in such a way as to suspend the power of complete alienation for an unreasonable period.

Restrictions on the right to alienate are regarded as repugnant to land ownership as they contravene public interest principles. Alienability is an ‘enabling’ right, being the source of a land owner’s power to transmit and create other rights. As such, where a condition of 1. R A Epstein, ‘Bundle of Rights Theory as a Bulwark Against Statist Conceptions of Private Property’ (2011) 8(3) Eco Journal Watch 223 at 233. 2. J Penner, ‘Potentiality, Actuality and “Stick-Theory”’ (2011) 8(3) Eco Journal Watch 274 at 278. 270

Restraints on Alienation and the Rule Against Perpetuities

6.1

the conferral of an estate is a restraint on alienation, that restraint may be unenforceable where it infringes the public policy favouring the free alienability of property. This will occur where the condition substantially removes the owner’s power of alienation. Ultimately the question is one of degree. It is possible for some kinds of partial restraint to be valid. In this respect, some forms of inalienability may be justified from a public policy perspective. Inalienability rules have been described as the ‘stepchild of law and economics’ (S R Ackerman, ‘Inalienability and the Theory of Property Rights’ (1985) 85 Columbia Law Review 931 at 931) and as a ‘facet of the right of exclusion’ (W Merrill, ‘Property and the Right to Exclude’ (1998) 77 Nebraska Law Review 730 at 742). Where valid, inalienability rules prevent the free transfer of an entitlement by the holder. These rules can provide significant benefits for the management of natural resources.3 As outlined by L Fennell in, ‘Adjusting Alienability’ (2009) 122 Harvard Law Journal 1403  at  1451, inalienability rules play a strong role in ‘fortifying limits on use and control’ and providing a ‘point of intervention’ for resource tragedies. They can provide an effective solution to the overuse of public resources and the inefficient maintenance of public goods: see  also A Porat, ‘Limited Inalienability Rules’ (2019) 107 Georgetown Law Journal 701). Inalienability rules have been applied to native title rights that cannot be transferred, leased or mortgaged: Mabo (No 2) v Queensland (1992) 175 CLR 1, 59 per Brennan J. This has been justified on a number of grounds, including that alienability is not a right recognised by Indigenous customs and that inalienability protects land and cultural resources for future generations. On the other hand, the inalienability of native title has been criticised because it can impede the economic progression of Indigenous communities: see T J Venn, ‘Economic Implications of Inalienable and Communal Native Title: The Case of Wik Forestry in Australia’ (2007) 64 Ecology Economics 131; E McPherson, ‘Beyond Recognition: Lessons from Chile for Allocating Indigenous Water Rights in Australia’ (2017) 40(3) University of New South Wales Law Journal 1171.) Restrictions on alienability can offer significant benefits for land ownership. Transferable land generates the productive use of resources. S Grattan in ‘Revisiting Restraints on Alienation: Public and Private Dimensions’ (2015) 41(1) Monash University Law Review 67 states at 70: Where property is freely alienable, through the medium of mutually beneficial exchange, it can be acquired by the person who values it most, measured in terms of willingness to pay. Further, satisfaction of the buyer and the seller’s respective individual preferences through such a consensual transaction has a society-wide, or public, benefit as well. Putting resources to their most productive use maximises the total wealth of society.

On the other hand, alienability tends to benefit freehold estates more than non-freehold estates. The right to alienate confers significant economic and security benefits that are largely experienced by freehold owners rather than tenants holding a leasehold estate. As outlined by S Tyer, ‘Home in Australia: Meaning, Values and Law’ (2020) 43 University of New South Wales Law Journal 340 at 380: The ability to dispose of the house is another difference between housing tenures. The right to dispose of their interest is a right freehold owners have. What this means is that freehold owners can realise, in monetary terms, the value of the house through disposal of the asset. Leaseholders — theoretically — also have a right to assign their interest. However, Australian leaseholders cannot practically exercise that right in exchange for financial gain. The short duration of their residential tenancy makes it commercially unappealing, albeit that a right 3. R A Epstein, ‘Why Restrain Alienation?’ (1985) 85 Columbia Law Review 970. 271

6.1

Australian Property Law

to assign it exists. This difference means that, again, freehold ownership might provide a superior home experience. Freehold owners might derive additional security knowing their homes are a financial investment that can be sold (and which will likely appreciate in value). Freehold owners might also be more inclined to invest their identity in a home because they ‘own’ the house, and will be able to realise the value of any improvements through its disposal. Leaseholders in Australia do not benefit in either way; they do not derive financial security because they cannot (commercially and practically speaking), as noted, assign their interest in the house for financial gain, and in turn this might make them reluctant to improve (and so manifest their identity in) the house.

6.2  Most of the cases that deal with restrictions on inalienability concern the validity of contractual restraints, whether partial or whole, upon both land interests and personal property. The classic Australian authority discussing the foundation of the inalienability of land interests is the High Court decision of Hall v Busst (1960) 104 CLR 206. The case is extracted below.

— Hall v Busst — (1960) 104 CLR 206 Facts: A purchaser of an island entered into a contract with the vendor not to transfer, assign or lease any part of the island without the consent of the vendor. Subsequently, the purchaser agreed to sell the island to a third party without the vendor’s consent. The third party went into possession. The vendor sued for damages for breach of contract. The issue before the High  Court was whether the contractual clause preventing the purchaser from assigning or leasing the island without consent was void on the grounds of public policy. Dixon CJ held that, on the facts, the restraint was contractual, imposed by way of a covenant. It was not a condition imposed upon the actual estate. His Honour nevertheless held that the restraint itself amounted to a complete prohibition on the right to alienate as it made alienation subject to the consent of the vendor and therefore offended the repugnancy doctrine and public policy considerations. Fullagar J agreed with Dixon CJ; however, Fullagar J restricted his analysis to public policy considerations. Menzies J agreed with Fullagar J and Dixon CJ, but also restricted his analysis to public policy grounds. Kitto and Windeyer JJ did not find that the clause was free-standing from the overall contract but Windeyer J noted that if it was, it would have constituted an unlawful restraint on alienation. Dixon CJ: … But the question arises whether, considered as an obligation binding the purchaser … cl 3 is not void as an attempt wholly to restrain alienation. It would not of course bind an alience once an alienation was made: for the alience would not be a party to the contract: and ex hypothesi we are not concerned with any question of the effect it might have upon the land in the hands of an alience not taking for value without notice. But we are concerned with a contract always operating upon the defendant and her ‘estate’ … until an alienation occurs … The question whether a bond or covenant or contract purporting to impose a total contractual restraint upon alienation is void does not seem to be settled. A condition doing so attached as a condition subsequent to the estate is of course void. The 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. That is immaterial, for it is a known rule that the condition is void. But with contractual restraints there is no fetter upon alienation which does more than sound in damages, that is, unless a doctrine of equity intervenes to make it bind the land. Coke at one time seemed to think that a bond with a condition against alienation of an estate was good: Coke Litt 206b. And in Freeman v Freeman, a bond against barring an entail was held valid. But according to Tatton v Mollineux, Coke is said to have taken a contrary view in the case of Poole. 272

Restraints on Alienation and the Rule Against Perpetuities

6.3

In a learned article by Mr  Charles Sweet upon ‘Restraints on Alienation’ (1917) 33 LQR, pp 236, 342 that writer does not refer directly to the question whether a covenant or agreement purporting to restrain alienation is or may be valid; but the author says, ‘If property is given to A absolutely he cannot be restrained from alienating it by any device, whether the device takes the form of a condition against alienation or a gift over on alienation; the attempted restraint is contrary to public policy, and its form is immaterial’ (p 240). Dr Glanville Williams has attacked the logical basis of invalidity for repugnancy (1943) 59 LQR, p 343; (1944) 60 LQR, pp 69, 190. In the course of doing so the learned writer ((1943) 59 LQR, pp 349–351) invoked the alleged contrast of a contract covenant or bond not to alienate as something inconsistent with the theory that a condition against alienation is repugnant. In effect he suggested that the distinction was untenable. The ground for denying the validity of a contractual restriction upon alienation is that it is a principle of the law that private property should be fully alienable. See per Jessel MR in Re Ridley; Buckton v Hay and Sweet (1917) 33 LQR 236. Cruise, 2 Dig p 6, in effect expresses a view that a contractual restriction upon the alienation of an absolute estate if unqualified should be considered void and this seems to accord with modern views of policy. Cruise, after referring to the supposed distinction between a condition and a covenant or contract, says this: ‘This doctrine appears extremely questionable, as it offers an obvious mode of restraining a person from those rights over an estate which the common law gives him; consequently of frustrating the common law, as fully as if a condition of this kind were allowed to be inserted in a conveyance of land; and in some cases it appears not to have been allowed.’ Indeed it is impossible to doubt that a fetter on alienation may be imposed by covenant which is as effective over a very long period of time to prevent alienation of land as a condition subsequent would have been had it been valid.

Commentary 6.3  The facts of Hall v  Busst concerned a contractual restriction upon a right to alienate. Dixon CJ considered whether the repugnancy principle applicable to conditions amounting to restrictions on alienation that are attached to title should also be extended to contractual restraints on alienability. His Honour noted that ‘the ground for denying the validity of a contractual restriction upon alienation is that it is a principle of the law that private property should be fully alienable’. In this respect, invalidity of a restraint on alienation, which was originally grounded in repugnancy to the grant or the indirect effect of Quia Emptores, may now, at least in the case of contractual restraints, be based on public policy through ‘a principle of the law that private property should be fully alienable’ (at 218 per Dixon CJ; see also at 223–4 per Fullagar J, 229 per Kitto J, 235–6 per Menzies J, and 246 per Windeyer J). In light of this, Dixon CJ concluded that a fetter on alienation that is imposed by contract can be just as effective in restraining alienation and should therefore be treated as invalid. It has been argued by Professor Glanville Williams in ‘The Doctrine of Repugnancy’ (1944) 60 Law Quarterly Review 190 that public policy is, in fact, the true foundation of the prohibition. This view was supported by Pearson J in Re Rosher (1884) 26 Ch D 801 at 813–14, who noted: … it seems to me that, unintentionally and unwillingly, another principle has been applied here … and that the question of policy has been allowed to intervene, omitting altogether all considerations of repugnancy … I confess I wish that the law had been allowed to stand on the simple question of repugnancy, because then there would have been no uncertainty and no confusion. 273

6.3

Australian Property Law

Arguably, if the true basis underlying the prohibition is public policy, some moderation in the strict principle is possible. Hence, in some circumstances, restraints on alienation such as partial restraints or contractual restraints, may be valid. See also M I Schenbly, ‘Restraints Upon the Alienation of Legal Interests’ (1935) 44 Yale Law Journal 961 at 964 and K Mackie, ‘Contractual Restraints on Alienation’ (1998) 12 Journal of Contract Law 8. This has not been applied to gifts or bequests. For example, in Attwater v Attwater (1853) 52 ER 131, a testator made a gift of property with a condition that it may only be sold to one of the devisee’s brothers. Lord Romilly MR concluded that the condition was void as a restraint on alienation notwithstanding that the clause left the donee free to dispose of the property by a mode other than sale. Similarly, in Re Rosher (1884) 26 Ch D 801, a testator gave his estate to his son, his heirs, executors, administrators and assigns, subject to a proviso that if the son, his heirs or devisees sold certain properties, the testator’s widow would have the option to purchase those properties for £3000. Pearson J concluded that the conditions were void. Because a requirement to sell at  one-fifth of the value of the property was equivalent to a restraint upon a sale. By contrast, in John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc [2004] SASC 128 at [121], Besanko J concluded that there was a need to confine the operation of the common law doctrine to accord with the public policy considerations underlying freedom of contract. On the facts, the Golf Club purchased land from the Nitschkes it had previously leased. Clause 3 of the contract prohibited the club from selling the land or any portion of it without first giving the Nitschkes the opportunity of purchasing the land on the same terms as those of the proposed sale. The South Australian Supreme Court concluded that the clause providing a right of first refusal was enforceable but the covenant requiring any purchaser also to give a right of first refusal and a covenant to obtain such a covenant from any successor purchaser was void. Besanko J made the following comments: The common law doctrine also applies in the case of restraints by way of bond, covenant or contract. The reason for the application of the doctrine in this area is the public policy consideration that private property should be fully alienable. Of course, there are many restrictions on the full alienability of private property that are upheld by the courts. Furthermore, there is an important countervailing public policy consideration, and that is the consideration that parties who freely negotiate an agreement should be bound by the terms of the agreement. In my opinion, there is a great deal to be said for confining the operation of the common law doctrine within narrow limits insofar as it applies to restraints imposed by bond, covenant or contract. This result could be achieved either by holding that certain restraints are not caught by the doctrine, or by developing the exception of a lawful collateral object.

On the facts, Besanko J went on to conclude at  [108] that when public policy considerations were taken into account, a partial contractual restraint should not be struck down. His Honour stated: … Hall v  Busst is authority for the proposition that the doctrine of unlawful restraints on alienation applies to restraints in bonds, contracts or by way of covenants and that a total restraint on alienation falls within the doctrine. Even if Menzies J (at 235–6) is to be taken to have also agreed with the reasons of Fullagar J, Hall v Busst is not authority either way on the question of whether a partial restraint on alienation in a contract falls within the doctrine.

Similarly, in Wollondilly Shire Council v Picton Power Lines Pty Ltd (1994) 33 NSWLR 551 the New South Wales Supreme Court considered whether an obligation in a contract for the sale of land to re-sell the land to the vendor at the same price if industrial premises were not erected within two years was invalid on the basis that it constituted a restriction against alienation. Unlike the restriction in Hall v Busst, which was unqualified in time and 274

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6.3

circumstances, the restriction in Wollondilly Shire Council v Picton Power Lines Pty Ltd was only partial because it involved a term stating that the land would not be transferred prior to the building being constructed and a provision that if the building was not completed within 24 months, the land would be sold back to the vendor at the original price. On the facts, Handley JA (with whom Meagher JA agreed) concluded at p 555B that the restriction was a ‘negative stipulation’ and that the type of restrictions that connect to personal contracts for the sale of land stand ‘right outside any legal doctrine which invalidates contractual restraints on alienation’. In Noon v Bondi Beach Astra Retirement Village Pty Ltd [2010] NSWCA 202, Giles, McFarlan, and Young JJA examined whether a provision in a purchase contract that a service company have the right to ‘buy back’ a unit for the original purchase price, as adjusted, amounted to a restraint on alienation. Young JA (McFarlan agreeing) concluded that the buyback arrangement did not offend the rule against restraint on alienation. This was because the restraint was not total, and the Noons appreciated that the buyback provision enabled them to receive a considerable discount on the purchase price and assured them a purchaser for the unit. Young JA concluded that courts should be very careful not to allow the doctrine to expand to invalidate perfectly proper commercial arrangements when the principle has its origins in absolute restrictions upon a transfer and that many partial restraints are valid. His Honour examined the origins of the principle, noting at [217]–[218]: The English gentry, particularly in the 17th and 18th centuries were extremely keen to keep their land in the family. The government and the courts were interested in seeing that land was freely alienable. As complements to the statute Quia Emptores 18 Ed 1 ch 1 (1290), rules were developed against perpetuities and also against conveyances where the conveyee was not able to transfer the land to whomsoever he or she wished. In its starkest form, the rule is that an absolute restriction on conveying by the conveyee of a conveyance in fee simple is repugnant to the grant and void.

Subsequently, in Bondi Beach Astra Retirement Village Pty Ltd v  Gora (2011) 82 NSWLR  665, a majority of the New  South  Wales Court of Appeal considered that an option to buy back a unit in a retirement village was unenforceable as an invalid restraint on alienation. Campbell JA concluded at [325] that ‘the restrictions on alienation relate to virtually all manner of disposing land, continue in perpetuity, and are in practice highly likely to permit a sale to only one person (or its nominee). Whoever it is sold to, it will be only be at a price well below the market value.’ In discussing the extension of the public policy arguments in Hall v  Busst to contractual restraints, his Honour stated at  [329]: ‘whether an agreement offends public policy should be decided as a matter of substance, not of form. To the extent  that the public interest in free alienability of property is the applicable test, it should result in the same result being arrived at concerning a restriction that is imposed as a condition of a transfer of property as it arrives at  concerning a restriction that is agreed as a matter of contract as part of a commercial transaction that includes a transfer of property.’ His Honour went on to note at [340] that many of the early cases where restrictions on alienation were struck down were ‘influenced by the concept of the restraint being repugnant to the grant, which in turn was influenced by medieval conveyancing principles about the impossibility of limiting an estate after a fee simple’. However, he concluded that the outcomes of those cases ‘do not necessarily translate into the different universe of discourse applicable to contractual restraints on alienation, which is dependent solely on public policy’. In Caboche v Ramsay (1993) 119 ALR 215, Gummow J concluded that the doctrine is applicable to both land and personal property, but concluded that where the restraint 275

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is imposed upon dealings with debts or other choses in action, or with the benefit of performance contracts involving personal skill and confidence, further and more detailed public policy principles apply beyond a bare ‘repugnancy’ assessment. This issue was subsequently raised by the Full Federal Court in Devefi Pty Ltd v MaHeffy Perl Nagy Pty Ltd (1993) 113 ALR 225 at 234–7, where the court indicated that restraining the assignment of the benefit of a contract may be inappropriate in some cases, while in others, a contractual licence containing an express provision barring any assignment of the rights would not, in the circumstances, be contrary to public policy.4 Moraitis Fresh Packaging (NSW) Pty Ltd v Fresh Express (Australia) Pty Ltd [2008] 14 BPR 26,339, considered the enforceability of a contractual right of first refusal relating to the right to occupy two stands at the Sydney markets. The right of first refusal was not granted in connection with a transfer of the right to occupy the stands. On appeal it was contended that the right of first refusal was void as a restraint on alienation. Giles JA noted that many contractual restrictions on the alienability of property do not offend the principle of full alienability and public policy analysis demands the consideration of another important policy; namely, that a party who agrees to a contractual restriction should be held to its agreement unless there be good reason to the contrary. Hodgson JA agreed, noting at [144]: ‘That, to be void, a restraint on alienation must be of sufficient degree and duration, and/or without a purpose which the law accepts as proper’. On the facts, if the clause was construed so as to mean that once the right of first refusal was engaged, that was an obligation to sell the stands for a price that did not reflect market value, this would effectively preclude any sale of the property and such a clause would be void. In Warren v Lawton (No 3) [2016] WASC 285 at [103], La Miere J agreed, noting that contractual restraints which are, in substance, total restraints are not permissible even if there is an improbable possibility of alienation. His Honour concluded that clauses in a contract of sale which gave a vendor a right to mortgage the land, a right of first refusal upon the death of both co-owners, and a requirement that his consent be given to any alteration of the joint tenancy amounted to an unlawful restraint upon the purchaser’s rights of alienation. These restraints went beyond what was reasonably necessary to protect the valid collateral purposes of the parties as co-owners and, the extent and effect of the contractual provisions, when considered overall, were ‘contrary to the public interest in the free alienability of land and are an unlawful restraint on alienation’ (at [117]). Not all rights of first refusal included within contracts of sale will, however, be regarded as restraints. It is necessary to consider the scope of the prohibition imposed by the right of refusal, the period for which the right operates, whether the grantor of the right must extract a similar promise from a subsequent purchaser and whether the right is to be exercised by reference to a fixed price. A right of first refusal that confers upon the grantee a right to acquire property at a significant under-value if the grantor wishes to alienate the property will generally constitute an impermissible restraint: Woolworths Ltd v About Life Pty Ltd (2017) 18 BPR 36,983 at [147] per Emmett AJA.) Nevertheless, not all courts have approached contractual restrictions in the same way. In Linden Gardens Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85, Lord Browne-Wilkinson introduced an interesting distinction, arguing that the same inalienability ‘rationale’ does not apply to contractual rights because, unlike land, they are not a finite resource.5 4. See also Broadcast Australia v Minister Assisting Minister for Natural Resources (Lands) (2004) 204 ALR 46 at 51. 5. See also International Management Group (UK) Ltd v German & Anor [2010] EWCA Civ 1349 at [31] per LJ Mummery noting: ‘There is simply no need for an express exception to be made to a general rule against the surrender of an entitlement or right, if the terms of that rule do not in fact catch 276

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In Bluebottle UK Ltd v Deputy Commissioner of Taxation (2007) 232 CLR 598, Gleeson CJ, Gummow, Kirby, Hayne and Crennan JJ at [61] concluded that ‘questions about applying the doctrine against restraint on alienation that applies in relation to interests in land do not arise’ when dealing with provisions regulating the rights to assign contractual benefits. This prompted Young JA to conclude in Noon v Bondi Beach Astra Retirement Village Pty Ltd [2010] NSWCA 202 at [218] that the views of Gummow J in Caboche v Ramsay, that the principle is applicable to both land and personal property, ‘may well have been overtaken’.6 6.4  The scope and relevance of the public policy rationale underlying contractual restraints on alienation was explored in Nullagine Investments Pty Ltd v Western Australian Club Inc (1993) 177 CLR 635, which is extracted below.

—  Nullagine Investments Pty Ltd v Western Australian Club Inc  — (1993) 177 CLR 635 Facts: Two tenants in common in equal shares of land entered into an agreement containing a clause (clause (4(b)) which provided that neither would dispose of its interest without first offering it to the other. The clause further provided that no alienation was to take place unless the proposed purchaser entered into a similar deed of covenant. One of the parties sought an order for the sale of the land and the distribution of the net proceeds of sale in equal shares under the partition and sale provisions of the Property Law Act 1969 (WA). The issue for the court was whether, as a matter of construction, clause 4(b) of the agreement precluded the application of the partition and sales provisions in the legislation. The High Court held by majority (Deane, Dawson and Gaudron JJ) that it did not. Their Honours concluded that the provisions of cl 4(b) were not, as a matter of construction, applicable to a sale, transfer, assignment or other disposition of the land itself, in the sense of the complete freehold estate. The majority concluded that, as a matter of both language and context, the actual words of cl 4(b) applied only to a sale, transfer, assignment or other disposition ‘by’ one of the two tenants in common of ‘its’ distinct ‘share or interest in the Land’. That being so, the express words of cl 4(b) did not apply to preclude an application to the Supreme Court of Western Australia for an order for the partition or sale of the land in issue. Brennan and Toohey JJ were in dissent; however, their judgments include detailed discussion on the scope and policy of the rule precluding restraints on alienation. Brennan J (in dissent): … 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. 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 ‘[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’.

a compromise of a claim to a putative entitlement or right’. There are, however, very few English decisions that evaluate the validity of the contractual restraint as most decisions focus upon the ‘repugnancy’ of a restraint in title. For further discussion see K Gray and S F Gray, Elements of Land Law, Oxford University Press, 5th ed, 2009, 229 [3.1.39]. See also S Grattan, ‘Property and Alienation: Rights, Obligations, Restraints’ in N Hopkins (ed), Modern Studies in Property Law, Hart Publishing, UK, 2013, Vol 7, 379, 394–96. 6. See  also G J Tolhurst, ‘The Efficacy of Contractual Provisions Prohibiting Assignment’ (2004) 26  Sydney Law Review 161; S Grattan, ‘Revisiting Restraints on Alienation: Public and Private Dimensions’ (2015) 41(1) Monash University Law Review 67. 277

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In the latter case, the only basis for holding the covenant or agreement invalid is public policy. How does public policy view a covenant by a tenant in common interested to the extent of onehalf in a parcel of land not to apply for an order for sale? In Hall v Busst, Dixon CJ stated the ground for denying the validity of a contractual restriction upon alienation to be ‘a principle of the law that private property should be fully alienable’. A covenant not to apply for an order for sale under s 126(1) does not affect the common law capacity of a tenant in common to alienate his share, but it precludes a tenant in common from realising his share by sale of the land in which he holds the share. Unless tenants in common agree to terminate the co-tenancy (either by purchase of shares, sale of the land or partition) such a covenant would maintain the land as the subject of a continuing co-tenancy. But does such a covenant offend public policy? The purpose of the first Partition Act in 1539 and of every subsequent Partition Act was the provision of a remedy for one co-tenant who, in the event of a dispute with another co-tenant, was without an adequate remedy to protect his share or interest in the land. The remedy of sale was first provided for by The Partition Act 1868 (UK). Both remedies terminate the co-ownership of land. The consequence of an order for either partition or sale is the termination of the existing co-ownership and the passing of full title to an owner who, without requiring the concurrence of a co-owner, can occupy and use the land as he sees fit or determine its further disposition. Sometimes this is effected by partition of the parcel of land, sometimes by purchase by continuing co-owners of the share or interest of a retiring co-owner, sometimes by sale of the entirety either to a third party or to one or more of the co-owners. However the consequence is effected, the remedies afforded by the Partition Acts to a co-owner of land terminate the co-ownership and break any deadlock affecting its occupation and use or its disposition. That being the effect of the modern Partition Acts, their purpose can be stated. The purpose of such Acts is to provide a statutory mechanism for terminating the co-ownership of land when the co-owners fail themselves to agree on the manner in which the co-ownership shall be terminated. By affording the remedies provided by the Partition Acts, the legislature has facilitated the alienability of the land itself and alienability of land is a policy which the law supports except where inalienability is required for the protection of a disadvantaged class. Co-owners having the capacity to deal with their respective shares or interests are at liberty to agree the terms on which the land will be disposed of or the terms on which the shares or interests of one or more co-owners will be acquired by another or others or the manner in which the land in co-ownership shall be divided. When a term bargaining away the statutory right to apply for an order for partition or sale is part of an agreement which itself provides for the termination of the tenancy in common, the bargain is consistent with the policy of the Partition Acts. Thus joint venture or partnership agreements which govern the development and sale of land or otherwise provide for its disposition when the joint venture or partnership is wound up may validly exclude, expressly or impliedly, the right of a co-owner to apply for an order for partition or sale. Similarly, the right to apply may be excluded by the terms of a grant of an option or right of pre-emption over the share or interest of a co-owner. But where there is no agreement between or among co-owners which provides for the termination of the co-ownership or where an agreement between or among co-owners would prevent the  termination of the co-ownership, it would be contrary to the policy of the Partition Acts to deny the remedies they afford. To deny those remedies would be to leave the land in the hands of the co-owners who may be unable or unwilling to agree on its management and use and who have made no agreement for its disposition. To leave the land in that situation is wholly inconsistent with the policy of facilitating alienability which, in my opinion, is one of the chief purposes of the Partition Acts. In the United States, public policy results in a somewhat different application of the Partition Acts, namely, that the remedies of partition and sale should not be bargained away for a period longer than that fixed by the rule against perpetuities. In Roberts v Jones the agreement between the two tenants in common was relevantly indistinguishable in effect from cl 4(b). They conferred 278

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on each other mutual rights of pre-emption and required any third party purchaser to ‘be willing to purchase subject to the obligations of the agreement’. Ronan J, speaking for the Court, said: The agreement unduly restricts the alienation of the property for an unreasonable length of time. Accordingly, it does not come within the general rule that an agreement postponing partition for a reasonable time will bar partition, … and as the operation of the agreement may result in restricting the alienation of the property for years, contingent in substance upon a sale being made with the consent of both parties, the agreement imposing such a restraint upon the alienation of an estate in fee simple for a period beyond that fixed by the rule against perpetuities is contrary to public policy and cannot be enforced. Such a rule, though supportable as an instance of a general rule against restraints on alienation, fastens on the perpetuity period as the yardstick of unreasonableness. But I would place the rule on the basis that one of the purposes of the Partition Acts is to provide for the termination of co-ownership of land where the co-owners are unable to provide for it or have failed to do so. The remedies afforded by the Partition Acts are created to serve that purpose in the public interest as well as in the interests of the co-owners. On that basis, the co-owners are incapable of bargaining away their right to apply for an order for partition or sale except where the bargain is made as part of an agreement which itself provides for the termination of the co-ownership. I would therefore hold that Pt 4 of cl 4(b) is void and that Nullagine, provided it has complied with its obligations under Pts 1 and 2, is at liberty to apply for and to obtain an order for sale under s 126(1). Nullagine, without the restriction purportedly imposed by Pt 4 of cl 4(b), may, if it wishes, sell its share on the open market. Part 4 is clearly severable from Pts 1 and 2. It may be severable from Pt 3 but it is immaterial whether Pt 3 falls with Pt 4 or not. Parts 3 and 4 relate to a covenantor’s right to sell its share after a covenantee’s failure to buy and, if Pts 3 and 4 are construed as a single covenant so that both parts fall, the covenantor’s common law right to sell its share on the open market and its statutory right to apply for and to obtain an order for sale under s 126(1) are left untrammelled. Toohey J (His Honour concluded that the requirement that a proposed purchaser assume the duties and obligations in the subclause, was an unlawful restraint on alienation. He continued): … The remaining question is whether the existence of cl 4(b), in particular the requirement that any purchaser of an interest in the land assume the duties and obligations contained in the subclause, constitutes of itself a restraint on alienation such that it brings down the whole of the subclause. It is at this point that the condition attached to the grant of special leave to appeal becomes important. To the extent that Nullagine might wish to argue that the existence of this requirement depressed the price which it would otherwise get for its interest in the land on the open market and to the extent that this proposition required the production of evidence to substantiate it, the restriction in the grant would preclude Nullagine from arguing that proposition. In other words, to succeed on this point Nullagine must demonstrate that the requirement of itself constitutes a restraint on alienation which renders nugatory the whole of cl 4(b). … However, there is a danger of inflating the proviso beyond its true significance. As between Nullagine and the Club, the right of pre-emption does not in truth constitute a restraint on alienation. If the right is exercised, the co-owner wishing to sell receives one-half of the value of the land. If the right is not exercised, the co-owner wishing to sell may do so. The requirement that any purchaser assume the duties and obligations in cl 4(b) does no more than put the purchaser in the position of an original co-owner. That is, as between the purchaser and the remaining co-owner there is a right of preemption which operates to the benefit of both co-owners. It ensures that if the right is exercised, the co-owner wishing to sell will receive half the value of the land, which 279

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Australian Property Law may be more than the value of a co-owner’s interest. If the right is not exercised, the co-owner wishing to sell may do so on the open market or may invoke the jurisdiction of the Supreme Court and seek an order for sale. All that the proviso does is place any purchaser in the position of an original co-owner. That does not constitute a restraint on alienation of a co-owner’s interest …

Commentary 6.5  The extracts from the judgments of Brennan and Toohey JJ in Nullagine Investments examine whether a contractual clause that, on the face of it appears to restrain alienation, may nevertheless be valid on public policy grounds if it can be shown to have some further utility in terms of title protection and property management. The clause in issue was a provision imposing co-owner responsibilities and placing a purchaser in the position of an original co-owner. According to Toohey J such a clause did not constitute an illegitimate restraint. While any condition that attaches to and restrains an estate is fundamentally ‘repugnant’ under the orthodox rule, contractual restraints may be justified on public  interest grounds, particularly where they provide clear benefit and utility to both parties. Toohey J concluded at 624 that a provision which does no more than put the purchaser in the position of an original co-owner necessarily ‘operates for the benefit of both co-owners.’ Brennan J (in dissent with respect to the primary clause), made the following statement at 650: Co-owners having the capacity to deal with their respective shares or interests are at liberty to agree the terms on which the land will be disposed of or the terms on which the shares or interests of one or more co-owners will be acquired by another or others or the manner in which the land in co-ownership shall be divided. When a term bargaining away the statutory right to apply for an order for partition or sale is part of an agreement which itself provides for the termination of the tenancy in common, the bargain is consistent with the policy of the Partition Acts.

6.6  This issue was further explored in Elton v  Cavill (No 2) (1994) 34 NSWLR 289 where the New South Wales Supreme Court concluded that a contractual restraint upon alienability may be validated by a clear and legitimate collateral purpose. The decision is extracted below.

—  Elton v Cavill (No 2)  — (1994) 34 NSWLR 289 Facts: A deed was entered into between co-owners of a home unit premises within a residential community which set out: ‘no transfer without the consent of other owners.’ The plaintiffs were two co-owners who sought to prevent the completion of a contract of sale entered into by another co-owner. The issue was whether the clause in the deed was invalid as a restraint upon alienation. Young CJ (His Honour discussed at length the doctrine of unlawful restraint upon alienation in the case of a contractual restraint and noted that the ‘ghosts of old property rules’ should be restricted within a contemporary environment. His Honour continued): … It seems that, putting all these matters together, Mr Sweet’s view has been accepted not only by strong academic writers, but also by judges whose reputations in the property law field 280

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are most enviable. Furthermore, there is a growing tendency to limit the effect that ghosts of old property law rules, rules which were worked out for a completely different social system in a different age, should have upon the use of property in Australia at the current day. While it is clear from Hall v Busst that the rule against alienation of property still applies, authorities such as Wollondilly in the Court of Appeal show that it may be relatively easily held inapplicable where other parts of the common law now effectively cover the field. Thus in my view the collateral purpose rule should be held to be part of the law of this State and it should be held that there is a legitimate interest in a co-owner in having a veto over who should be an owner of other undivided shares in the same property to justify a restraint on alienation which is for the purpose of securing a proper collateral benefit. However, as Mr Rushton points out, even if the purpose test is accepted, the court needs to consider whether there are any invalid or illegitimate collateral objects which the restraint in question is also likely to protect or achieve. On the facts, this particular clause was, in substance a restraint on alienation. However, the legitimate collateral purpose rule did not apply because the other owners should not be able to exercise the right unreasonably, where they no longer held title, and prevent an owner from onselling the property in the future. Thus, in such circumstances, the restraint effectively promoted invalid or illegitimate collateral objects which could not be severed from the clause …

Commentary 6.7  The conclusions of Young CJ in Elton v Cavill indicate that there is no universal rule

that a contractual restraint on the alienation of property is automatically void. Indeed, where such a restraint can be proven to have a legitimate collateral purpose it may be regarded in law as valid and enforceable. This rule is derived from the conclusions of the court in Reuthlinger v  MacDonald [1976] 1 NSWLR 88 where Needham J held at  101: ‘a restraint imposed for the protection of a valid collateral object is not invalid. There is no objection in law, in my opinion, to the grant of an irrevocable power of attorney during the joint lives of the parties. The restraint on sale in this case is in aid of that grant of power.’ The validity of the legitimate collateral purpose rule was also upheld in Bondi Beach Astra Retirement Village Pty Ltd v Gora [2011] NSWCA 396 where Campbell JA concluded at [328] that the ‘valid collateral purpose’ rule meant that: ‘If a contractual restraint does indeed have a valid collateral purpose, that can provide a reason for public policy to favour its enforcement. Part of the reason for this, of course, is that public policy will be taken into account in assessing whether a collateral purpose is valid or legitimate.’ If there are both legitimate and invalid or illegitimate purposes then consideration must be given to whether the clause can be severed. Young CJ felt that where there are both legitimate and illegitimate purposes in a restraint on alienation and the clause cannot be severed, the court must decide whether, overall, the clause is contrary to public policy.’ On the facts of Elton v Cavill, Young J found that the restraint went beyond what was reasonably necessary to protect the legitimate interests of the other co-owners. Mrs Cavill held a life tenancy in a one quarter share of the land and a further one quarter share as executrix of the estate. She was seeking to tell the quarter share she held as executrix without the consent of all of the other co-owners, even where they no longer held title. Young J felt that this restraint was unreasonable because the discretion was too broad and the co-owners should only be able to refuse consent where such a refusal was reasonable on the circumstances. Restraints that may be validated under the ‘legitimate collateral purpose’ rule will include restraints designed to protect the party’s concurrent interests in land. Thus, where 281

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one co-owner seeks to veto another co-owner transferring his or her undivided share to a third party, the restraint is ‘legitimate’ because it protects the interests of the remaining co-owners. Young CJ made it clear that a restraint could only be validated under the legitimate collateral purpose rule where the person receiving the benefit of the restriction retained a title in the property. His Honour stated at 300: … in my view the collateral purpose rule should be held to be part of the law of this State and it should be held that there is a legitimate interest in a co-owner in having a veto over who should be an owner of other undivided shares in the same property to justify a restraint on alienation which is for the purpose of securing a proper collateral benefit.

Subsequently, in Goyal v Chandra [2006] NSWSC 239, Brereton J stated at [23]: It seems to me that if one co-owner, and it matters not for present purposes whether he or she be joint tenant or tenant-in-common, binds himself or herself to deal with his or her interest only in a particular way — namely, by transferring it or devising it, or leaving it to pass by way of survivorship to the other — that is not a restraint on alienation. The property itself remains alienable. The owner undertakes a personal obligation to deal with it only in a particular way. Anyone who enters into a contract for sale does that. Any owner of land who creates in another an equitable interest by way of proprietary estoppel does that. Such an agreement or arrangement is not void as a restraint on alienation. It follows that an agreement not to sever a joint tenancy is similarly not void as a restraint on alienation.7

Other situations where a legitimate collateral purpose may be raised include protection of mortgagee security interests and protection of a landlord’s reversionary title. Where a co-owner, mortgagee, or landlord restricts the right to alienate by making alienation dependent upon their consent, the consent should not be unreasonably withheld. A restraint that goes beyond providing reasonable protection to concurrent interest holders  may, however, be struck down as an invalid restraint upon alienation. As summarised in John Nitschke Nominees Pty Ltd v Hahndorf Golf Club Inc [2003] SASC 286 at [122] by Besanko J: A restriction giving the co-owners a right on reasonable grounds to veto a transfer to a person not of good character is permissible, because it goes to the co-owners’ quality of lifestyle, which is a valid purpose to be served by such a covenant; but a covenant that prohibits a co-owner from selling without the consent of the other co-owners is an invalid restraint, since it effectively allows the other co-owners to dictate the terms of the sale and the price.

In Warren v  Lawton (No 3) [2016] WASC 285, La Miere J outlined the scope of the legitimate collateral purpose rule between co-owners, noting that co-owners have a legitimate entitlement to control the ‘identity’ of the person with whom they are in a co-owner relationship and a contractual restraint that supports this will amount to a legitimate collateral purpose. His Honour stated at [104]: Where the party benefited and the party burdened are co-owners of property, the co-owner has a legitimate interest in controlling the identity of those with whom they are in the relationship of co-ownership. Parties who enter into a co-ownership arrangement involving land usually do so on the basis that the identity of the other is important. They are reluctant to be thrust against their will into co-ownership with a stranger. Moreover, contractual restraint on alienation may make good business sense for the parties involved, as otherwise, they would not be voluntarily entered into and the party agreeing to purchase subject to the restriction may benefit from paying a lower purchase price. To allow the promisor who has paid less because of the restraint to resile from the bargain may give the promisor a windfall at the expense of the promisee. However, restraints may have invalid or illegitimate collateral 7. See also Matsen v Matsen [2008] NSWSC 135 at [63]. 282

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objects such as where the co-owner may use the restraint to achieve rights which do not otherwise exist and which enable a co-owner to dictate completely the terms of sale and price so as to give the other co-owner only the choice of selling at undervalue. Such objects are illegitimate and may result in the restraint being void as contrary to public policy. Where a restraint or restraints have both legitimate and illegitimate collateral purposes the court must look at the restraints overall to determine whether the legitimate collateral purposes outweigh the illegitimate collateral purposes and the public policy in favour of the free alienability of land.

Public policy and inalienability 6.8  The significance of public policy in the assessment of contractual restraints on alienation is increasingly apparent. Public policy is a dynamic process, dependent upon context and circumstantial evaluation. Many rights and interests that would previously have been struck down may now be validated under what is broadly described as a public policy analysis. As outlined by the court in Evanturel v Evanturel (1874) LR6 PC 1 at 29: The determination of what is contrary to the so-called ‘policy of the law’ necessarily varies from time to time. Many transactions are upheld now by our own Courts which a former generation would have avoided as contrary to the supposed policy of the law. The rule remains, but its application varies with the principles which for the time being guide public opinion.

The well-known American judge, Benjamin Cardozo has argued that law is influenced by four, often overlapping, forces — ‘the force of logic or analogy, the force of history, the force of custom and the force of justice, morals and social welfare’ — and suggested that each of these categories broadly reflects the prevailing mores of the day: B Cardozo, The Growth of the Law, Yale University Press, New Haven, 1924, p 62. The law concerning restraints on alienability has evolved as the courts have increasingly recognised the role that such restraints can play in supporting economic progress, social utility and the private management of ownership responsibilities. As outlined by Epstein (R A Epstein, ‘Why Restrain Alienation?’ (1985) 85 Columbia Law Review 970 at 976): Rules restraining alienation are best accounted for, both positively and normatively, by the need to control problems of external harm and the common pool. In essence the restraint on alienation is a substitute for direct remedies for misuse when these are costly and uncertain to administer. In speaking of the restraints on alienation it is necessary to address those natural resources and human activities that are most difficult to organise and control.

Inalienability rules can be important for the progression of a democratic market society. Economic efficiency and distributive goals often depend upon restrictions to ensure that unfettered market processes, incompatible with the responsible functioning of a democratic state, are more effectively checked. As outlined by S Ackerman-Rose in ‘Inalienability and the Theory of Property Rights’ (1985) 85 Columbia Law Review 931 at  969: ‘Inalienability is frequently justified not as an ideal policy but as a second-best response to the messiness and complexity of the world’. Despite this, there is no doubt that modernity favours alienability (R C Ellickson, ‘Property in Land’ (1993) 102 Yale Law Journal 1315 at 1376). Land becomes increasingly valuable as populations increase and this scarcity has resulted in stronger enforcement of alienability entitlements. This policy trajectory is well established: (M I Schnebly, ‘Restraints Upon the Alienation of Legal Interests: I’ (1935) 44 Yale Law Journal 961, 964). On the other hand, there is some internal inconsistency. It has been argued that if the disposer wishes to include a restraint, such inclusion must logically form a component of the antecedent right: R A Epstein, ‘Why Restrain Alienation?’ (1985) 85 Columbia Law Review 970, 973–83. See  also S Grattan, 283

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‘Revisiting Restraints on Alienation: Public and Private Dimensions’ (2015) 41(1) Monash University Law Review 67 at fn 15. It is clear that despite the various discussions outlined above, the precise policy underlying restraints against alienation, and how it fits with other doctrines, lacks detailed judicial scrutiny. It appears, to be ‘bound up with but distinct from the rule against perpetuities’, which, as outlined below, have a similar rationale: see further I Dawson, ‘The Rule Against Inalienability: A Rule without a Purpose’ (2016) 26(3) Legal Studies 414 at 424.

6.9

Revision Questions

1. Explain the conclusions of the High  Court in Hall v  Busst and consider how subsequent courts have sought to qualify the scope of this decision. 2. Should partial contractual restrictions on alienation be struck down or do they form an important part of contractual law? Should a distinction be made between restrictions applicable to land and restrictions applicable to personal property and if so, why? 3. K Mackie in ‘Contractual Restraints on Alienation’ (1998) 12 Journal of Contract Law 2 referred to the quote by G Williams (‘The Doctrine of Repugnancy’ (1944) 60 Law Quarterly Review 69 at 190) and noted that the author ‘made a sustained and vigorous attack on the whole doctrine of repugnancy’. Professor Williams had argued that the doctrine of repugnancy is logically untenable, stating: If the Courts so wished, there is almost no limit to the extent to which it [the doctrine of repugnancy] could be used as an excuse for controlling contracts and conveyances. Fortunately it has not been much extended in recent years, and in my submission we should now recognise the doctrine of repugnancy for what it is, a useless piece of medieval lumber. Williams was of the view that if the doctrine of repugnancy did not apply to contractual restrictions, there was no reason why it should apply to restraints on estates because ‘there is no logical distinction between restraints so imposed and those imposed by contract’. Do you agree with these conclusions? Do  you think that the doctrine of ‘repugnancy’ amounts, in the words of Williams, to a ‘useless piece of medieval lumber’? Should all alienability restrictions be examined under broader public policy considerations? Discuss with reference to some of the case extracts.

The Rule Against Perpetuities 6.10  The rule against perpetuities, like the rule against restraints on alienation, seeks

to prevent one owner from holding onto land for too long. Restricting the alienability or controlling the successors of property for too long is problematic. This is not just because property is insufficiently transferable, but because owners or testators should not be able to ‘project their control over property for too long a time after they have ceased to be owners’. In other words, both rules ‘favour the living in the enjoyment of property as against the dead hand of the past’ (P W Hogg and H A J Ford, ‘Victorian Perpetuities in a Nutshell’ (1969) 7(2) Melbourne University Law Review 155). To do otherwise would diminish the value of property for successors. As outlined by E H Abbott (Jr), ‘Lease and the Rule Against Perpetuities’ (1918) 27 Yale Law Journal 878 at 886: The policy behind the rule is undoubtedly to prevent one owner from unduly and unreasonably diminishing the value of ownership to his successors. The same policy also lies behind the companion rule — the rule against restraints on alienation — which prevents undue

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restriction of the right of alienation, which is one of the most valuable incidents of ownership. Property — especially real property — endures, while owners are ephemeral. Even an owner in fee is in a sense only a tenant for life with power of disposition. Unless restrained by law, any given owner might, by the creation of these indestructible contingent interests, practically deprive his inevitable successors of all the benefits of ownership throughout an indefinite future. So long as the present estate may be cut short at any moment a large part of its value either for use or sale is gone. As a practical matter no one will either buy or efficiently improve a property which he may lose at any moment upon the happening of a contingency beyond his own control. Public policy clearly required an antidote for this situation. That antidote was the rule against perpetuities and its companion, the rule against restraints on alienation.

Common law rule [I]t occurred to some ingenious person that it was perhaps possible to keep control over the ownership of property for a time by granting an estate for life with contingent remainders, for, as contingent remainders were not transferable, no alienation of the fee could take place until they vested. In response, the judges developed the law of future interests, which allowed for the destruction of such remainders.8

6.11  The rule against perpetuities evolved to prevent the perpetual creation of particular forms of contingent interests. As outlined by Horowitz and Sitkoff: The Rule Against Perpetuities permitted a donor’s freedom of disposition to be exercised in a way that included indestructible contingent future interests, but only as regards persons the donor could have known (lives in being) plus the minority of the next generation (plus ­twentyone years). The underlying purpose of the Rule was to prevent resurrection of the entail by way of a string of successive life estates subject to indestructible contingent future interests.9

Historically, contingent remainder interests were created in an attempt to control land and estates after death. Often, however, this resulted in estates being bound up for many years. This effectively amounted to an indirect restraint on alienability because enduring contingent legal remainders, as with alienation restrictions, impeded the accessibility of land. In light of this, the courts sought to limit this type of ‘control from the grave’ with a device that came to be known as the rule against perpetuities, but is perhaps better described as the ‘rule against remoteness’ because it is not a rule directed against interests lasting for too long, but rather, against interests that vest in title too late. The rule evolved in England as a response to the difficulties of dealing with landed estates. As Gray has outlined (J Chipman Gray, Perpetuities, 4th ed, Little Brown & Co, Boston, 1942, at pp 123–200), the intention was to set a boundary upon the time frame in which future interests could commence while continuing to ‘enable land-owning families the capacity to secure the retention of land for several generations’. The rule has an application to freehold estates, leasehold interests and personal property, and is capable of being adapted to ‘new and ever-varying states of fact and circumstances’.10 The common law rule against perpetuities can be traced to Lord Nottingham LC’s decision  in the Duke of Norfolk’s Case (1681) 3 Ch  Cas 1; 22 ER 931. During the seventeenth  century, the rule developed two primary aspects: first, that a future interest  8. J Chipman Gray, The Rule Against Perpetuities, Little Brown, Boston, 1886, at 191. See also: J C Gray, Perpetuities, 1942, and J H C Morris & W B Leach, The Rule Against Perpetuities, Stevens & Sons Ltd, UK, 1962.  9. S Horowitz and R Sitkoff, ‘Unconstitutional Perpetual Trusts’ (2014) 67 Vanderbilt Law Review 1769 at 1778. 10. Re The Trustees of Hollis’ Hospital and Hague’s Contract [1899] 2 Ch 540 at 552. 285

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could only be valid when it vested within the defined perpetuity period; and second, the perpetuity period was defined under common law by reference to a life in being. In this respect, the common law rule has always focused upon the issue of vesting. A future interest was regarded as having satisfied the rule when the beneficiary of the interest was clearly set out, any condition precedent to the vesting of title (not possession) had been achieved, and the percentage or amount of the entitlement was established. The common law rule has been outlined in Re Thompson [1906] 2 Ch 199 at 202 as follows: A grant or other limitation of any estate or interest to take effect in possession or enjoyment at a future time, and which is not, from the time of its creation, a vested estate or interest, will be void ab initio if, at the time when the limitation takes effect, there is a possibility that the estate or interest limited will not vest within the period of a life or lives then in being, or within a further period of twenty-one years thereafter.

The essence of the common law rule was to invalidate any grant of a contingent remainder interest that could possibly vest in title outside the perpetuities period. In this respect, the common law rule applied to contingent remainder interests, which had not vested in title. If it was not absolutely certain that such interests would vest in title within the prescribed perpetuity period, they would be regarded under common law as void from the outset.11 Hence, under common law the crucial issue was whether, at  the time the instrument creating the interest takes effect, the interest was sure to vest (if at all) within the prescribed perpetuity period. Where there was any chance, however slim or unlikely, that the interest would vest outside this period, the interest would be void. Under common law, the initial perpetuity period of a life in being was subsequently extended to a life in being plus 21 years plus any relevant period of gestation.12 An interest shown to infringe the rule against perpetuities will be void ab initio as will any interest that is dependent upon that void interest. Where the future interest confers a benefit upon a class rather than an individual, the interest would be void if it could not be established that all members of the class were ascertained within the perpetuity period. This was subsequently modified by the ‘class closing’ rule which made it clear that, in the absence of any intention to the contrary in the instrument, a future interest for the benefit of a class would close when the first ‘entitled’ member of the class took their share and this precluded the whole interest from being invalidated on the basis that future members could not be ascertained.13 Statutory provisions regulating the rule against perpetuity now embellish the common law rule in all States (see  the detailed discussion at  6.17 below). However, unlike the common law rule, the statutory rules adopt a ‘wait and see’ approach so that a contingent remainder will only be invalid on the basis of perpetuities where it is proven to extend beyond the prescribed statutory period.14 6.12  The following case examines the scope of the rule against perpetuity and in

particular, whether the rule against perpetuity should be applied to future interests other than the contingent remainder. In particular, the case examines whether it is applicable to the ‘possibility of a reverter’ (that is, the potential interest that a donor of a contingent

11. Garland v Brown (1864) 10 LT 292 at 294. 12. Cadell v Palmer (1833) 1 Cl & Fin 372; 6 ER 956. 13. Andrews v Partington (1791) 3 Bro CC 401; 29 ER 610. 14. For an overview of the statutory principles see: I Murray, ‘Accumulation in Charitable Trusts: Australian Statutory Perpetuities Rules’ (2014) 8(2) Journal of Equity 163. 286

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interest acquires). The extract provides a useful overview of the scope and application of the common law rule.

—  Cram Foundation v Corbett-Jones  — [2006] NSWSC 495 (Unreported, 26 May 2006) Facts: Martha Cram devised property in Wollongong for use as a hospital for crippled children subject to the proviso that the property would revert to next of kin should it cease to be used for the stated purposes. One of the issues for the court to decide was whether a possibility of a reverter held by the next of kin attracted perpetuity principles. Brereton J held that it did not because the perpetuity rule applies to the creation not the termination of interests and the possibility of a reverter is a vested interest and therefore unaffected by perpetuities. Brereton J: Is the gift over void for perpetuity? The Perpetuities Act  1984 (NSW) commenced on 31  October  1984 and, with certain immaterial exceptions, does not apply to a will taking effect before that date [ss 3(1), definition of ‘settlement’; 4(1)]. As the Will was executed and the testatrix died many years before 31 October 1984, it is necessary to consider the common law rule against perpetuities. The common law rule against perpetuities (or, as the authors of Jacobs’ Law of Trusts, 6th  ed (at [1081]), call it, the rule against remoteness of vesting) is that a future interest in property must vest, if at all, within the perpetuity period of ‘a life or lives in being’ and 21 years thereafter. Under this rule, a gift over conditional upon an event which need not necessarily occur within the perpetuity period is void [Re The Trustees of Hollis’ Hospital and Hague’s Contract [1899] 2 Ch 540, 555 (Byrne J); Re Da Costa, Clarke v Church of England Collegiate School of St Peter [1912] 1 Ch 337, 342 (Eve J); Perpetual Trustee Co v Williams (1913) 13 SR (NSW) 209, 213–214 (Street J); Williams v The Perpetual Trustee Co Ltd (1913) 17 CLR 469, 485 (Barton ACJ), 495 (Isaacs J)]. Thus, where there is a gift for charitable purposes with a gift over to a non-charitable purpose, on the fulfilment of a condition which may occur outside the perpetuity period, the gift over is void, and the initial gift for charitable purposes is regarded as absolute and unconditional [Re Bowen, Lloyd Phillips v Davis [1893] 2 Ch 491; Re Baillie, Faithful v Sydney Industrial Blind Institution (1907) 7 SR (NSW) 265]. However, there are conflicting views as to whether, where there is a limited or determinable gift (as distinct from a conditional gift — a distinction to which it will be necessary to return), a grantor’s possibility of reverter is subject to the rule against perpetuities. It has been submitted that I should hold that the possibility of reverter is also subject to the perpetuity rule, but I have concluded that it is not. First, the view that the rule against perpetuities does not apply to the grantor’s possibility of reverter is sound in principle. The rule against perpetuities is concerned with the creation, and not the duration or termination, of interests, and does not invalidate a limitation which provides that an interest shall or may cease at a future date outside the perpetuity period [Wainwright v Miller [1897] 2 Ch 255, esp 261; see also Re Gage [1898] 1 Ch 498]. If a determinable fee terminates, then there will be an interest of which the settlor has not disposed. Any beneficial interest of which a settlor fails to dispose remains in the settlor under a resulting trust, ab initio, even if it is uncertain when, if ever, it will take effect [Charles Harpum, Malcolm Grant and Stuart Bridge, The Law of Real Property, 6th ed, 2000, [7-090]–[7-091]]. Secondly, although several cases suggest that the perpetuity rule is applicable to the grantor’s possibility of reverter, on examination their reasoning is not compelling. In the Hollis’ Hospital case, Byrne J recorded (at 549) a concession in argument that if the clause in question ought to be construed as a limitation or as creating a shifting use it would be void as infringing the rule against perpetuities, and held (at 555) that, taking effect as a condition, it was void for the same reason. However, as Isaacs J pointed out in Williams 287

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v  Perpetual Trustee (at 495), while portion of the land conveyed was the legal property of Thomas Hollis, Snr and other grantors, the right of reverter was limited to the heirs of Thomas Hollis alone; thus this was not a true case of reverter to the grantor, as if on resulting trust, upon termination of a determinable fee; it was in substance a gift over. In Re Smith [1967] VR 341, Menhennitt J (at 346, 26–29) described the concession referred to by Byrne J as a ‘decision’, but as the context was a condition for re-entry and not a determinable grant, what his Honour said was obiter. In Hopper v Corporation of Liverpool (1944) 88 Sol Jo 213, Bennett VC expressed the opinion that if the rule against perpetuities applied to the possibility of reverter on a fee subject to a condition which may or may not happen, it must equally apply to the possibility of reverter on a fee limited to determine on an event which may or may not happen. But in my respectful opinion, this overlooks the circumstance that the perpetuity rule applies to the creation, not termination, of interests, and leaves unexplained what happens to the fee simple upon termination of a determinable fee. In Siemenski v  Brooks Nominees [1990] Tas SR 236, Zeeman J, with reference to Hopper v  Corporation of Liverpool, the Hollis’ Hospital case and Re  Smith, said that though Hollis’  Hospital and Hopper had been much criticised, he was persuaded he should follow Hollis’ Hospital, concluding that ‘the respondent holds the fee simple free from any possible re-entry or reverter’  — which reflects that his Honour approached the case as if it made no difference whether the specified event was a condition or a limitation, and did not consider whether it made a difference, save to observe that the view expressed in Morris and Leach on the Rule against Perpetuities, 2nd edn, (at 213) — that any decision that the rule against perpetuities applied was practically equivalent to a decision that determinable fees simple and fees simple subject to a right of entry for condition broken did not exist, or that there was no difference between them and a fee simple absolute — may be too extreme as, for example, an executory limitation on failure of issue on the part of a grantee would not offend the rule. That exception itself illustrates that there may be a difference between failure of an executory limitation, and fulfilment of a condition. Thirdly, other authority favours the view that the rule against perpetuities does not apply to the grantor’s possibility of reverter on termination of a determinable fee, even outside the perpetuity period. In Williams v Perpetual Trustee, Isaacs J, though joining in dismissal of the appeal, expressly withheld assent from the proposition that a right of reverter unlimited in time was void for perpetuity (at 494–495), thinking that the question was ‘quite open to argument’. His Honour referred to Attorney-General v Cummins (1906) 1 IR 406n (Palles CB) and Re Tyrrell’s Estate (1907) 1 IR 292, 299 (Walker C), which took a view contrary to the Hollis’ Hospital case. In Attorney-General v Pyle (1738) 1 Atk 435, Lord Hardwicke LC held that the testator’s heir had a valid possibility of reverter after a devise of land to a school ‘so long as it shall continue to be endowed with charity’. In Re  Cooper’s Conveyance Trusts, Crewsdon v  Bagot [1956] 1  WLR  1096, there was a conveyance of land to trustees in fee simple upon trust for an orphans’ home, and upon failure of that trust then for other purposes; while the second trust was void for perpetuity, the trust for the orphans’ home terminated in accordance with the testator’s intention, and there was a valid resulting trust for his estate. Three cases concerning bequests of personal property hold that upon termination of a grant by a limitation, property falls into residue for the benefit of a residuary legatee regardless of when the determination occurs, even though a remainder to that legatee would be void for perpetuity [Re Randell, Randell v  Dixon (1888) 38 Ch  D 213; Re  Blunt’s Trusts, Wigan v Clinch [1904] 2 Ch 767; Re Chardon [1928] Ch 464]. In such a case, the apparent ‘gift over’ to the residuary legatee is not taken to be a provision which itself vests an interest in another 288

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person, but rather to indicate (superfluously) the reverter of the interest to the residuary estate [Re Randell, 218–219]. Accordingly, in my opinion, principle and the balance of authority favours the view that, at common law, the grantor’s possibility of reverter upon termination of a determinable fee is a vested interest, and is unaffected by the rule against perpetuities [see also Re Tilbury West Public School Board and Hastie (1966) 55 DLR (2d) 407, 412–416 (Grant J); Re  Essex County Roman Catholic Separate School Board and Antaya (1977) 80 DLR (3d) 405, 408 (Klever J); Peter Butt, Land Law, 4th ed, 2001, [1272]]. [Under the Perpetuities Act, a possibility of reverter under a determinable interest is subject to the rule against perpetuities: s 14(2).] Here, the gift over is neither to the residuary beneficiaries under the will, nor even to the deceased’s next-of-kin at the date of her death (who would be entitled on partial intestacy), but to the deceased’s next of kin at the time when the property ceases to be used for the specified purposes. Even if a gift over to the next of kin as at the date of death might reflect, superfluously or otherwise, the operation of law on termination of a determinable gift (and there are difficulties with this where, as here, there is an express gift dealing with the whole of the residuary estate), the gift over to the next of kin when the specified event occurs does not; to the contrary, it is a true gift over, to persons who would not be entitled by operation of law on termination of a determinable gift, and whose entitlement is derived solely from the Will. As, for the purposes of the gift over, the trust property may cease to be used for the designated purposes after the expiry of the limitation period, those next-of-kin take a future interest upon an event that need not necessarily occur within the time allowed by the rule against perpetuities. It follows that the gift over is void, as the specified event might occur outside the perpetuity period.

Commentary 6.13  Brereton J concluded in Cram that the possibility of a reverter was an interest to

which the rule against perpetuities should not apply. In reaching this decision, his Honour reiterated some important principles concerning the application of the common law rule against perpetuities. In particular, his Honour noted at [32] that the rule against perpetuities is concerned with ‘the creation, rather than the duration or termination, of interests’ and therefore does not invalidate a limitation which provides that an interest shall or may cease at a future date outside the perpetuity period.15 In this regard, Brereton J at [57] referred to the distinction between a determinable limitation and a conditional grant. His Honour noted that the distinction is essentially ‘between a grant “to A but if he alienates then to B”, where the gift over is void, and a grant to “A until he alienates, and then to B” where the gift to A comes to an end if he purports to alienate it’. Brereton J held that this distinction was well settled and fundamental and that its effect was, in the first case, the donor is taking back something that he has given absolutely, something that is beyond his power. By contrast, in the second case, the donor is merely defining the nature of what is being given. In light of this, his Honour concluded that the balance of authority favoured the view that, at  common law, the grantor’s possibility of reverter upon termination of a determinable fee amounted to a vested interest, because it is effectively a reverter of the primary interest to the residuary estate. The rule against perpetuities has no application to vested interests as it only applies to contingent remainder interest and executory interests. The facts of Cram dealt with the law prior to the introduction of the New South Wales legislation. Under the existing Perpetuities Act 1984 (NSW) s 14(2), a possibility of reverter under a determinable interest will be subject to the rule against perpetuities. Nevertheless,

15. Wainwright v Miller [1897] 2 Ch 255 esp at 261. 289

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the conclusions in Cram have been held to apply to conditional interests. In Freemasons Hospital v Attorney-General for the State of Victoria [2010] VCC 373, Gardiner AJ at [75] concluded: ‘On the application of Brereton J’s analysis in Cram, it seems clear that if what has occurred amounts to a conditional interest, it would be void on an application of the rule against perpetuities under both the common law and under the Perpetuities and Accumulations Act’. In Freemasons Hospital v  Attorney-General for the State of Victoria [2010] VSC 373 at  [109], Gardiner AJ approved of the analysis of Brereton J in Cram and held that the same principle should apply to determinable limitations because, like conditional interests, the determining act may or may not occur. Other interests that have been held to be outside the scope of the rule against perpetuities include a right of entry retained by a grantor where a condition subsequent is breached: Re The Trustees of Hollis’ Hospital and Hague’s Contract [1899] 2 Ch 540; Perpetual Trustee Co v Williams (1913) 13 SR (NSW) 209. While the rule was originally confined to estates in real property, it was expanded to apply to other forms of property, including leasehold interests, legal and equitable interests, and personal property. The rule does not, however, apply to in personam rights and it has been held to have no application to contracts and options that are not specifically enforceable as these interests are not proprietary: Trustees Executors & Agency Co Ltd v  Peters (1960) 102 CLR 537. In Hutton v  Watling [1948] Ch 26, however, the court concluded that an option agreement unlimited in time could be specifically enforceable against the original grantor and did not offend the rule against perpetuities. The court held that this was because ‘the jurisdiction to grant specific performance of a contract for the sale of land [was] founded not on the equitable interest in the land which the contract is regarded as conferring upon the purchaser, but on the simple ground that damages will not afford an adequate remedy; in other words, specific performance is merely an equitable mode of enforcing a personal obligation with which the rule against perpetuities has nothing to do’. This rationale was accepted by the High Court in Trustees Executors & Agency Co Ltd v Peters (1960) 102 CLR 537. All the state and territory statutes deal with options; however, only some deal specifically with options contained in leases. In all jurisdictions the statutes confirm the common law position that options to renew leases and options to acquire reversions are not subject to the rule. For the relevant provisions, see: Perpetuities and Accumulations Act  1985 (ACT) s 10(1); Perpetuities Act 1984 (NSW) s 15(a), (b); Law of Property Act (NT) s 197; Property Law Act  1974 (Qld) s  218(1); Perpetuities and Accumulations Act  1992 (Tas) s 15(1); Perpetuities and Accumulations Act 1968 (Vic) s 15(1); Property Law Act 1969 (WA) s 110 (which does not apply to options to renew). In some states, options to acquire an interest in land are also exempted from the rule. Under the Western Australian Act the rule against perpetuities does not apply options to acquire an interest in land; however, an option that is or may be exercisable more than 21 years from its grant becomes void on the expiry of 21 years from the date of its grant, as between the original parties and all persons claiming through them: Property Law Act 1969 (WA) s 110(1)(B), (2). The rule against perpetuities no longer applies to options in the United Kingdom following the implementation of the Perpetuities and Accumulations Act 2009 (UK) s 9. See also Souglides v Tweedie [2012] EWHC 561 (Ch)at [26] per Newey J.

Scope of the common law rule 6.14  Under the common law rule, a contingent remainder is treated as void from the

outset if there is a possibility that it could vest in title outside the perpetuity period. This

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means that a contingent remainder interest will only be valid if, at the date of the grant, it is clear that one of two things will happen: (i) the contingent remainder will, if at all, definitely vest within the perpetuity period; or (ii) it becomes certain that the contingent remainder will never vest. The relevant perpetuity period is a life in being, plus 21 years plus a gestation period. EXAMPLE A grant to Richard for life, with the remainder to his first child to attain 21  years will be compliant with the rule against perpetuities. If Richard has no children who are 21 or older at the date of the grant, the grant creates a contingent remainder since no one knows who (if anyone) will be Richard’s first child to reach the age of 21 years. The remainder may never vest since Richard might not have a child who reaches 21 years. However, if it does vest, it must do so within the perpetuity period because Richard will have a child during his life and a gestation period and that child will, if at all, turn 21 within the additional 21-year period. Richard will be the relevant life in being for the purposes of the perpetuity period because: 1. he is alive at the date of the grant; and 2. he is the first life expressly or impliedly referred to in the grant. EXAMPLE A grant to Lucy for life, with the remainder to her first child to attain 25  years would be invalid pursuant to the common law rule against perpetuities if Lucy has no children of that age or older at the date of the grant. Lucy is the relevant life in being for the purposes of the perpetuity period. If Lucy is yet to have a child, there is a possibility that the contingent remainder could vest outside the perpetuity period because there is a possibility that if Lucy falls pregnant directly after the grant is executed, then dies in childbirth, that child will turn 25, if at all beyond the residual period of 21 years (plus gestation period).

These examples reveal that the focus of the common law rule is on possibilities rather than probabilities. The remainder to Lucy’s first child to attain 25 years would be invalid if she has no children because of the ‘possibility’ of events occurring outside the perpetuity period. If Lucy has a child after the date of the grant, it is possible that the child might turn 25, if at all, more than 21 years and a gestation period after Lucy dies. For example, if Lucy dies in childbirth, the child will not turn 25 within the residual 21-year period. The  important aspect about the common law rule is that it must be clear at the date when the disposition is created that the contingent remainder will vest within the perpetuity period, if it is going to vest at all (that is, Lucy may not have any children). If there is a possibility at that date that a contingent remainder will vest in title outside the time frame of a life in being (a gestation period) and 21  years, the contingent remainder will be struck down, however remote the possibility may seem at the date of creation.

Life in being 6.15  There are specific rules relevant to the determination of which life in being is the

relevant life for the purposes of the rule against perpetuities.

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These may be summarised as follows: 1. The life in being will be the first life either expressly or impliedly referred to in the grant. If the grantor is alive and gives his or her son a life interest with remainder to his or her grandchild, then the grantor may be the life in being because of the implied reference to parentage in the disposition and because the grantor is alive at the date the grant was created. The primary requirement is to determine that the measuring ‘life’ is actually ‘in existence’ and that they can be ascertained with reasonable certainty from the terms of the grant. 2. The life in being may be an individual or a class of people. Where it is a class, that class must not be capable of increasing in number. For example, the life in being may be the grantor, or the grantor’s children. However, in order for the children of the grantor to be the relevant lives in being, it must be clear at the date of the grant that no more children will be born. If it is possible that more children may be born, the children cannot constitute the relevant lives in being. This resulted in the common law principles known as the fertile octogenarian and the precocious toddler. The fertile octogenarian assumes that a woman may have children well beyond what is medically regarded as the usual childbearing age, because she is presumed to be able to conceive beyond 70  years of age. The precocious toddler principle assumes that a child of any age is capable of conceiving a child: Re Gaite’s Will Trusts [1949] 1 All ER 459. These presumptive common law rules have now been modified by statute in Australia. For example, s 8 of the Perpetuities and Accumulations Act 1968 (Vic) specifically provides that a male can have a child at 12 years old and over and a female can have a child at 12 years and over but not over the age of 55 years. See also: Law of Property Act 2000 (NT) s 189; Perpetuities and Accumulations Act 1992 (Tas) s 10; Property Law Act 1969 (WA) s 102; and Property Law Act 1974 (Qld) s 212. There are two further unusual principles that affect the common law rule. The first is the ‘unborn widower’, which posits that someone not married at the date of the death of the testator might marry someone, not born at the testator’s death, who would then die more than 21 years after the widower dies causing any gift to the children to vest outside the perpetuity period: Re Frost (1889) 43 Ch D 246. For example: Property is devised to A (a bachelor) for life, and then to any widow who may survive him for life, and then to such of his children as are living at the death of any such widow. At common law, the remainder to the children of A is void, as their interest cannot vest until the death of the widow, which may be more than 21 years after the death of the life in being, A. According to common law, the widow cannot be a life in being, because (unless A predeceased the testator) A’s widow may not have been alive at the testator’s death. Even if A were married at the testator’s death that wife might die and he might remarry a woman who was not alive at testator’s death and who cannot therefore be a life in being. The second unusual principle is the ‘magic gravel pits’ case, which posits that a testator who leaves property to beneficiaries subject to a contingency that is bound to occur within 21 years will have the gift invalidated if there is a possibility of that contingency not happening. In Re Wood [1894] 2 Ch 310, a testator bequeathed his freehold gravel pits to his children requesting the trustee to work the pits and then sell them and provide the income to the children equally. The English Court of Appeal held that the gift failed because it could not be certain that the pits would be ‘worked out’ within the perpetuity period. 292

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3. The life in being cannot be a corporation or an animal; it must be a human life that is in existence at the date the grant takes effect.

Certainty requirements 6.16  Under the common law it must be absolutely clear at the date when the grant was

executed that the contingent remainder interest will vest in title, if at all, within a life in being plus 21 years plus a gestation period. If there is any possibility that it will not, the contingent remainder will be void ab initio and any dependent (subsequent) interests will also be struck down: Re Abbott [1893] 1 Ch 54; Re Buckton’s Settlement Trusts [1964] Ch 497. However, any prior interest will take effect as it would if the contingent remainder had not been included: Garland v Brown (1864) 10 LT 292. For example, if a grant is made to ‘my son for life, remainder to my grandson when he turns 21’ the grant will be valid if the grandchild is alive at the date of the grant where the life in being is the son. If, however, the life in being is the grantor (ie, the grandfather in this case) and the son has no children at the date of the grant, the contingent remainder will be invalid because it is uncertain that within the life of the grantor plus 21  years plus a gestation period a grandson will be born who will turn 21. The son may not have children until, for example, 10 years after his father dies. If a grandson is born, that child will not turn 21 within the residual perpetuity period, which in this instance would only be 11 years. The possibility of that event occurring, even if it is unlikely because the son has displayed a strong interest in having children while his father is alive, will invalidate the contingent remainder under common law. As outlined by Lindley LJ in Re  Wood [1894] 3 Ch  381 (quoting Theobald on Wills, 3rd ed, at 401): 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.

See further J Chipman Gray, Perpetuities (4th ed, 1942); J H C Morris & W Barton Leach, The Rule Against Perpetuities, 2nd ed, Stevens, London, 1962; R Megarry & W Wade, The Law of Real Property, 7th ed, Sweet & Maxwell, London, 2000, Ch  7, Part  3, Section  2; D E Allan, ‘The Rule Against Perpetuities Restated’ (1964) 6 University of Western Australia Law Review 27; L R McCredie & D G Doane, ‘Perpetuities Law Reform in Victoria’ (1969) 43 Australian Law Journal 366; and P W Hogg & H A J Ford, ‘Victorian Perpetuities Law in a Nutshell’ (1969) 7 Melbourne University Law Review 155.

Statutory rule against perpetuities 6.17  The statutory rule against perpetuities replaces the common law rule with what

has been described as a ‘wait and see’ principle. Hence, the old common law ‘what-mighthappen’ possibilities test becomes a statutory rule of ‘what-does-happen.’16 The wait and see  principle is now codified in statute. In Queensland, Tasmania, Victoria, Western Australia, New South Wales, the Australian Capital Territory and the Northern Territory the ‘wait and see’ statutory perpetuity period is 80 years: see Property Law Act 1974 (Qld) s 209; Perpetuities and Accumulations Act 1992 (Tas) s 6; Perpetuities and Accumulations

16. See  M Simes, ‘Is the Rule Against Perpetuities Doomed? The “Wait and See” Doctrine’ (1953) 52 Michigan Law Review 179. 293

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Act  1968 (Vic) s  6; Property Law Act  1969 (WA) s  101; Perpetuities Act  1984 (NSW) s 7(1); Perpetuities and Accumulations Act 1985 (ACT) s 8(1); Law of Property Act (NT) s 187. For example, s 5(1) of the Perpetuities and Accumulations Act 1968 (Vic) states: ‘… where the  instrument  by which any  disposition is made so provides the perpetuity period applicable to the disposition under the rule against perpetuities instead of being of any other duration shall be such number of years not exceeding eighty as is specified in the instrument as the perpetuity period applicable to the disposition’. This section must be read together with s 5(3), which sets out that where no period of years is specified in an instrument as the perpetuity period: ‘… but a date certain is specified in the instrument as the date on which the disposition shall vest, the instrument shall, for the purposes of this section, be deemed to specify as the perpetuity period applicable to the disposition a number of years equal to the number of years from the date of the taking effect of the instrument to the specified vesting date’. In New South Wales and the Australian Capital Territory, the legislation effectively substitutes 80 years for the common law period because the statutory period is applicable to an interest created by a settlement, and ‘settlement’ is defined as any instrument, transaction or dealing whereby a person makes a disposition. Disposition is defined to include any alienation of property: Perpetuities Act 1984 (NSW) s  7(1); Perpetuities and Accumulations Act  1985 (ACT) s  8(1). In Victoria, Western Australia, Queensland and Tasmania, a period not exceeding 80 years may be substituted for the common law perpetuity period in an instrument. Where this does not occur, the common law period is to apply: Perpetuities and Accumulations Act  1968 (Vic) s  5(1); Property Law Act 1969 (WA) s 101; Property Law Act 1974 (Qld) s 209(1); Perpetuities and Accumulations Act 1992 (Tas) s 6(1). In the Northern Territory the instrument may specify either the common law period or 80 years from the date the settlement takes effect, and if no period is specified the perpetuity period is taken to be 80 years: Law of Property Act (NT) s 187(1), (2). In South Australia, the rule against perpetuities has been abolished altogether, although the court retains a jurisdiction to require contingent interests to vest if they remain contingent after 80 years: see Law of Property Act 1936 (SA) ss 61 and 62. The statutory rule sets out that the disposition pursuant to which an interest is created should be treated as if it is not subject to the rule until it is clearly established that the interest cannot vest within the appropriate perpetuity period. In this regard, the ‘wait and see’ approach is endorsed: Perpetuities and Accumulations Act 1985 (ACT) s 9; Perpetuities Act 1984 (NSW) s 8; Law of Property Act (NT) s 190; Property Law Act 1974 (Qld) s 210; Perpetuities and Accumulations Act  1992 (Tas) s  9; Perpetuities and Accumulations Act 1968 (Vic) s 6; Property Law Act 1969 (WA) s 103. This means that an interest will not be automatically invalid if it is not certain that it will vest within the 80-year period. Hence, a contingent interest to which the statutory principles apply will not be invalid from the outset, but may become invalid where it does not vest within the prescribed 80-year period. Further, dependent interests that would otherwise have been invalidated under common law may be validated in all states except South Australia: Property Law Act 1974 (Qld) s 215; Perpetuities and Accumulations Act 1992 (Tas) s 12; Perpetuities and Accumulations Act 1968 (Vic) s 11; Property Law Act 1969 (WA) s 109; Perpetuities Act  1984 (NSW) s  17; Perpetuities and Accumulations Act  1985 (ACT) s  18; Law of Property Act (NT) s 199.

Class gifts 6.18  The rule against perpetuities also applies to dispositions that are made to a class

of persons. Class gifts will arise where a disposition is given to a class of people with a

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common characteristic who are to take the title in shares proportionate to the number of members within the group. The application of the rule against perpetuities to gifts to a class is absolute as the remoteness will affect the class as a whole if it is able to affect a number of the members of that class. Hence, it must be established that the interest of each member of the class is capable of vesting within the perpetuity period. For example, ‘To X for life with remainder to such of my grandchildren who reach the age of 25’. This is a class gift because the grandchildren do not take an established proportion when the disposition is executed, but rather their proportion is uncertain and will depend upon how many grandchildren are found to come within the class. Under common law, a class gift will not be regarded as ‘vested’ in accordance with perpetuity requirements unless the fractional share of the title taken by each member of the class is certain to come within the perpetuity period. Under common law, if there is a possibility that the fractional share of any class member will not vest within the perpetuity period, the whole class will fail under what is known as the ‘all or nothing’ rule. As outlined by Sir Denys Buckley in the English Court of Appeal in Re Drummond’s Settlement [1988] 1 WLR 239: 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. EXAMPLE Consider the gift, ‘To X for life, remainder to such of X’s children who reach the age of 25’. Assuming X survives the testator and the children range from 1 to 12 years old, X will be the life in being. Applying the common law rule, it is possible that some of X’s children (the youngest) may not reach 25 until more than 21 years after X’s death. Therefore, under common law (prior to the introduction of the class closing rules) the gift to the whole class of children became void. It was not possible to validate the gift only for those children who were certain to turn 25, if at all, within the perpetuity period. Under the old principles, the common law adopted an all or nothing approach.

Class-closing rules 6.19  The administration of class gifts can be difficult where the scope of the membership

is uncertain. To resolve this problem, the courts eventually developed what came to be known as ‘class-closing rules’. The class-closing rules were derived from the early decision in Andrews v Partington (1791) 3 Bro CC 401; 29 ER 610, which set out that a class which is capable of further increase will ‘close’ for the purposes of complying with the rule against perpetuities once a member becomes entitled to call for the distribution of his or her share and persons who might qualify for inclusion in the class after that period are excluded. The object of the rule in Andrews v Partington is said to be ‘to make property vest as early as possible, so that the persons to whom it is given may know what they have to expect, and make the fund available at the earliest period’: Gimblett v Purton (1871) LR 12 Eq 427 at 430; Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844 at [92] per Lindsay J. While the rule has been described as a rule of construction, it is also one of rule of convenience, and a departure from its operation must be clearly justified: 295

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In Re Tom’s Settlement; Rose v Evans [1987] 1 WLR 1021 at 1025F-G, citing In Re Clifford’s Settlement Trust; Heaton v Westwater [1981] Ch 63 at 67. The rule will, however, defer to a contrary intention expressed in the instrument and this will depend upon the language used. In Lehmann v Haskard [1997] NSWSC 225, Young J concluded at [8] that: The class closing rules have been associated with the modern rule against perpetuities, though it is clear that they pre-dated the final statement of the modern rule against perpetuities. They have been associated because the effect of the class closing rules has been to dampen the devastating effect of the modern rule against perpetuities. However, this is not the only effect of the class closing rules and it would seem that they have not been affected by the abolition of the modern rule against perpetuities by the Perpetuities Act 1984 (NSW).17

Pursuant to the class closing rules, all class members who are currently in existence become entitled provided they satisfy the contingency. Members coming into existence after the class closes will be excluded and will therefore take nothing. Hence, the interest of every member of a class must necessarily be capable of vesting within the perpetuity period. If not, the whole class gift is void It has been argued that these rules promote efficient distribution: see Lyall, ‘Class Closing Rules and Future Interests in Freeholds: Law and Political Economy’ (1985) 20  Irish Jurist  66. They ensure that at  least some members of a class obtain a distribution; this approach is more in line with the intention of the grantor than the ‘all or nothing’ rule that previously existed. The class-closing rules may, however, be ousted where a clear intention to do so is apparent in the instrument. This was set out in Re Clifford’s Settlement Trusts [1981] Ch 63 at 67 where the court concluded that in order for the class-closing rules to be inapplicable it must be established that there is an ‘inescapable incompatibility’ between the terms of the instrument and the application of the rules. On the facts, a testory settled shares on his grandchildren, the children of his son, John Lewis Clifford, as follows: ‘The Trustees shall hold the Trust Fund in Trust for the children of the Settlor’s son … born in the Settlor’s lifetime or after his death who before the expiration of the period of Twenty one years from the death of the survivor of the Settlor [and his son] shall attain the age of Twenty five years and the other children or child of the said [son living at the expiration of such period and if more than one in equal shares’. At the date the settlement was made the settlor’s son, John Lewis Clifford, had two children. Two more were subsequently born. The settlor died in 1955. Thus, the relevant period under cl 2 was 21 years from the death of the son. The argument advanced on behalf of the four children mentioned above was that once the eldest had attained 25 years the rule in Andrews v Partington applied to close the class and confine the settlement to such of the children then living who had reached 25 years and to those then living who reached 25 years at some future date. (At that stage, the eldest and second eldest had already attained 25 years.) Against this the trustees argued on behalf of any children of the son yet to be born, who would be excluded, that the rule in Andrews v  Partington should not be applied because there was a sufficient contrary intention apparent from the language of the settlement. Sir Robert Megarry held that for a contrary intention to be established the language must be necessarily incompatible with the rule and this could not be established on the facts. See also the discussion by J Maxton, ‘Andrews v Partington: A Rule of Construction Re-Examined’ (1980) 1(1) Canterbury Law Review 94. 17. See also: Public Trustee of Queensland v Smith [2008] QSC 339 at 37; Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844 at [86] per Lindsay J. 296

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In Re Drummond’s Settlement [1988] 1 WLR 239, Sir Denys Buckley in the English Court of Appeal discussed the scope and purpose of the class-closing rules, making the following comments at 267: … 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. … 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 competing 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.

The class-closing rules will have an application in four primary situations: 1. where an interest is given to a class without any contingency or preceding life interest. In this situation, the class will close when the instrument comes into effect provided at least one member exists at that time; 2. where an interest is given to a class without a preceding life interest but subject to a contingency that must be satisfied. In this situation, the class closes when the first member satisfies the contingency and becomes entitled to call for distribution; 3. where a class gift is subject to a life estate that prevents immediate distribution. In this situation, the class will close when the life interest determines; 4. where a class gift is subject to a life estate that prevents immediate distribution and is subject to a contingency. In this situation, the class will close when the life interest determines, or when the first class member satisfies the contingency and becomes entitled to call for distribution, whichever is later. 6.20  The scope of the class-closing rules and their relevance to beneficiaries taking

pursuant to a discretionary trust was examined by the Supreme Court of Queensland in Yeomans v Yeomans [2006] 1 QdR 390. An extract of this decision follows.

— Yeomans v Yeomans — [2006] 1 QdR 390 Facts: A testator left his estate to be distributed to such of his grandchildren whom the executor, in his discretion, deemed appropriate. During the course of considering the validity of this disposition, McMurdo J in the Queensland Supreme Court concluded that the class closing rules did not apply to a discretionary trust because no trust property is vested in the beneficiaries. In the course of reaching this conclusion, his Honour considered the purpose of the class closing rules. McMurdo J: … The purpose of the class closing rules is to attribute to the testator an intention which is consistent with the convenience of an early vesting with classes closed, so that the beneficiaries may know the minimum size of each share and the personal representative or trustee may begin to distribute the fund. That convenience is not provided by applying the class closing rules to a gift such as this, at least because it constitutes a discretionary trust and no 297

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property is vested in a member of the class as at the testator’s death. In Re Bellville [1941] 1 Ch 414 at 418–419, the Court of Appeal identified the reason for the relevant class closing rule as one of convenience, and in particular of avoiding the inconvenient postponement of the distribution of the personal estate of the testator ‘till it could be ascertained how many legacies of the given quantity would be payable’, and observed that the rule does not apply when that inconvenience does not exist. There is a potential inconvenience in not knowing how many members there will be within the class of potential recipients. Conceivably, decisions as to expenditure for the benefit of certain grandchildren could be complicated by the prospect that there will be further grandchildren, whose education is also to be considered. However that is not the kind of inconvenience which the class closing rules were designed to avoid. The question, of course, is one of testamentary intention. It may be accepted that any inconvenience was a material consideration for the testator. However, the confinement of the class to grandchildren living at his death would still result in a trust which would be expected to be administered over many years, and which would require a course of decision making with a consideration of a proposed expenditure against the possible demands upon the trust fund in the future. Having regard to the evident purpose of the trust, the testator must have intended all of his grandchildren to be potential beneficiaries, whether they were born before or after his death. In my view, the rules of construction relied upon by the executor and the third respondents are excluded in this case. The expression ‘my grandchildren’ includes grandchildren born after the death of the testator, and whether presently alive or not.

Commentary 6.21  The conclusion of McMurdo J in Yeomans was that the primary objective of the class closing rules is to attribute an intention to the testator that is consistent with ‘the convenience of an early vesting with classes closed’ and this is to ensure that the beneficiaries are aware of the size of their share and to allow the personal representative to distribute the fund properly. His Honour concluded that this objective is not served by a discretionary trust because pursuant to such a trust, no property vests in the potential objects at  the date of the testator’s death. On the facts the testator intended all of his grandchildren to be potential beneficiaries, whether they were born before or after his death, because the trust was to be administered and managed over many years and it was inappropriate to apply class-closing rules in this context. See also J Glover, ‘The Rule against Perpetuities and its Application to Unit and Discretionary Trusts’  (2007) 14  Australian Property Law Journal  225. The common law class-closing rules have also been reinforced in the legislation. The Perpetuities Act  1984 (NSW) abolishes the ‘all or nothing’ rule under common law in s  8 and reinforces the class gift approach in s  9(4) by setting out that members of the  class who vest outside the perpetuity period may be excluded without affecting the interests of those who do. Similar provisions exist in the Australian Capital Territory, Northern Territory, Queensland, Tasmania, Victoria and Western Australia: Perpetuities and Accumulations Act  1985 (ACT) s  9; Law of Property Act (NT) s  191; Property Law Act 1974 (Qld) s 213; Perpetuities and Accumulations Act 1992 (Tas) s 10; Perpetuities and Accumulations Act 1968 (Vic) s 9; Property Law Act 1969 (WA) s 105(1); Law of Property Act 1936 (SA) s 60. 6.22  A detailed overview of the history of the common law rule against perpetuities,

its application within a variety of different situations and a methodology for approaching exam questions is set out in the article that is extracted below.

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—  Understanding the Rule Against Perpetuities: Adopting a Five Step Approach to a Perpetuities Problem  — L A McCrimmon (1997) 5 Australian Property Law Journal 130 Introduction … Professor Reutlinger notes that: ‘I always capitalise the Rule Against Perpetuities. No one who has taken or taught the subject will doubt that, in this area of the law, it isn’t just another rule of law; it is the Rule’: M Reutlinger, ‘When Words Fail Me: Diagramming the Rule Against Perpetuities’ (1994) 59 Missouri Law Review 157. I ascribe to this view.

The origins and policy of the rules against perpetuities In feudal England, control of land equalled wealth, power and social prestige. A prerequisite to maintaining one’s position in society was the ability to maintain control over the family landholdings. For reasons of public policy, the common law courts took the position that land must remain freely alienable. Hence, from an early date the courts were involved in a battle to restrict the ability of a landholder to exercise, from the grave, control over real property. During the course of this battle the courts formulated rules to invalidate interests which vested at too remote a time in the future. These rules became known as the rules against perpetuities. The word ‘perpetuity’ literally means, ‘the state or quality of being perpetual’. In other words, ‘lasting or enduring forever or for an indefinitely long time’. It has been noted that: … the word perpetuity was probably first used in the English courts about the end of the sixteenth century. It has since been used in at least three different senses, namely (1) a limitation in the nature of an unbarrable entail, or (2) an inalienable interest, or (3) an interest which vests in interest at too remote a time in the future. It is the third meaning of the word, namely an interest which vests at too remote a time in the future, which is the subject matter of the rules against perpetuities. Historically two rules to restrict the power of a landholder to control the future ownership and enjoyment of land have been developed by the courts. These are sometimes referred to as the ‘old rule against perpetuities’, or the rule in Whitby v Mitchell, and the ‘modern rule against perpetuities’. While the ultimate object of both rules is the same, namely to invalidate interests which may vest in interest at too remote a time in the future, the two rules are separate and distinct. …

The modern Rule Against Perpetuities With the rise of the executory interest following the passage of the Statute of Uses 1535, the courts began to uphold the validity of executory devises of potentially long duration. By the latter part of the seventeenth century it became clear that the use of the executory devise could defeat the policy of the courts to restrict the power of landholders to control, from the grave, the use and enjoyment of land; a fact which disturbed members of both the bench and the bar. In the Duke of Norfolk’s Case, a decision which has been described as ‘one of the classics of English legal literature and a landmark in the field of equity jurisdiction’, Lord Nottingham LC laid the foundation of the ‘modern Rule Against Perpetuities’. Lord Nottingham held that the validity of a future interest is governed by the time within which the interest is to vest. If that time is too remote, the future interest is invalid. In determining whether the time is too remote, consideration was to be given to possible, rather than actual, events. On the facts of the case Lord Nottingham held that a future interest which had to vest, if it vested at all, no later than the expiration of a life in being when the interest was created, was a valid interest .… 299

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Elements of the rule — the general law The Rule Against Perpetuities can be dissected into a number of elements. When followed sequentially, these elements evolve into a five step process for analysing a perpetuities problem. These elements will be considered in turn.

Element 1: The Rule Against Perpetuities applies to contingent remainders and executory interests, not to vested interests The Rule Against Perpetuities invalidates attempts to create interests which will vest at  too remote a time in the future. Hence, if an interest is vested as at the date of the creation of the interest, the Rule will not apply.

Example 1 Testator (T) devises Blackacre to A for life, then to B for life, then to C for life, then to D in fee simple. (At T’s death, A is three years old, B is two years old, C is one year old, and D is 10 years old.) The fact that a substantial period of time may elapse before B, C or D’s interest vests in possession is irrelevant, because at the date of the creation of the interest, the life estates in remainder to B and C, and the fee simple remainder to D, are vested in interest. The focus of the Rule is on the nature of the interest created, not on the person to whom the interest is conveyed. If a contingent remainder or an executory interest is created by the instrument, the Rule may apply. If the interest is vested as at the date of the creation of the interest, the Rule will not apply.

Element 2: The date of the creation of the interest is dependent upon the nature of the instrument containing the gift If the interest is one to which the Rule Against Perpetuities may apply, it is necessary to determine when the perpetuity period begins to run. Under the general law, the perpetuity period begins to run as at  ‘the creation of the interest’. The date of creation of the interest will depend on the nature of the instrument containing the gift. If the gift is contained in a will, the perpetuity period will begin to run from the date of the death of the testator. If the gift is contained in an instrument inter vivos, the perpetuity period will begin to run from the date the instrument takes effect. For example, if the gift is contained in a deed, the perpetuity period will take effect from the date of execution and delivery of the deed. If the gift is revocable, the perpetuity period runs from the date the settlor releases the power of revocation (if the power of revocation is not revoked, the power will terminate on the settlor’s death).

Element 3: Life in being To constitute a life or lives in being, four conditions must be satisfied: the measuring life or lives must be human; such person or persons must be living at the date of the creation of the interest; if a group of persons is used as the measuring lives, that group cannot be capable of increasing in number after the date of the creation of the interest; and if a group of persons is used as the measuring lives, that group must be ascertainable. In other words, it must be possible to determine what members of the group were alive at the date of the creation of the interest so that it can be determined when the last survivor of that group dies. Ascertaining the life in being (or ‘lives in being’ in that more than one measuring life can be designated either expressly or by implication), is the major stumbling block in the application of the Rule Against Perpetuities. When determining whether a person or group of persons can constitute a life or lives in being, such a person or group must be viewed as a yardstick against which the validity of the gift can be measured. For the reasons discussed below, the focus should not be on physical capabilities of such person or persons. When determining whether a person, or group of persons, can constitute a life or lives in being within the meaning of the Rule Against Perpetuities, all of the conditions noted above must be satisfied. Each of the four conditions is discussed below. 300

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Condition 1 — measuring lives must be human This prerequisite is self-explanatory. To quote Meredith J in Re Kelly, Cleary v Dillon: If the lives of the dogs or other animals could be taken into account in reckoning the maximum period of ‘lives in being and 21 years afterwards’ any contingent or executory interest might be properly limited, so as only to vest within the lives of specified carp, or tortoises, or other animals that might live for over a hundred years, and for 21 years afterwards, which, of course, is absurd. ‘Lives’ means human lives.

Condition 2 — person(s) must be living at the date of creation of the interest Condition 3 — group of persons, if used, must not be capable of increasing in number When analysing a limitation to determine whether it offends the Rule Against Perpetuities, these conditions, although separate and distinct, are often considered together. To satisfy these conditions it is essential first to determine the date of the creation of the interest. For example, a limitation contained in a will may be valid, whereas the same limitation, if contained in a deed inter vivos, may offend the Rule.…

Example 2 Testator (T) devises Blackacre to all of my grandchildren in fee simple. (At T’s death, T had two children, X and Y.) This gift is contained in a will, therefore the date of creation of the contingent fee simple remainder to T’s grandchildren is the date of the death of T. The measuring lives for the purpose of the Rule may be expressly or impliedly designated in the instrument containing the gift. No express designation is contained in this example; however, X and Y are impliedly designated. Obviously the grandchildren of T must be the issue of the children of T, namely X and Y, therefore X and Y are lives which are necessarily involved in the limitation and which satisfy all of the criteria necessary to constitute lives in being. They are human, they are alive at the date of creation of the interest, their number, given the death of T, is not capable of increasing, and their number is ascertainable. T’s grandchildren cannot be lives in being because subsequent to the date of creation, namely the date of the death of T, X and Y may have more children, therefore conditions 2 and 3 above are not satisfied. The contingent fee simple remainder to T’s grandchildren does not offend the Rule Against Perpetuities because the gift to the grandchildren must vest, if it vests at all, within death of the survivor of X and Y, plus 21 years. In fact, in this example all of the grandchildren of T will be ascertained as at the death of the survivor of X and Y (neither X nor Y can have any more children — ie grandchildren of T — after their death) therefore the fee simple interest will vest in the grandchildren of T immediately upon the death of such survivor. There is no need to employ the 21 years. C = date of creation V = date of vesting — the date of the death of the last measuring life, in this case Y GC = grandchild — no further grandchildren can be born after the death of X and Y, therefore the contingent fee simple remainder to the grandchildren of T must vest within the death of the last life in being plus 21 years If this same gift were contained in a deed inter vivos, it would offend the Rule Against Perpetuities and would be invalid under the general law.

Example 3 Grantor (G) gives Blackacre to trustees upon trust for all of G’s grandchildren. (At the date of the deed establishing the trust, G has two children, X and Y, who are both alive.) This gift is contained in a deed inter vivos, therefore the date of creation is the date of the execution and delivery of the deed. No express designation of a life in being is contained in 301

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the deed. G’s children are impliedly designated for the reasons noted in example 2; however, they cannot constitute lives in being. Subsequent to the date of creation, namely the date of the execution and delivery of the deed, G, who is still alive, may have more children and therefore the condition necessary to constitute G’s children as lives in being, namely that they belong to a class that is not capable of increasing in number, is not satisfied. The only other person impliedly designated in the deed is G and therefore G will be the life in being. The gift to the grandchildren will be invalid as infringing the Rule Against Perpetuities. It is possible that when G dies, any children alive at her death may have children more than 21 years after G’s death. Hence, there is a possibility that the contingent fee simple interest in the grandchildren may vest, if it vests at all, more than 21 years after the death of the life in being at the creation of the interest, namely G. Hence, the gift to the grandchildren will infringe the Rule Against Perpetuities and will be invalid. P = perpetuity period Taking this analysis one step further, it was noted above that the measuring lives can be implied in the instrument, as in the above examples, or the measuring lives can be designated expressly. The person or persons designated expressly as a life or lives in being can be selected at random and there is no requirement that they have any connection with the settlor or with the beneficiaries of the gift.

Example 4 Grantor (G) grants Blackacre to trustees on trust for such of my lineal issue who shall be living at the expiration of 20 years from the day of the death of the last survivor of all of the lineal descendants of the late Sir Owen Dixon who shall be living at the date of the execution and delivery of this deed. The lineal descendants of the late Sir Owen Dixon alive at the date of creation can (admittedly with difficulty and expense) be ascertained, and, given the wording of the grant, that group is not capable of increasing in number subsequent to the date of the creation of the interest. Therefore, such a group constitutes expressly designated measuring lives.… …

Condition 4 — group of persons, if used, must be ascertainable at the date of creation of the interest The group designated, either expressly or impliedly, as the lives in being cannot be so numerous as to be unascertainable.

Example 6 Testator (T) devises Blackacre to trustees to be held for A for life, then for B for life, then for all of my lineal descendants living at the death of the last survivor of all persons who shall be living at the time of my death. The gift of a life estate in possession to A, and a life estate in remainder to B, are vested interests which fall outside the purview of the Rule Against Perpetuities and are therefore valid. The contingent fee simple remainder to the lineal descendants of T does not escape the Rule. The gift cannot vest until such time as the last measuring life, namely the last survivor of all persons alive at  T’s death, dies. It would be impossible to determine what members of this group were alive at the date of the creation of the interest, therefore the gift would be void for uncertainty. Ascertaining who, or what group, constitutes a life or lives in being is a two-step process. First, all of the conditions necessary to constitute a life or lives in being noted above must be satisfied. Secondly, it must be kept firmly in mind that lives in being are used as a yardstick to measure the validity of a limitation contained in an instrument. They are part of the perpetuity formula and therefore the focus should not be on the actual physical attributes of such measuring lives.

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In other words, when applying the perpetuity formula, the focus is on theoretical possibilities, not on actual events or probabilities. This concept is fundamental to an understanding of the next element of the Rule. If, at  the commencement of the perpetuity period, it is theoretically possible to construct circumstances in which vesting would occur outside of the period, then the Rule Against Perpetuities is infringed. Ford and Lee note that the facts existing at  the commencement of the perpetuity period, namely the date of the creation of the interest, must be examined to determine whether it is possible for vesting to occur outside the perpetuity period. If it is logically possible to construct circumstances in which vesting would occur outside the period, then the rule is infringed. This is so even if the postulated circumstances are highly improbable and even if later events make them impossible. In other words, the rule is concerned only with logical possibilities open at the commencement of the period; it is not concerned with practical probabilities, or with actual later events. The determination of whether there is a theoretical possibility that the interest will not vest within the perpetuity period must be made at the commencement of that period, namely at the date of the creation of the interest. This is sometimes referred to as the ‘initial certainty rule’. To illustrate this point reference often is made to extreme examples of its application, two of which have been metaphorically referred to as the ‘fertile octogenarian’, and the ‘precocious toddler’.

The Rule Against Perpetuities: An Overview 6.23  The following is an overview of the nature and scope of the common law and

statutory rule against perpetuities. AIM: The purpose of the rule against perpetuities is similar to the rationale underlying restrictions on inalienability. It aims to promote the freedom of the courts to strike down contingent remainder interests or executory interests created by estate holders that do not vest within a specified time frame and therefore tie up land for long periods of time. The rule only applies to interests that are not vested. In effect, the aim is to prevent estate holders from controlling their estates ‘from the grave’. 1. THE COMMON LAW RULE: No contingent remainder interest shall be valid unless it vests, if at all, no later than 21 years (plus gestation period) plus a life in being after the creation of the grant. It must be absolutely certain at the date when the interest is created that title will vest, if at all, within this period. Where applicable, the common law rule will invalidate a contingent remainder interest that offends the rule against perpetuity immediately. Where the contingent remainder is given to a class rather than an individual, the fractional share of each class member must vest within the perpetuity period. The class-closing rules will validate a contingent remainder in favour of those members of the class that have satisfied the contingency within the perpetuity period once the class closes. Where the class-closing rules apply, only those members of the class who have a vested interest will be entitled to call for distribution. 2. LIFE IN BEING: The life in being under the common law rule must be a human life or lives (that is, it can be an individual or a class). If life is not expressly designated it will be the first life implied in the grant. The life in being must be ascertainable at the date when the grant is created. It is not possible for a life in being to increase in number, so if the life in being is a class, that class must not be capable of expanding. The common law presumptions associated with the ‘fertile octogenarian’ and the ‘precocious toddler’ have created some unusual approaches 303

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to the concept of a life in being; however, these principles are now modified by statute. 3. THE STATUTORY RULE: South  Australia has completely abolished the rule against perpetuities, but s 62 of the Law of Property Act 1936 makes it clear if there remain interests in the property that have not vested 80 or more years after the date of a disposition of property, the court may vary the terms of the disposition so that the interest(s) vest immediately. In New South Wales and the Australian Capital Teritory the ‘wait and see’ 80-year statutory period has fully replaced the common law rule. In other states, the disponor may choose between the common law rule and the 80-year ‘wait and see’ statutory period. Where applicable, the statutory period requires proof that the contingent remainder will vest within 80 years. It is not necessary to prove that the contingent remainder will vest when the instrument is created because the statutory rule is based upon a ‘wait and see’ approach and the interest will only be struck down where it is clear that it will not vest within the relevant period. 4. The rule against perpetuities applies to property interests not personal interests. Hence, it will not apply to rights of entry, the possibility of a reverter, determinable limitations, conditional titles, or contractual rights or options that are not specifically enforceable or do not generate an equitable estate.

6.24 Revision Questions 1. What is the rationale underlying a rule that invalidates contingent remainder interests that do not vest within a prescribed period of time? 2. In Cram Foundation v Corbett-Jones, Brereton J concluded that the rule against perpetuities did not apply to a ‘possibility of a reverter’ because this type of interest arises as a consequence of the termination of a determinable fee and is therefore a vested interest that does not attract the rule against perpetuities. Do you agree with this conclusion? What were some of the reasons outlined by Brereton J for his decision? 3. Under the common law rule against perpetuities it must be shown with certainty that the contingent remainder interest will vest within the prescribed perpetuity period, if at all. Does this mean that it must be established at the date when the instrument is created that the contingency will happen? 4. What restrictions are applicable to the category of persons capable of being a life in being under common law? 5. Do you think that the class-closing rules are fair when they may have the potential effect of excluding a large number of class members from receiving a share of the interest? 6. What is the difference between the requirement for certainty of vesting under the common law rule against perpetuities and the ‘wait and see’ principle adopted by the statutory rule against perpetuities? 7. Consider the following example: In 2005, Ralph executes an inter vivos deed over land he owns in New South Wales. Ralph is 54 years old. The deed states: ‘I give a life estate in my land to my son for life with remainder to such, if any, of my grandchildren who will turn 21 when I turn 70.’ Is the gift to the grandchildren valid? 304

Chapter 7

Leases The Nature of a Lease: Non-Freehold Estate 7.1 Types of Leases 7.2 Validation Requirements 7.3 Statutory Formalities for the Creation of Common Law Leases 7.4 Extract: Property Law Act 1958 (Vic) — s 54 7.4 Exclusive Possession 7.5 Case: Radaich v Smith 7.6 Case: Street v Mountford 7.6 Commentary 7.7 Case: Swan v Uecker 7.8 Commentary 7.9 Revision Questions 7.10 Certainty Requirements 7.11 Equitable Leases 7.12 Case: Walsh v Lonsdale 7.13 Commentary 7.14 The doctrine of part performance 7.15 Tenancy by estoppel 7.16 Case: Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd 7.17 Commentary 7.18 Revision Questions 7.19 Common Law Rights and Duties 7.20 Reasonable habitability 7.21 Landlord’s duty of care 7.22 Case: Jones v Bartlett 7.22 Commentary 7.23 Duty to Provide Tenant with Quiet Possession/Duty Not to Derogate 7.24 Tenant’s Duty to Use the Premises in a Tenant-Like Manner 7.25 Miscellaneous tenant duties 7.26 Express contractual duties 7.27 Specific statutory duties 7.28 Extract: Residential Tenancies Act 2010 (NSW) — ss 32–34, 38–39, 41, 44, 50–52, 55, 55a and 63 7.28

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Australian Property Law Extract: Residential Tenancies Act 1997 (Vic) — ss 7, 31, 40, 45, 62–63, 65, 72, 81 and 85 7.28 Extract: Retail Tenancies Act 2003 (Vic) — ss 1, 11, 17, 21, 33, 35 and 61 7.28 Extract: Retail Shop Leases Act 1994 (Qld) — ss 3, 22, 22A, 24–25 and 27 7.28 Revision Questions 7.29 Assignment and Sub-Letting 7.30 Qualification of the right 7.31 Privity of contract 7.32 Privity of estate 7.33 Case: P&A Swift Investments v Combined English Stores Group 7.34 Commentary 7.35 Remedies 7.36 Right of re-entry 7.36 Extract: Transfer of Land Act 1958 (Vic) — s 67 7.36 Termination and repudiation 7.37 Case: Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd 7.37 Commentary 7.38 The doctrine of frustration 7.39 Merger and surrender 7.40 Revision Questions 7.41

The Nature of a Lease: Non-Freehold Estate 7.1  A lease over land creates a non-freehold estate. The interest is based upon the agreement between the landlord and the tenant to confer exclusive possession, upon terms, for a limited period of time. The estate is non-freehold because it endures for a determined period of time, as outlined by William Blackstone in Commentaries on the Laws of England, 1766, Bk 2 at 143: Every estate which must expire at a period certain and prefixed, by whatever words created, is an estate for years. And therefore this estate is frequently called a term, terminus, because its duration or continuance is bounded, limited and determined: for every such estate must have a certain beginning and a certain end.

The leasehold estate is characterised as an interest in land and therefore regarded as a form of real property. Historically, however, the lease was classified under common law as personal property. The reason for this lay in the fact that the lease was treated purely as a contractual arrangement whereby a landlord agrees to confer exclusive possession upon a tenant for a definite term subject to the provisions within the contract. The nature of the tenant’s interest was characterised as contractual and therefore personal in nature. As such, the only remedy available to the tenant in a situation where they were dispossessed was damages based upon either trespass or a breach of contract. By contrast, the remedies available to support real property interests were more extensive. Under common law, the primary remedy supporting a real action was known as the assize of novel disseisin, 306

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which amounted to an action to recover lands of which the plaintiff had been disseised, or dispossessed. The assize of novel disseisin has been described as one of the ‘glories of medieval common law’ because it provided a speedy and rational procedure for recovering real property: D Sutherland, The Assize of Novel Disseisin Clarendon Press, Oxford, 1973 at 623. The non-availability of this remedy the lease (non-freehold estate) was one of the core distinctions between freehold and non-freehold estates. Following colonisation, Australia inherited the English common law framework, including the land system as it had evolved in England at that point. Under this framework, leases were classified as personal property, being described rather ambiguously as ‘chattels real’. In or around the late fifteenth century, the writ of ejectment began to be used in actions where a tenant had been dispossessed to allow tenants for a term to recover possession. The applicability of the writ of ejectment effectively elevated the leasehold to a quasi real property interest. Formally, however, the distinction between the lease and other forms of real property remained. The only practical impact that the distinction continued to have, however, was in the area of intestacy. As soon as legislation was introduced applying similar rules to both real and personal property in the event of intestacy, even this distinction was diminished. Eventually, the introduction of broad reforming legislation covering residential and retail tenancies in all states also meant that the rules, duties and remedies applicable to leases in these areas became codified and this allowed statute to embellish perceived common law deficiencies. A brief overview of this reforming legislation is outlined further in the chapter at 7.28. As a contract, the lease is governed by the contractual principles and any breach of a term will entitle the tenant or landlord to damages or a decree of specific performance in equity where damages are inadequate. As an interest in land, the lease confers upon the tenant exclusive possession for a defined period, creating an in rem right for the duration of the lease. The proprietary character of the lease stems from a number of factors. First, the enforceability of the lease contract: the contract confers upon the tenant a right, enforceable at law, to exclusive possession for the defined period, subject only to the terms and conditions of the lease contract. Second, the availability of a range of different remedies: a breach of lease may raise a right to damages at law or a decree of specific performance in equity or, alternatively, where the tenant is dispossessed, a right to enforce the writ of ejectment and allow the tenant to recover possession. Finally, the proprietary character of the lease is manifest in its popularity as both a domestic and commercial device. In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 83 ALJR 1152, French CJ noted at [32] that ‘even though leases in land are personalty, they have long been regarded as land’. Similarly, in Balgra Office Enterprises Pty Ltd v Commissioner of State Taxation [2008] SASC 50 Gray J at [25] stated that: A lease was considered to be personal property or a chattel because the old common law ‘real actions’ would not allow a dispossessed lessee to recover possession, but restricted a lessee to a claim for a breach of the lease contract and consequentially to claims for money or damages. Only a person entitled to seisin could recover possession by way of a real action. The ‘res’ itself, hence property which could be recovered in this manner became ‘real property’. This situation changed with the evolution of real actions, and in particular the action of ejectment, to allow a dispossessed lessee to bring an action for possession of land.

In contemporary society the lease is an increasingly attractive interest with great social and economic utility. Nevertheless, despite widespread acceptance of the lease as a common land interest, its transactional status as a monetary and contractual device endures. 307

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Consider the comments in this extract from M Harwood, ‘Leases: Are They Still Not Really Real?’ (2000) 20 Legal Studies 503 at 505: Historically of course, the distinction was in law clear, certain and of practical significance: real property comprised freehold interests in land, whilst leasehold interests in land were classified as chattels real and personalty. The underlying reason was, perhaps, not so transparent. It was, it has been said, not just the technical one that under early feudal law freehold interests were (and leaseholds were not) protected by the real actions. The reason lay in a certain perception of their economic function: Leases helped to provide a useful investment for a society which knew nothing of stocks and shares. Money might be employed in buying land and letting it out on lease in order to obtain an income from the capital; or in buying a lease for a lump sum which would be recovered with interest out of the produce of the land. The attitude to history and to landed property ownership … is that the leasehold and tenancy are seen … as an adjunct to the freehold, a function of the management of the freehold estate, a monetary and contractual rather than a land transaction, viewed — most significantly — from the perspective of the freeholder or the financier and entrepreneur, rather than of the occupying tenant.

Types of Leases 7.2  There is a variety of different forms of leases that may arise, each based upon the period of time for which the lease is expressed to endure. This period may be expressly set out or implied from the circumstances.

(i) Fixed-term tenancy The fixed-term lease is an express tenancy and endures for a period specifically agreed upon by the parties. It will automatically expire at the end of that period without the need for either party to give notice. A fixed-term lease may be for any period of time mutually agreed upon, provided that the period of time is certain.1

(ii) Periodic tenancy A periodic tenancy is a tenancy that is not explicitly fixed in duration. It will endure for any recurring period of time dependent upon the rental paid. If rent is paid on a monthly basis, a periodic tenancy will be implied for the monthly period in which rent is paid. A periodic tenancy will only be terminated where notice is given which is equivalent to the rental period. A periodic tenancy may arise expressly where a lease agreement sets out that a fixedterm lease exists and also allows a further period to automatically give effect to the fixed term in circumstances where the lease is not terminated. A periodic tenancy may also be implied from the circumstances surrounding the occupancy, in particular, the period for which rent is paid. Hence, a periodic tenancy may be implied where a tenant has gone into possession of a property and started paying rent. This situation will often arise where the parties have not complied with the formalities for the creation of an express fixed-term lease, or where the tenant ‘holds over’ after the expiration of a fixed-term tenancy. The duration of the implied periodic tenancy will be referenced by the rental payments. Hence, 1. Bishop v Taylor (1968) 118 CLR 518. 308

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if the rent is paid monthly, then the implied periodic tenancy will be monthly. If the rent is paid yearly, then the implied periodic tenancy will be yearly. The primacy of this presumption was outlined by Rich and Dixon JJ in Moore v Dimond (1929) 43 CLR 105 at 108: 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.

The facts of Moore v Dimond concerned an agreement to confer a lease for a set period of time that anticipated the lease continuing beyond the fixed date. The High Court held that the agreement to create the lease did not comply with the legal formalities and was therefore not enforceable at law, although it was enforceable in equity. The agreement concerned both a fixed-term lease and an ‘anticipated’ periodic lease. The High court held that the combined effect of the agreement being enforceable in equity and the payment of rent generated both an equitable lease and an implied, common law lease. The implied common law lease mirrored the equitable fixed-term lease that the parties had intended to operate yearly. The fact that the parties had ‘intended’ this lease to endure for a different duration to the yearly tenancy was irrelevant given the absence of what Rich and Dixon JJ described as ‘want of appropriate expression’ or a ‘formal demise’. The fixed-term lease was only enforceable in equity and was intended to be yearly. The implied periodic lease that followed was therefore enforceable under common law presumption as a yearly tenancy. The common law presumption of a yearly implied tenancy has, however, been significantly circumscribed by legislation. Section 127(1) of the Conveyancing Act 1919 (NSW) s 129 of the Property Law Act 1974 (Qld) and s 71 of the Property Law Act 1969 (WA) all make it clear that the common law presumption does not apply and any tenancy lacking a clear agreement concerning duration shall be deemed to constitute a tenancy at  will, determinable by either of the parties by one month’s notice in writing. Section 127(1) of the Conveyancing Act 1919 (NSW) states as follows: No tenancy from year to year shall, after the commencement of this Act, 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.

In Dockrill v Cavanagh (1944) 45 SR (NSW) 78, the court held that a reference to ‘no agreement as to duration’ in s 127 of the Conveyancing Act 1919 (NSW) in effect meant that there was no agreement as to duration that was compliant with the legal formalities for the creation of a lease. As a result, s 127 will apply even in circumstances where the parties have, as in Moore v Dimond, agreed to a longer lease term, but despite this have not brought this intention into legal effect by complying with the relevant legal formalities.2

(iii) Tenancy at will A tenancy at will can be an express or an implied tenancy. It will arise wherever a person enters into possession under a lawful right and remains in possession when that right expires with the consent of the landlord. Caution must be exercised outside of this 2. See also Mooloolaba Slipways Pty Ltd v Cashlaw Pty Ltd [2011] QSC 236 at [80] per Atkinson J. 309

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because, as outlined by Nicholls LJ in Javid v Aqil [1991] 1 WLR 1007 at 1013, ‘… so long as such parties are in the throes of negotiating larger terms, caution must be exercised before inferring or imputing to the parties an intention to give to the occupant more than a limited interest, be it licence or tenancy’. The tenancy may be determined at any time by either party. The usual situation where a tenancy at will arises is where a tenant remains in lawful possession of the leased premises following the expiration of a fixed-term lease with the consent of the landlord and with the tenant not paying rent on a regular periodic basis and therefore failing to raise an implied periodic tenancy. This situation commonly arises during ‘negotiations’ where the parties are working towards the conferral of a larger interest making it inappropriate to transform the ‘interim’ interest into an entitlement that does not truly reflect the circumstances. As outlined by Jordan CJ in Commonwealth Life (Amalgamated) Assurance Ltd v Anderson: A tenancy at will exists whenever, by virtue of an express or implied agreement between the land-owner and another person, the other is in exclusive possession of the land, otherwise than as servant or agent of the owner, for an estate which is not of freehold or for a term. A tenancy at will is subject to many inconveniences. It is necessarily terminable at the will of either party by demand of possession, express or implied. It differs in this respect, as in others, from a licence in that no period of notice is necessary for its termination; although, on termination by the owner, the tenant has a reasonable time to enter and remove his goods, but not a right to exclusive possession for the purpose. The estate created by the tenancy is unassignable, because a purported assignment terminates it as soon as it comes to the notice of the owner. See also Chan v Chan [2020] VSCA 40 at [74]-[75] per Tate JA.

(iv) Tenancy at sufferance Where a person enters into possession under a lawful right and remains in possession after that right ceases, without either the assent or dissent of the owner, a tenancy at sufferance will be implied. A tenancy at sufferance cannot be implied if the landlord expressly objects. The most common example of a tenancy at sufferance is where a tenant has entered into possession under a valid tenancy, and remains in possession after the tenancy has come to an end, without the landlord’s assent or dissent. A tenancy at sufferance can only arise by operation of law. Given that there is no explicit agreement between the landlord and tenant, a tenancy at sufferance does not create an obligation to pay ‘rent’, although a tenant may claim for use and occupation. A tenancy at sufferance cannot be assigned or sublet. If a landlord subsequently does provide consent, the tenancy at sufferance becomes a tenancy at will. If the rent is paid and accepted, the law will imply a periodic lease: Cao v Baccello Pty Ltd as trustee for the Mondello Family Trust [2020]WASCA 82 at [50]–[51] per Murphy, Beech and Vaughan JJA. This form of tenancy has been characterised as a ‘legal fiction’ without any firm basis for its tenancy description: Fry v Metzelaar [1945] VR 65 at 67.

Validation Requirements 7.3  As a proprietary interest, the lease is enforceable under different sources of law: statute, common law and equity. The particular laws relevant to the valid creation of a legal lease will depend upon who is making the lease and to what land it applies. When the Crown issues a lease over Crown land, it will generally be created pursuant to a specific Act of Parliament. In this way Crown leases are fully regulated by the terms and provisions of the specific Act, although whether the Act confers exclusive possession may still, in substance, be a question for the courts to determine: see, for example, Wik Peoples v Queensland (1996) 187 CLR 1, where the High Court held that a pastoral lease created by 310

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a specific Act of Parliament did not confer exclusive possession and therefore could not be classified as a common law lease. By contrast, private leases, entered into between individuals with respect to land that they own in a private capacity, are regulated by statutory provisions that have a general application as well as established common law requirements. The basic statutory and common law validation requirements for private leases are outlined below.

Statutory Formalities for the Creation of Common Law Leases 7.4  In accordance with the property legislation in each state, a legal lease can only be

validated under common law where it is created by way of a deed. This is because all legal interests in land must be created by a deed unless expressly excepted. In this context, a deed is defined as an instrument passing an interest in land that has been signed, sealed and delivered. The deed should describe the lease, the date the lease contract is entered into, the names of the parties, recitals, testatum and testimonium. The only statutory exception to the requirement that a lease must be in a deed to be legally valid is where the lease is orally created for a period of three years or less. The legislation on this is uniform in all states and territories. Section 54 of the Property Law Act 1958 (Vic), dealing with the creation of interests in land by parol, is extracted below. Similar provisions exist in other states: Conveyancing Act 1919 (NSW) s 23D(2); Property Law Act 1974 (Qld) s 10(2); Conveyancing and Law of Property Act 1884 (Tas) s 60(4); Property Law Act 1969 (WA) s 35(2); Law of Property Act 1936 (SA) s 30(2); Law of Property Act 2000 (NT) s 30(2); Civil Law (Property Act) 2006 (ACT) s 203(1). Section 54(2) makes it clear that a lease which is taken in possession, for three years or less, for the best rent reasonably possible to obtain, can be validated under common law without the need to execute a deed. The requirements in this respect are regulated closely and it must be clear that, under the lease, the tenants have taken possession from the date when it is expressed to commence and that there is a creation rather than an assignment of the lease.3 EXTRACT

Property Law Act 1958 (Vic) — s 54 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. 3. Crago v Julian [1992] 1 All ER 744 (CA). 311

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Exclusive Possession 7.5  In order to create a valid lease it must be clearly established that the lease confers exclusive possession upon the tenant for a defined period of time. Exclusive possession is the foundation of all leasehold interests because, as noted by Windeyer J in the High Court in Radaich v Smith (1959) 101 CLR 209 at 222: … a legal right to 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.

Windeyer J concluded that where exclusive possession is granted, it must automatically create a lease and: If there be any decision … 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 (at 223).

If exclusive possession is not conferred there can be no lease and it is likely that the arrangement will be merely permissive and take the form of either a bare or a contractual licence. Exclusive possession will exist where the terms of the lease contract entitle the tenant to private, uninterrupted and full occupation of the land for the entire duration of the term. Australian courts have made it clear that a determination of exclusive possession is a question of fact dependent upon the circumstances of each case. No one factor is determinative and the mere fact that a contract is described as a lease or that the parties intended the agreement to constitute a lease, is not conclusive: Radaich v Smith (1959) 101 CLR 209 at 214 per McTiernan J, at 217 per Taylor J, and at 222 per Windeyer J. This approach was subsequently confirmed by the High Court in Chelsea Investments Pty Ltd v Commissioner of Taxation (1966) 115 CLR 1 at 117 per Windeyer. 7.6  There are two important cases that illustrate the approach the courts have taken in the assessment of exclusive possession: Radaich v Smith (1959) 101 CLR 209; Street v Mountford [1985] AC 809. Summaries of these decisions are set out below:

—  Radaich v Smith  — (1959) 101 CLR 209 Facts: This case concerned an agreement granting occupancy for a five-year term over a small suburban lock-up shop used as a milk bar. The consideration for the occupancy was a small weekly payment. The agreement described itself as a licence however it was clear from the facts that the occupant retained, out of commercial necessity, exclusive possession of the relevant premises. The issue for the High Court was whether an agreement which described itself as a licence could nevertheless be a lease and whether, in substance, exclusive possession existed. The High Court decided that the agreement should be classified as a lease, having regard not only to the written terms of the agreement but also the relevant surrounding circumstances. In particular, consideration was given to the nature of the premises and the purpose for which the grant was given. The court concluded that the grantee could make use of the premises only if she had the exclusive right to use them as a shop. 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. 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 312

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MR in Booker v Palmer. 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 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 longestablished law: see Cole on Ejectment (1857) pp 72, 73, 287, 458. 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 313

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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 ‘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 ‘Licence 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 ‘the whole nature of the agreement shews that the appellant was intended to have exclusive possession of the land’. 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. 314

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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. The magistrate was right. The deed created a lease of the part of the building shown in the sketch annexed to it, that is that 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.

—  Street v Mountford  — [1985] AC 809 Facts: The owner of a house granted a room to a lodger for 37 pounds per week. The payment was described as a ‘licence fee’ and the lodger entered the premises and had exclusive possession of the area on the understanding, expressly set out in the agreement, that the arrangement did not constitute a lease under the Rents Act. The owner had the right to re-enter the room for the purposes of inspection or maintenance. The lodger subsequently applied for a ‘fair rent’ assessment under the Rents Act and the owner sought a declaration that the room was held under a licence rather than a lease. Lord Templeman: In the case of residential accommodation there is no difficulty in deciding whether the grant confers exclusive possession. An occupier of residential accommodation at a rent for a term is either a lodger or a tenant. The occupier is a lodger if the landlord provides attendance or services which require the landlord or his servants to exercise unrestricted access to and use of the premises. A lodger is entitled to live in the premises but cannot call the place his own. In Allan v Liverpool Overseers (1874) LR 9 QB 180 at 191–192 Blackburn J said: A lodger in a house, although he has the exclusive use of rooms in the house, in the sense that nobody else is to be there, and though his goods are stowed there, yet he is not in exclusive occupation in that sense, because the landlord is there for the purpose of being able, as landlords commonly do in the case of lodgings, to have his own servants to look after the house and the furniture, and has retained to himself the occupation, though he has agreed to give the exclusive enjoyment of the occupation to the lodger. If on the other hand residential accommodation is granted for a term at a rent with exclusive possession, the landlord providing neither attendance nor services, the grant is a tenancy any express reservation to the landlord of limited rights to enter and view the state of the premises and to repair and maintain the premises only serves to emphasise the fact that the grantee is entitled to exclusive possession and is a tenant. In the present case it is conceded that Mrs Mountford is entitled to exclusive possession and is not a lodger. Mr Street provided neither attendance nor services and only reserved the limited rights of inspection and maintenance and the like set forth in cl 3 of the agreement. On the traditional view of the matter, Mrs Mountford not being a lodger must be a tenant. There can be no tenancy unless the occupier enjoys exclusive possession but an occupier who enjoys exclusive possession is not necessarily a tenant. He may be owner in fee simple, a trespasser, a mortgagee in possession, an object of charity or a service occupier. To constitute a tenancy the occupier must be granted exclusive possession for a fixed or periodic term certain in consideration of a premium or periodical payments. The grant may be express, or may be inferred where the owner accepts weekly or other periodic payments from the occupier. Occupation by service occupier may be eliminated. A service occupier is a servant who occupies his master’s premises in order to perform his duties as a servant. In those circumstances the possession and occupation of the servant is treated as the possession and 315

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occupation of the master and the relationship of landlord and tenant is not created: see Mayhew v Suttle (1854) 4 E & B 347, 119 ER 137. The test is whether the servant requires the premises he occupies in order the better to perform his duties as a servant: Where the occupation is necessary for the performance of services, and the occupier is required to reside in the house in order to perform those services, the occupation being strictly ancillary to the performance of the duties which the occupier has to perform, the occupation is that of a servant. (See per Mellor J in Smith v Seghill Overseers (1875) LR 10 QB 422 at 428 cf [1874–80] All ER Rep 373 at 375.) The cases on which counsel for Mr Street relies begin with Booker v Palmer [1942] All ER 674. The owner of a cottage agreed to allow a friend to install an evacuee in the cottage rent free for the duration of the war. The Court of Appeal held that there was no intention on the part of the owner to enter into legal relationships with the evacuee. Lord Greene MR said (at 677): To suggest there is an intention there to create a relationship of landlord and tenant appears to me to be quite impossible. There is one golden rule which is of very general application, namely, that the law does not impute intention to enter into legal relationships where the circumstances and the conduct of the parties negative any intention of the kind. It seems to me that this is a clear example of the application of that rule. The observations of Lord Greene MR were not directed to the distinction between a contractual tenancy and a contractual licence. The conduct of the parties (not their professed intentions) indicated that they did not intend to contract at all. In the present case the agreement dated 7 March 1983 professed an intention by both parties to create a licence and their belief that they had in fact created a licence. It was submitted on behalf of Mr Street that the court cannot in these circumstances decide that the agreement created a tenancy without interfering with the freedom of contract enjoyed by both parties. My  Lords, Mr Street enjoyed freedom to offer Mrs Mountford the right to occupy the rooms comprised in the agreement on such lawful terms as Mr Street pleased. Mrs Mountford enjoyed freedom to negotiate with Mr Street to obtain different terms. Both parties enjoyed freedom to contract or not to contract and both parties exercised that freedom by contracting on the terms set forth in the written agreement and on no other terms. But the consequences in law of the agreement, once concluded, can only be determined by consideration of the effect of the agreement. If the agreement satisfied all the requirements of a tenancy, then the agreement produced a tenancy and the parties cannot alter the effect of the agreement by insisting that they only created a licence. The manufacture of a five-pronged implement for manual digging results in a fork even if the manufacturer, unfamiliar with the English language, insists that he intended to make and has made a spade. It was also submitted that, in deciding whether the agreement created a tenancy or a licence, the court should ignore the Rent Acts. If Mr Street has succeeded, where owners have failed these past 70 years, in driving a coach and horses through the Rent Acts, he must be left to enjoy the benefit of his ingenuity unless and until Parliament intervenes. I accept that the Rent Acts are irrelevant to the problem of determining the legal effect of the rights granted by the agreement. Like the professed intention of the parties, the Rent Acts cannot alter the effect of the agreement. In Marcroft Wagons Ltd v Smith [1951] 2 All ER 271, [1951] 2 KB 496 the daughter of a deceased tenant who lived with her mother claimed to be a statutory tenant by succession and the landlords asserted that the daughter had no rights under the Rent Acts and was a trespasser. The landlords expressly refused to accept the daughter’s claims but accepted rent from her while they were considering the position. If the landlords had decided not to apply to the court for possession but to accept the daughter as a tenant, the moneys paid by the daughter would have been treated as rent. If the landlords decided, as they did decide, to apply 316

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for possession and to prove, as they did prove, that the daughter was not a statutory tenant, the moneys paid by the daughter were treated as mesne profits. The Court of Appeal held with some hesitation that the landlords never accepted the daughter as tenant and never intended to contract with her although the landlords delayed for some six months before applying to the court for possession. Roxburgh J said ([1951] 2 All ER 271 at 277, [1951] 2 KB 496 at 507): Generally speaking, when a person, having a sufficient estate in land, lets another into exclusive possession, a tenancy results, and there is no question of a licence. But the inference of a tenancy is not necessarily to be drawn where a person succeeds on a death to occupation of rent-controlled premises and a landlord accepts some rent while he or the occupant, or both of them, is or are considering his or their position. If this is all that happened in this case, then no tenancy would result. In that case, as in Booker v Palmer, the court deduced from the conduct of the parties that they did not intend to contract at all. Errington v Errington [1952] 1 All ER 149, [1952] 1 KB 290 concerned a contract by a father to allow his son to buy the father’s house on payment of the instalments of the father’s building society loan. Denning LJ referred (see [1952] 1 All ER 149 at 154, [1952] 1 KB 290 at 297) to the judgment of Lord Greene MR in Booker v Palmer where, however, the circumstances and the conduct of the parties negatived any intention to enter into legal relationships. Denning LJ continued ([1952] 1 All ER 149 at 154–155, [1952] 1 KB 290 at 297–298): We have had many instances lately of occupiers in exclusive possession who have been held to be not tenants, but only licensees — when a requisitioning authority allowed people into possession at a weekly rent … when a landlord told a tenant on his retirement that he could live in a cottage rent free for the rest of his days … when a landlord, on the death of the widow of a statutory tenant, allowed her daughter to remain in possession, paying rent for six months: Marcroft Wagons Ltd v Smith when the owner of a shop allowed the manager to live in a flat above the shop, but did not require him to do so, and the value of the flat was taken into account at £1 a week in fixing his wages … In each of those cases the occupier was held to be a licensee and not a tenant … The result of all these cases is that, although a person who is let into exclusive possession is, prima facie, to be considered a tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy. Words alone may not suffice. Parties cannot turn a tenancy into a licence merely by calling it one. But if the circumstances and the conduct of the parties show that all that was intended was that the occupier should be granted a personal privilege with no interest in the land, he will be held only to be a licensee. In Errington v Errington and in the cases cited by Denning LJ there were exceptional circumstances which negatived the prima facie intention to create a tenancy, notwithstanding that the occupier enjoyed exclusive occupation. The intention to create a tenancy was negatived if the parties did not intend to enter into legal relationships at all, or where the relationship between the parties was that of vendor and purchaser, master and service occupier, or where the owner, a requisitioning authority, had no power to grant a tenancy. These exceptional circumstances are not to be found in the present case, where there has been the lawful, independent and voluntary grant of exclusive possession for a term at a rent. If the observations of Denning LJ are applied to the facts of the present case it may fairly be said that the circumstances negative any intention to create a mere licence. Words alone do not suffice. Parties cannot turn a tenancy into a licence merely by calling it one. The circumstances and the conduct of the parties show that what was intended was that the occupier should be granted exclusive possession at a rent for a term with a corresponding interest in the land which created a tenancy.

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In Cobb v Lane [1952] 1 All ER 1199 an owner allowed her brother to occupy a house rent free. The county court judge, who was upheld by the Court of Appeal, held that there was no intention to create any legal relationship and that a tenancy at will was not to be implied. This is another example of conduct which negatives any intention of entering into a contract, and does not assist in distinguishing a contractual tenancy from a contractual licence. In Facchini v Bryson [1952] 1 TLR 1386 an employer and his assistant entered into an agreement which, inter alia, allowed the assistant to occupy a house for a weekly payment on terms which conferred exclusive possession. The assistant did not occupy the house for the better performance of his duty and was not therefore a service occupier. The agreement stipulated that ‘nothing in this agreement shall be construed to create a tenancy between the employer and the assistant’. Somervell LJ said (at 1389): If, looking at the operative clauses in the agreement, one comes to the conclusion that the rights of the occupier, to use a neutral word, are those of a lessee, the parties cannot turn it into a licence by saying at the end ‘this is deemed to be a licence’ nor can they, if the operative paragraphs show that it is merely a licence, say that it should be deemed to be a lease. Denning LJ referred to several cases including Errington v Errington and Cobb v Lane and said (at 1389–1390): In all the cases where an occupier has been held to be a licensee there has been something in the circumstances, such as a family arrangement, an act of friendship or generosity, or such like, to negative any intention to create a tenancy … In the present case, however, there are no special circumstances. It is a simple case where the employer let a man into occupation of a house in consequence of his employment at a weekly sum payable by him. The occupation has all the features of a service tenancy, and the parties cannot by the mere words of their contract turn it into something else. Their relationship is determined by the law and not by the label which they choose to put on it. The decision, which was thereafter binding on the Court of Appeal and on all lower courts, referred to the special circumstances which are capable of negativing an intention to create a tenancy and reaffirmed the principle that the professed intentions of the parties are irrelevant. The decision also indicated that in a simple case a grant of exclusive possession of residential accommodation for a weekly sum creates a tenancy. … In my opinion this case was wrongly decided. McNair J, citing the observations of Denning LJ in Errington v Errington [1952] 1 All ER 149 at 154–155, [1952] 1 KB 290 at 297 and Marcroft Wagons Ltd v Smith, failed to distinguish between, first, conduct which negatives an intention to create legal relationships, second, special circumstances which prevent exclusive occupation from creating a tenancy and, third, the professed intention of the parties. In Murray Bull & Co Ltd v Murray the conduct of the parties showed an intention to contract and there were no relevant special circumstances. The tenant holding over continued by agreement to enjoy exclusive possession and to pay a rent for a term certain. In those circumstances he continued to be a tenant notwithstanding the professed intention of the parties to create a licence and their desire to avoid a controlled tenancy. In Addiscombe Garden Estates Ltd v Crabbe [1957] 3 All ER 563, [1958] 1 QB 513 the Court of Appeal considered an agreement relating to a tennis club carried on in the grounds of a hotel. The agreement was: ‘described by the parties as a licence … the draftsman has studiously and successfully avoided the use either of the word “landlord” or the word “tenant” throughout the document. …’ (See [1957] 3 All ER 563 at 567, [1958] 1 QB 513 at 522 per Jenkins LJ.) 318

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On analysis of the whole of the agreement the Court of Appeal came to the conclusion that the agreement conferred exclusive possession and thus created a tenancy. Jenkins LJ said ([1957] 3 All ER 563 at 565, [1958] 1 QB 513 at 522): The whole of the document must be looked at and if, after it has been examined, the right conclusion appears to be that, whatever label may have been attached to it, it in fact conferred and imposed on the grantee in substance the rights and obligations of a tenant, and on the grantor in substance the rights and obligations of a landlord, then it must be given the appropriate effect, that is to say, it must be treated as a tenancy agreement as distinct from a mere licence. In the present case it is clear that exclusive possession was granted and so much is conceded. In these circumstances it is unnecessary to analyse minutely the detailed rights and obligations contained in the agreement. In the Addiscombe case [1957] 3 All ER 563 at 571, [1958] 1 QB 513 at 528 Jenkins LJ referred to the observations of Denning LJ in Errington v Errington [1952] 1 All ER 149 at 154, [1952] 1 KB 290 at 297 to the effect that ‘The test of exclusive possession is by no means decisive’. Jenkins LJ continued: I think that wide statement must be treated as qualified by his observations in Faccioni v Bryson ((1952) 1 TLR 1386 at 1389) and it seems to me that, save in exceptional cases of the kind mentioned by Denning LJ, in that case, the law remains that the fact of exclusive possession, if not decisive against the view that there is a mere licence, as distinct from a tenancy, is at all events a consideration of the first importance. Tenant exclusive possession is not decisive because an occupier who enjoys exclusive possession is not necessarily a tenant. The occupier may be a lodger or service occupier or fall within the other exceptional categories mentioned by Denning LJ in Errington v Errington. In Isaac v Hotel de Paris Ltd [1960] 1 All ER 348, [1960] 1 WLR 239 an employee who managed a night bar in a hotel for his employer company which held a lease of the hotel negotiated ‘subject to contract’ to complete the purchase of shares in the company and to be allowed to run the nightclub for his own benefit if he paid the head rent payable by the company for the hotel. In the expectation that the negotiations ‘subject to contract’ would ripen into a binding agreement, the employee was allowed to run the nightclub and he paid the company’s rent. When negotiations broke down the employee claimed unsuccessfully to be a tenant of the hotel company. The circumstances in which the employee was allowed to occupy the premises showed that the hotel company never intended to accept him as a tenant and that he was fully aware of that fact. This was a case, consistent with the authorities cited by Lord Denning in giving the advice of the Judicial Committee of the Privy Council, in which the parties did not intend to enter into contractual relationships unless and until the negotiations ‘subject to contract’ were replaced by a binding contract. In Abbeyfield (Harpenden) Society Ltd v Woods [1968] 1 All ER 352, [1968] 1 WLR 374 the occupier of a room in an old people’s home was held to be a licensee and not a tenant. Lord Denning MR said ([1968] 1 All ER 352 at 353, [1968] 1 WLR 374 at 376): The modern cases show that a man may be a licensee even though he has exclusive possession, even though the word ‘rent’ is used, and even though the word ‘tenancy’ is used. The court must look at the agreement as a whole and see whether a tenancy really was intended. In this case there is, besides the one room, the provision of services, meals, a resident housekeeper, and such like. The whole arrangement was so personal in nature that the proper inference is … that he was a licensee … As I understand the decision in the Abbeyfield case the court came to the conclusion that the occupier was a lodger and was therefore a licensee not a tenant. In Shell-Mex & BP Ltd v Manchester Garages Ltd [1971] 1 All ER 841, [1971] 1 WLR 612 the Court of Appeal, after carefully examining an agreement whereby the defendant was allowed to use a petrol company’s 319

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filling station for the purposes of selling petrol, came to the conclusion that the agreement did not grant exclusive possession to the defendant, who was therefore a licensee. Lord Denning MR in considering whether the transaction was a licence or a tenancy said ([1971] 1 All ER 841 at 843, [1971] 1 WLR 612 at 615): Broadly speaking, we have to see whether it is a personal privilege given to a person, in which case it is a licence, or whether it grants an interest in land, in which case it is a tenancy. At one time it used to be thought that exclusive possession was a decisive factor. But that is not so. It depends on broader considerations altogether. Primarily on whether it is personal in its nature or not: see Errington v Errington and Woods. In my opinion the agreement was only ‘personal in its nature’ and created ‘a personal privilege’ if the agreement did not confer the right to exclusive possession of the filling station. No other test for distinguishing between a contractual tenancy and a contractual licence appears to be understandable or workable. Heslop v Burns [1974] 3 All ER 406, [1974] 1 WLR 1241 was another case in which the owner of a cottage allowed a family to live in the cottage rent free and it was held that no tenancy at will had been created on the grounds that the parties did not intend any legal relationship. Scarman LJ cited with approval the statement by Denning LJ in Facchini v Bryson [1952] 1 TLR 1386 at 1389: In all the cases where an occupier has been held to be a licensee there has been something in the circumstances, such as a family arrangement, an act of friendship or generosity, or such like, to negative any intention to create a tenancy. (See [1974] 3 All ER 406 at 415, [1976] 1 WLR 1241 at 1252.) In Marchant v Charters [1977] 3 All ER 918, [1977] 1 WLR 1181 a bed-sitting room was occupied on terms that the landlord cleaned the rooms daily and provided clean linen each week. It was held by the Court of Appeal that the occupier was a licensee and not a tenant. The  decision in the case is sustainable on the grounds that the occupier was a lodger and did not enjoy exclusive possession. But Lord Denning MR said ([1977] 3 All ER 918 at 922, [1977] 1 WLR 1181 at 1185): What is the test to see whether the occupier of one room in a house is a tenant or a licensee? It does not depend on whether he or she has exclusive possession or not. It  does not depend on whether the room is furnished or not. It does not depend on whether the occupation is permanent or temporary. It does not depend on the label which the parties put on it. All these are factors which may influence the decision but none of them is conclusive. All the circumstances have to be worked out. Eventually the answer depends on the nature and quality of the occupancy. Was it intended that the occupier should have a stake in the room or did he have only permission for himself personally to occupy the room, whether under a contract or not in which case he is a licensee? But in my opinion, in order to ascertain the nature and quality of the occupancy and to see whether the occupier has or has not a stake in the room or only permission for himself personally to occupy, the court must decide whether on its true construction the agreement confers on the occupier exclusive possession. 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 wholly unidentifiable. In Somma v Hazelhurst [1978] 2 All ER 1011, [1978] 1 WLR 1014 a young unmarried couple, H and S, occupied a double bed-sitting room for which they paid a weekly rent. The landlord did not provide services or attendance and the couple were not lodgers but tenants enjoying exclusive possession. But the Court of Appeal did not ask itself whether H and S were lodgers or tenants and did not draw the correct conclusion from the fact that H and S enjoyed exclusive possession. The Court of Appeal was diverted from the correct inquiries by the fact that the landlord obliged H and S to enter into separate agreements and reserved power to determine each agreement separately. The landlord also 320

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insisted that the room should not in form be let to either H or S or to both H and S but that each should sign an agreement to share the room in common with such other persons as the landlord might from time to time nominate. The sham nature of this obligation would have been only slightly more obvious if H and S had been married or if the room had been furnished with a double bed instead of two single beds. If the landlord had served notice on H to leave and had required S to share the room with a strange man, the notice would only have been a disguised notice to quit on both H and S. The room was let and taken as residential accommodation with exclusive possession in order that H and S might live together in undisturbed quasi-connubial bliss making weekly payments. The agreements signed by H and S constituted the grant to H and S jointly of exclusive possession at a rent for a term for the purposes for which the room was taken and the agreement therefore created a tenancy. Although the Rent Acts must not be allowed to alter or influence the construction of an agreement, the court should, in my opinion, be astute to detect and frustrate sham devices and artificial transactions whose only object is to disguise the grant of a tenancy and to evade the Rent Acts. I would disapprove of the decision in this case that H and S were only licensees and for the same reason would disapprove of the decision in Aldrington Garages Ltd v Fielder (1978) 37 P & CR 461 and Sturolson & Co v Weniz (1984) 272 EG 326. In the present case the Court of Appeal held that the agreement dated 7 March 1983 only created a licence. Slade LJ accepted that the agreement and in particular cl 3 of the agreement: ‘shows that the right to occupy the premises conferred on [Mrs Mountford] was intended as an exclusive right of occupation, in that it was thought necessary to give a special and express power to [Mr Street] to enter …’ Before your Lordships it was conceded that the agreement conferred the right of exclusive possession on Mrs Mountford. Even without cl 3 the result would have been the same. By the agreement Mrs Mountford was granted the right to occupy residential accommodation. Mr Street did not provide any services or attendance. It was plain that Mrs Mountford was not a lodger. Slade LJ proceeded to analyse all the provisions of the agreement, not for the purpose of deciding whether his finding of exclusive possession was correct, but for the purpose of assigning some of the provisions of the agreement to the category of terms which he thought are usually to be found in a tenancy agreement and of assigning other provisions to the category of terms which he thought are usually to be found in a licence. Slade LJ may or may not have been right that in a letting of a furnished room it was ‘most unusual to find a provision in a tenancy agreement obliging the tenant to keep his rooms in a “tidy condition”’. If he was right about this and other provisions there is still no logical method of evaluating the results of his survey. Slade LJ reached the conclusion that ‘the agreement bears all the hallmarks of a licence, rather than a tenancy, save for the one important feature of exclusive occupation’. But in addition to the hallmark of exclusive occupation of residential accommodation there were the hallmarks of weekly payments for a periodical term. Unless these three hallmarks are decisive, it really becomes impossible to distinguish a contractual tenancy from a contractual licence save by reference to the professed intention of the parties or by the judge awarding marks for drafting. Slade LJ was finally impressed by the statement at the foot of the agreement by Mrs Mountford ‘I understand and accept that a licence in the above form does not and is not intended to give me a tenancy protected under the Rent Acts’ Slade LJ said: … it seems to me that if [Mrs Mountford] is to displace the express statement of intention embodied in the declaration, she must show that the declaration was either a deliberate sham or at least an inaccurate statement of what was the true substance of the real transaction agreed between the parties … My Lords, the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent. Sometimes it may be difficult to discover whether, on the true construction of an agreement, exclusive possession is conferred. Sometimes it may appear from the surrounding circumstances that there was no intention to 321

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create legal relationships. Sometimes it may appear from the surrounding circumstances that the right to exclusive possession is referable to a legal relationship other than a tenancy. Legal relationships to which the grant of exclusive possession might be referable and which would or might negative the grant of an estate or interest in the land include occupancy under a contract for the sale of the land, occupancy pursuant to a contract of employment or occupancy referable to the holding of an office. But where as in the present case the only circumstances are that residential accommodation is offered and accepted with exclusive possession for a term at a rent, the result is a tenancy. The position was well summarised by Windeyer J sitting in the High Court of Australia in Radaich v Smith (1959) 101 CLR 209 at 222, where he said: 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 proportion 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 the 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). My Lords, I gratefully adopt the logic and the language of Windeyer J. Henceforth the courts which deal with these problems will, save in exceptional circumstances, only be concerned to inquire whether as a result of an agreement relating to residential accommodation the occupier is a lodger or a tenant. In the present case I am satisfied that Mrs Mountford is a tenant, that the appeal should be allowed, that the order of the Court of Appeal should be set aside …

Commentary 7.7  The above case extracts reveal the scope and range of the court’s approach to the assessment of exclusive possession. Windeyer J in Radaich v Smith focused upon the objective fact of exclusive possession. His Honour argued that the intention of the parties could not override the objective fact that exclusive possession exists and where exclusive possession can be proven from all of the circumstances, a tenancy must arise. As Windeyer J outlined at 221–23: 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 … 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 322

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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.

Hence, the fact that the agreement was described as a ‘licence’ was not determinative because all of the circumstances indicated that exclusive possession had, in fact, been conferred. This was clear because the business could not have functioned effectively if the holder did not retain a level of control which allowed her to carry on her business without interruption and with the capacity to eject third parties from the premises where needed. In Quest Rose Hill Pty Ltd v The Owners Corporation of Strata Plan 64025 (2012) 16 BPR 31,387 the New South Wales Supreme Court subsequently held that a determination of exclusive possession is a question of fact and the issue of whether a lease or a licence has been created will flow from this determination. In Swan v Uecker [2016] VSC 313, Croft J in the Victorian Supreme Court concluded that intention should be determined ‘objectively, having regard to the rules of the relevant agreement, and the surrounding circumstances according to the general rules for the submission of extrinsic evidence, rather than as an exception to those rules’. In Living and Leisure Australia Ltd (ACN 107 863 445) v Commissioner of State Revenue [2018] VSCA 237, the Victorian Supreme Court approved the decision in Radaich v Smith. On the facts, the appellant had two tow operators that had an agreement with the Crown to operate ski tows in the Australian ski fields at Falls Creek and Mt Hotham. The agreements were expressed as leases and were granted under s 28 of the  Alpine Resorts Act 1983  (Vic). The issue was whether these ‘agreements’ were ‘crown leases’, which in turn depended on whether they granted the tow operators ‘exclusive possession’. The ski tows were on Crown land and each agreement was drawn as a lease, and gave each of the tow operators exclusive possession, subject to a ‘reservation’ to allow the public to use and enjoy the land with a matching obligation on the tow operators to allow the public to have that access. At first instance, Croft J found that the agreements did give the tow operators ‘exclusive possession’ and were, relevantly, a ‘lease of Crown land’. On appeal, the majority (Ferguson CJ and Whelan JA with Niall JA in dissent) held that the agreement did confer exclusive possession. Their Honours first held that access was only available to ‘members of the public’ and this was confined to which people entering in a private capacity and even these areas were restricted by the requirement that there be no interference with the ski lift operators’ activities. Further, the instruments required the ski lift operators to control the conduct of members of the public on the land. Finally, their Honours found that the decision in Radaich supported this conclusion because exclusive possession was necessary in order to carry on the licensed business. As outlined by Ferguson CJ and Whelan JA (at [18]): Like the shop lessee in  Radaich  v Smith,  exclusive possession of the demised land was necessary for the ski lift operators in order for them to carry on the businesses provided for by the instruments. They did not need exclusive possession of all land, but they did need exclusive possession of the critical parts of it. The businesses could not be reasonably carried on without exclusive possession of those critical parts, and those critical parts are not fixed or delineated. They might be anywhere on the demised land and they might change from time to time. The whole of the land was demised because, provided public access for non-commercial use and enjoyment was preserved to the non-critical parts of the land, the interests of all could be accommodated in that way.

The decision in Living and Leisure Australia Ltd makes it clear that exclusive possession is assessed according to a range of factors. These include the following: the terms of the instrument setting up the agreement, the nature of the activities carried out and the relevance of exclusive possession to the nature of those activities. If a business cannot 323

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reasonably be carried out without exclusive possession, or at least exclusive possession within critical areas, then it is reasonable to assume that the terms of the instrument presume the conferral of such possession. (See also: Goldsworthy  Mining Ltd v Federal Commissioner of Taxation (1973) 128 CLR 199.) In Street v Mountford Lord Templeman in the House of Lords expressly endorsed the approach of Windeyer J in Radaich v Smith, concluding that the existence of exclusive possession is, in itself, determinative and the subjective intention of the landlord, once granted, cannot deny or alter the consequences of granting exclusive possession. Hence, according to Lord Templeman at 821, it was plain from the facts that Mrs Mountford was a tenant rather than a lodger because she was granted the right to occupy residential premises. Lord Templeman felt that the courts must be ‘astute to detect and frustrate sham devices and artificial transactions’ and on the facts, the only intention of the parties in describing the agreement as a licence was to avoid the application of the Rent Acts and therefore this description should not be treated as illustrative of the substantial intent of the parties. Mrs Mountford was clearly a tenant because exclusive possession had been conferred and indeed, Lord Templeman suggested that where the circumstances involve residential accommodation that is offered and accepted on the basis of exclusive occupation, for a term, at a rent, the result should always be a tenancy. The subsequent decision of the House of Lords in Bruton v London Quadrant Housing [2000] 1 AC 406 upholds the approach taken by the House of Lords in Street v Mountford. The decision in Bruton is, however, an interesting one in that it concludes that a lease can arise in circumstances where a housing trust has granted exclusive possession of a flat despite having no proprietary title to the land itself. The parties had described the grant as a licence and the housing trust had previously agreed with the Council that they would not confer any tenancies as it would be ultra vires to do so without the permission of the Secretary of State. Lord Hoffmann rationalised the conclusion that the grant created a tenancy despite the absence of proprietary title in the landlord by holding at 413 that a lease is concerned purely with the relationship between a landlord and tenant and not ‘with the question of whether the agreement creates an estate or other proprietary interest’. Thus, his Honour went on to conclude at 413, the fact that the trust had no proprietary title did not change the fact that it had created a lease because it is ‘the fact that the agreement is a lease which creates the proprietary interest’. His Lordship concluded at 414 that this question had no issue with nemo dat quod non habet (you cannot give what you do not have) because he felt that it would be ‘putting the cart before the horse to say that whether the agreement is a lease depends upon whether it creates a proprietary interest’. This decision effectively mandates the creation of a lease where exclusive possession exists despite the absence of proprietary title. The effect of this decision is interesting. Consider the following extract by S Bright from the article, ‘Leases, Exclusive Possession and Estates’ (2000) 116 Law Quarterly Review 7, which explores the differing conclusions by Millett LJ in the Court of Appeal and those of Lord Hoffmann in the House of Lords with respect to the conferral of exclusive possession and the creation of estates: … Although both courts agree that exclusive possession is necessary in order for there to be a lease, there are contrasting views as to whether this is an absolute or relative concept. In the House of Lords, exclusive possession was found on the basis of the contractual agreement between Mr Bruton and the Housing Trust. The agreement gave Mr Bruton the  right to exclusive possession: he did not have to share possession with anyone else, and the Housing Trust retained only limited rights over the premises. The Housing Trust’s lack of title is not relevant. In contrast, Millett LJ regarded exclusive possession as looking beyond the 324

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relationship between the two contracting parties. According to this view, exclusive possession, meaning possession to the exclusion of the whole world, is essential for a lease; if ‘the grantor has no power to exclude the true owner from possession, he has no power to grant a legal right to exclusive possession and his grant cannot take effect as a tenancy’: ([1998] QB 834 at p 845). This means that Mr Bruton could not have exclusive possession and, thus, he could not have a lease.

If it is possible to have exclusive possession in the relational sense referred to in the House of Lords, the further question arises as to the nature of the resulting relationship. We are told that it is a relationship of landlord and tenant but not whether it is an ‘estate’. Given that relativity of title is a fundamental aspect of English land law, it could be classified as an estate in this relative sense. This is hard to accept, however. For derivative title, at least, the principle of nemo dat quod non habet — no one can convey what he does not own — is also fundamental to English land law. The Housing Trust did not have an estate, and so could not grant an estate to Mr Bruton. Indeed, this is implied when Lord Hoffmann states, at pp 156H–157A, that a ‘lease may, and usually does, create a proprietary interest called a leasehold estate … This will depend upon whether the landlord had an interest out of which he could grant it.’ On this point, too, the Court of Appeal had differed. The premise of Millett LJ in the Court of Appeal was that a lease is (always) a proprietary concept: ‘A tenancy is a legal estate’ (per  Millett  LJ [1998] QB 834 at 845). There is much to be said for this view. Although there can be tenancies of sorts that do not confer estates, the tenancy at will and the tenancy by estoppel, these are generally treated as special cases and would not be described as ‘leases’ without qualification. Moreover, much previous case law proceeds on the assumption that all leases are estates in land, an assumption which has, on occasion, been made explicit: I myself find it impossible to conceive of a relationship of landlord and tenant that has not got that essential element of tenure in it, and that implies that the tenant holds of his landlord, and he can only do that if the landlord has a reversion. You cannot have a purely contractual tenure. (Lord Greene MR in Milmo v Carreras [1946] KB 306 at 310.)

More recently, Neuberger J stated that ‘a lease involves not only a contract, but also an estate in land’ (Re Friends Provident Life Office [1999] 1 All ER (Comm) 28 at 36). Often this assumption is implicit in the reasoning as, for example, in the reasoning of the House of Lords in National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675. It is, therefore, a surprise that both Lord Hoffmann and Lord Hobhouse of Woodborough state clearly in Bruton, with little discussion of the point, that, though usual, an estate in land is not an essential element of a lease. A lease, in the words of Lord Hoffmann ‘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’ (at 156H). This discussion indicates that a tenancy by estoppel can be generated from an enforceable agreement to enter into a lease. However, it remains important to remember that until the estoppel is ‘fed’ and the landlord acquires the estate in land which is the subject of the estoppel, the lease cannot actually arise. Up until this point, the only interest that exists is an equitable lease grounded in the estoppel that prevents the parties and their successors in title from denying that the grant was effective to create the interest it purported to create. If the landlord subsequently acquires the legal estate, the estoppel will be ‘fed’ and a legal lease may arise. As outlined by the Victorian Supreme Court of Appeal in Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd [2013] VSCA 106 at [22], a tenancy by estoppel 325

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may prevent the parties from denying a relationship of landlord and tenant, but it cannot actually establish a tenancy which was binding upon a third party who held the estate. This was confirmed by the High Court in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 where Gageler J noted at [155] that the expectation generated by a representation is not a grant of an interest in land but rather, ‘an offer on terms which they would be “free” to accept. The obvious problem is that such an offer might well come to nothing’ because the grantor is entitled to ‘give full effect to its own self-interest in setting the terms of the offer. And any interest in land to be granted to the tenants necessarily depended on reaching an agreement upon the terms of an enforceable agreement for a lease.’ Similarly, in Kay v London Borough of Lambeth [2006] 2 WLR 570, Lord Scott held that the Bruton lease generated a ‘non-estate lease’, the terms of which were binding between the parties subject to the representation but a consensual termination could not turn the ‘Bruton non-estate tenants into estate tenants’ (at [145]). 7.8  A further interesting question in the assessment of exclusive possession is whether there is a requirement that in order to create a lease, the conferral of exclusive possession must endure for a specific period of time. This is particularly apropos with the advent of online accommodation sites such as AirBnB, where short-term accommodation has become a global phenomenon. Does this short-term accommodation confer upon the holder a lease or should this type of interest be better classified as a licence? This issue was recently raised by the Victorian Supreme Court in Swan v Uecker [2016] VSC 313, which is extracted below:

—  Swan v Uecker  — [2016] VSC 313 Facts: The Applicant owns a two bedroom apartment in Fitzroy Street, St Kilda. In August 2015, she leased the Apartment to the Respondents pursuant to a residential tenancy agreement for a fixed term lease of one year. The Applicant subsequently sought an order for possession in VCAT on the basis that the Respondents had sublet the Apartment in breach of the provisions of the Lease. The Applicant’s argued that the Respondents granted leases to third parties (‘AirBnB guests’) who stayed in the Apartment. The Respondents conceded before the Tribunal that AirBnB guests had stayed at the apartment for short-term stays, booked through the AirBnB website, however they argued that this was a licence rather than a lease. VCAT agreed and dismissed the application. Croft J in the Victorian Supreme Court subsequently reviewed the issue of whether the occupancy by the AirbnB guests could constitute a lease. Croft J: Lease or licence? — The applicable test Having regard to the matters raised by and the subject of submissions in the three questions posed by the Amended Notice of Appeal and the grounds relied upon in that Notice, it is helpful to preface the treatment of these questions with discussion of the authorities with respect to the characterisation, more generally, of leases and licences. It is well accepted that, as a matter of law, the test to be applied to distinguish between a lease and a licence is whether or not what is granted is exclusive possession. Thus, in Lewis v Bell, Mahoney JA said: In the present case, it was accepted, or at least assumed, that the test is that of exclusive possession. That, in my opinion, is correct. It is the test which was adopted by at least the majority of their Honours in Radaich v Smith. That that is, at least initially, the test, was affirmed by Mason J in Goldsworthy Mining Ltd v Federal Commissioner of Taxation. It is not necessary to analyse the precise nature of the right to exclusive possession which is here in question. It is, for present purposes, sufficient to say that it involves that the lessee have 326

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the general right to exclude others, including the lessor, from the premises, subject at least to such specific provisions for entry as may be particularly provided for in the document. ... But there are cases in which it is not clear from the terms of the grant, construed in the light of the whole agreement and its context, what it is that is being granted by them. In such cases, it  is necessary to determine what is granted by looking at other aspects of the transaction. Thus, a grant may not be in terms of ‘possession’ but of something else. It may be the grant of a right to occupy premises; the right to ‘carry on a business on’ the premises; or, as in the present case, the right ‘to use’ the premises either generally or in a particular way. In such cases, the court must, by the process of construction, determine whether what is granted is mere occupation or use, or is possession in the relevant sense. And where what is granted is possession, it still, in principle, may remain to be decided whether what is granted is exclusive possession. But it is not necessary to consider, in this case, whether there can be a distinction between possession and exclusive possession and (if there can) what distinctions there may be between possession and exclusive possession in this context. In deciding, in such cases, whether what has been granted is the right to exclusive possession, the court, in the process of construction, has in practice looked, inter alia, to two things: the nature of the rights which, in terms, have been granted; and the intention of the parties. Party intention in this context is to be determined objectively on the basis of the terms of the particular agreement under consideration and having regard to surrounding circumstances to the extent that is permissible according to the ordinary rules of construction. Reference is made by the Respondents to a number of passages in the judgment of Windeyer J in Radaich v Smith, particularly the following: 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 … 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. ... 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. On the basis of these and similar passages, the Respondents stress intention and the ‘legal right’ to exclusive possession as being of critical importance, the latter leading into submissions with respect to the remedies available to tenants and licensees respectively as, as I understand the submissions, some indicia of the nature of the particular occupation. However, for the reasons which follow, I am of the opinion that this is rather to put the cart before the horse in that the first task is the proper characterisation of a particular legal relationship as a lease or a licence and issues with respect to the nature of available remedies naturally follow from 327

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that characterisation. In any event, these and similar passages, as far as they go to intention, do not, in my view, detract from the position I have indicated and would not, on any basis, countenance reference to self-serving subjective statements. The position with respect to intention is, as I have indicated, to be determined objectively having regard to the terms of the relevant agreement and the surrounding circumstances according to the general rules for the admission of extrinsic evidence, rather than as an exception to those rules. As the House of Lords indicated in Street v Mountford, surrounding circumstances may be relevant to the issue of intention. Nevertheless, as is made clear by Lord Templeman, intention is — as would be expected on the application of the general principles for the admission of extrinsic evidence as articulated in Codelfa Construction — to be determined on the basis of surrounding circumstances, including the nature of the subject premises and the rights granted. In this respect, Lord Templeman said My Lords, the only intention which is relevant is the intention demonstrated by the agreement to grant exclusive possession for a term at a rent. Sometimes it may be difficult to discover whether, on the true construction of an agreement, exclusive possession is conferred. Sometimes it may appear from the surrounding circumstances that there was no intention to create legal relationships. Sometimes it may appear from the surrounding circumstances that the right to exclusive possession is referable to a legal relationship other than a tenancy. Legal relationships to which the grant of exclusive possession might be referable and which would or might negative the grant of an estate or interest in the land include occupancy under a contract for the sale of the land, occupancy pursuant to a contract of employment or occupancy referable to the holding of an office. But where as in the present case the only circumstances are that residential accommodation is offered and accepted with exclusive possession for a term at a rent, the result is a tenancy. The position was well summarised by Windeyer J sitting in the High Court of Australia in Radaich v Smith, where he said: 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 proportion 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 the 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. My Lords, I gratefully adopt the logic and the language of Windeyer J. The position with respect to extrinsic evidence, as indicated, was reaffirmed in National Outdoor Advertising Pty Ltd v Wavon Pty Ltd by Young J: When looking to this question one must see whether exclusive possession as a legal concept has been granted to the person who claims to be lessee. In dealing with this question one does not merely look to see whether the magic words ‘exclusive possession’ have been used in the document. But one looks at the whole of the document and, at least if the document is ambiguous, one looks to the surrounding 328

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circumstances as well. I discussed the authorities which led to this result in  Chaka Holdings Pty Ltd v Sunsim Pty Ltd, and it is unnecessary to repeat that analysis here. Indeed, it is clear from such cases as Radaich v Smith that members of the High Court did look at the surrounding circumstances, such as the fact that a milk bar business could only be carried on in reasonable convenience by persons having exclusive possession, when considering whether or not there was a lease or licence created by the document before them in that case. The nature of the process of construction and ‘discernment’ of relevant intention is also, in my view, further illustrated and explained very clearly in the speech of Lord Templeman in Street v Mountford, including the reference to the judgment of Blackburn J which is set out: In the case of residential accommodation there is no difficulty in deciding whether the grant confers exclusive possession. An occupier of residential accommodation at a rent for a term is either a lodger or a tenant. The occupier is a lodger if the landlord provides attendance or services which require the landlord or his servants to exercise unrestricted access to and use of the premises. A lodger is entitled to live in the premises but cannot call the place his own. In Allan v Liverpool Overseers Blackburn J said A lodger in a house, although he has the exclusive use of rooms in the house, in the sense that nobody else is to be there, and though his goods are stowed there, yet he is not in exclusive occupation in that sense, because the landlord is there for the purpose of being able, as landlords commonly do in the case of lodgings, to have his own servants to look after the house and the furniture, and has retained to himself the occupation, though he has agreed to give the exclusive enjoyment of the occupation to the lodger. If on the other hand residential accommodation is granted for a term at a rent with exclusive possession, the landlord providing neither attendance nor services, the grant is a tenancy; any express reservation to the landlord of limited rights to enter and view the state of the premises and to repair and maintain the premises only serves to emphasise the fact that the grantee is entitled to exclusive possession and is a tenant … The Respondents also made reference to the judgment of McHugh J in Western Australia v Ward, where his Honour said: Accordingly, a contract giving a person the legal right to exclusive possession of land or tenement for a determinate period, however short, is a lease. When the cases talk of exclusive possession, they speak of legal possession. It is the right to legal possession that constitutes a lease. Indeed, it is a pity that the term ‘exclusive possession’ was ever used, although its use dates back to about 1830. As Mr D W McMorland has pointed out ’Between 1830 and 1950 a number of cases used the phrase “exclusive possession” to indicate the distinguishing feature of a tenancy, but it is always quite clear that it is used in the sense of the legal right to sue in trespass.’ The adjective ‘exclusive’ adds nothing to the concept of possession. As the editor of Salmond on Jurisprudence has pointed out, ‘exclusiveness is of the essence of possession. Two adverse claims of exclusive use cannot both be effectually realised at the same time’. It is the legal right to possession, not the physical fact of exclusive ‘possession’ or occupation, that is decisive. That is why a lessee can bring an action for ejectment although driven from the premises and why at common law the lessee could bring an action for ejectment although he or she had not yet entered upon the land. The legal right to possession before entry gave rise to an interesse termini that enabled the lessee to bring an action of ejectment and, after entry, an action for trespass to the land as well as ejectment. 329

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In contrast, a licence to use land ordinarily confers only a personal right that is enforceable in contract but not by an action in trespass or ejectment. The right of the occupant to bring an action of ejectment and after entry an action in trespass for wrongful entry on the land has always been the mark of the lessee. The lessee may bring such an action against a third party and even the lessor. In contrast to the lessee, a licensee, whose occupation is wrongly terminated or interfered with, must sue in contract or for some tort other than trespass to the land. If wrongly ejected from the land, the licensee cannot maintain an action in ejectment. If ejected by the grantor, the licensee may be able to obtain an injunction restraining the grantor from breaching the personal contract. If ejected by a stranger, the licensee may have an action in trespass to the person or some other tort. But in neither case is the action of ejectment or trespass to land available to the licensee … Turning now to the relevant surrounding circumstances with particular reference to the present proceedings, it is helpful to make reference to the passage from the judgment of Tadgell JA in KJRR Pty Ltd v Commissioner of State Revenue to which the Respondents referred: The agreement described itself as a licence but the High Court decided that it fell to be classified as a lease in the light of the true nature of the grant, having regard not only to the written terms of the agreement but to the relevant surrounding circumstances, including in particular the nature of the premises and the purpose for which the grant was given and taken. In effect it was held, for it was obvious as a matter of commonsense, that the grantee could make use of the premises only if she had the exclusive right to use them as a shop. Moreover, reference was also made to the judgment of Nettle JA in Genco v Salter. In case it matters, I doubt that a paying guest in short-term hotel style serviced apartment accommodation of two or three days’ duration would be a ‘lessee’ or ‘tenant’ within the meaning of the definition. The guest could not be regarded as a lessee or tenant (properly so called) unless present under an arrangement which conferred a right of exclusive possession. Usually, the owner of an hotel retains dominion over a hotel room or suite with right to enter for cleaning and other purposes and power to forbid the guest from allowing others to stay there. Depending on the facts, the same considerations would apply to a guest taking short term hotel style accommodation for a period of a few days in a serviced apartment. Against this background, the Respondents submit that the surrounding circumstances in this case are such that no legal right of exclusive possession was granted. They said that it is a matter of common sense that the AirBnB guests, staying only for a handful of days, had no need for the legal right to sue in trespass. The AirBnB guests are in a similar position, the Respondents contend, to an hotel guest. Moreover, it is said that if something ‘went wrong’ during a short stay at the Apartment, the AirBnB guests would only require a remedy in contract against the Respondents. Additionally, it is contended that the overall construction of the AirBnB Agreement and having regard to the surrounding circumstances suggests that an AirBnB guest would expect their host to retain the responsibility and the right to eject third parties from the premises should a problem develop. Thus it is said that on the basis of a licence agreement, the contractual arrangement between the AirBnB guests and the Respondents would be interpreted as giving the AirBnB guests a right to damages against the Respondents because the Respondents did not give them what they bargained for. It is said that if the AirBnB guests were tenants, then they may not have a right against the Respondents in such circumstances. Finally, it is said that there is an analogous position with hotels and hotel bookings in that guests in an hotel would not want to be in a position of having to bring proceedings to recover possession and to seek damages against the intruder — they want to be able to sue the hotel. As foreshadowed, I am of the view that the method of characterisation of the nature of the AirBnB Agreement inherent in these submissions is misconceived. First, as the authorities indicate, the characterisation of an agreement such as the AirBnB Agreement as a lease or a 330

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licence depends upon the proper construction of that agreement — looking to substance and not form — and having regard to relevant surrounding circumstances. This is not a process that can be transcended by drawing broad analogies with, for example, a hotel or various species of serviced apartments. As was submitted by the Applicant, there is a broad spectrum of residential accommodation available ranging from the usual hotel room licensing arrangements through to long-term serviced apartment agreements which, on any view, would be taken to be leases. The question here is, where does the AirBnB Agreement in the present circumstances fall on this spectrum. That is only determinable, as I have indicated, applying the process of analysis which I have described. Moreover, it is, as I have observed previously, to invert the process of characterisation to reason from what are said to be available remedies and thereby characterise the ‘creature’ to be protected by such remedies. Apart from this approach being both inverted and circular, it also seeks to conflate practicality with the actual legal position determined according to the analysis I have indicated. Indeed, a moment’s reflection indicates the fallacy in this approach. It is also at odds with the reference of McHugh J in Western Australia v Ward to a lease having a period ‘however short’. In the present circumstances, the ‘remedies’ approach advanced by the Respondents, which I so label for convenience, is superficially attractive when short-term occupancies are being considered — such as a few days under an AirBnB agreement or under some other similar agreement. Short-term leases are, however, not eschewed by the common law, assuming the other ingredients indicative of a lease are to be found. Moreover, short-term lease terms in possession are well accepted in the lease and sub-lease environment where, for example, reservation of the final day of the head lease term in the granting of a sub-lease is essential if the sub-lease is to take effect as such and not as an assignment. Thus, even the single day of possession retained by the head tenant is significant and recognised. It may be said that this position is merely the result of the application of legal principles. Whether that perspective is correct or not, it was made clear by Nettle JA quite recently, that leases could be created by express agreement — for days or even hours. Admittedly, the words ‘tenant’ and ‘tenancy’ are sometimes used in a looser sense than their legal meanings of lessee and lease. But I doubt that ‘tenant’ is used in a loose sense in the definition of ‘sole-occupancy unit’ for the purposes of Class. If anything, given the definition is expressed in terms of occupation to the exclusion of others, it rather implies that ‘tenant’ is intended to have its ordinary legal meaning. Additionally, although it is possible to have a tenancy for days and possibly even for hours, ‘tenant’ in the definition of ‘sole-occupancy unit’ falls to be construed in context and the context created by the definition of ‘sole-occupancy unit’ suggests a person with an [sic] right to occupy the tenanted premises to the exclusion of others for more than just hours or days. It is also to be observed that, in this case, the Board found that the arrangement between Mr Salter and the guests who stayed in the subject apartments was one of licence as opposed to lease and therefore not a tenancy. That finding is not disputed. Moreover, without conflating practicalities, one might ask where practical issues asserted by the Respondents stop? For example, a three month lease of residential premises — or any premises for that matter — would carry with it the right to take proceedings to protect possession — including a legal right to sue in trespass — whether or not that right was costeffective or practical. As I have indicated, the practicality or otherwise of exercising such rights is not a matter that goes to the characterisation of the arrangement. Additionally, I do not accept the Respondents’ analysis of rights available to AirBnB guests as tenants because I am of the view that it is clear — putting aside considerations of practicality which would, in any event, depend upon the period of occupation agreed for those guests — that a myriad of other remedies would possibly be available by way of injunctive relief, against the person from whom they derived their rights of occupation, together with a right to damages and possibly repudiatory damages for breach of covenant or contractual provisions. 331

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As to third parties, clearly, injunctive and tortious relief may be available, depending on the circumstances. There may also be rights available as against the grantor of their occupation rights on the basis of a breach of the covenant for quiet enjoyment by ‘third parties’ deriving title from such grantor or the persons over which the grantor had control. Finally, in this context and in the context of the broader considerations flowing from the authorities which have been considered, I am of the view that the hotel room analogy is not appropriate in the present circumstances. The evidence and the provisions of the AirBnB Agreement indicate, in my view, that although the occupancy granted to the AirBnB guests was, in this case, for a relatively short time, the quality of that occupancy is not akin to that of a ‘lodger’ or an hotel guest. Rather, it was the possession — exclusive possession — that would be expected of residential accommodation generally. In the present circumstances, it is no different from the nature of the occupancy — the exclusive possession — granted to the tenants, the Respondents, under the Lease from the Applicant. They have, by means of the AirBnB Agreement, effectively and practically passed that occupation, with all its qualities, to their AirBnB guests for the agreed period under the AirBnB Agreement. Concluding this more general treatment of the nature of leases and licences in the context of these proceedings, reference is made to the summary of factors which the Respondents submit suggest that the AirBnB Agreement was more likely to be a licence than a lease. [69] None of these factors, in my view, suggests that the AirBnB Agreement was more likely to be a licence than a lease, both for the preceding reasons and for those which follow. As I have indicated, the form of the AirBnB Agreement and the language used must be construed according to ordinary principles of construction having regard to extrinsic circumstances which may be considered in light of those usual principles. Moreover, the process of construction focuses on substance and not form, and thus the matters raised in the first six of those factors do not assist the Respondents’ position. Neither does the process whereby the AirBnB agreement is entered into via an online booking system affect the position. The website booking facility produces an agreement as a result of the booking — then ascertainment of the terms of the resulting agreement and the proper construction of that agreement is a matter for the application of ordinary, settled, principles of law. The same applies with respect to the process of payment — payment by cash, cheque or electronic funds transfer, for example, does not affect the character of what is paid for in circumstances such as this. Modern commercial law readily accommodates electronic transactions and there is no basis for treating agreements such as AirBnB agreements — whether they are leases or licences in their particular circumstances — any differently. In the present circumstances, there is no suggestion that any formal requirements of the Act affect the position; but, rather, that s 9 of the Act may exclude its operation in these circumstances. The only other of those factors that merits particular comment which has not been addressed elsewhere in these reasons is the suggestion that it is significant that the AirBnB advertisement did not identify particular premises. There is, however, no doubt as between the parties to the AirBnB Agreement as to which premises were the subject of that agreement. Indeed, identification of the premises is, in my view, in the present circumstances, a prime matter which could be resolved by reference to extrinsic circumstances. In any event, if this point were of significance, then it would seem to impinge upon the existence or enforceability of the AirBnB Agreement on the basis of certainty of terms. If this were the case, it would be equally significant whether or not the AirBnB Agreement were characterised as a lease or a licence.

Question 1 — Was there any evidence or other material before the Tribunal to support the finding that the tenants were able to access the rented premises during each AirBnB stay? VCAT found that the Respondents were able to access the Apartment during each AirBnB stay. The first question in the Amended Notice of Appeal asks whether there was any evidence or other material before the Tribunal to support that finding. This is clearly a question of law. 332

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The Respondents contend that the Applicant’s submissions in this respect were merely an attack on the fact-finding process in VCAT. It is, however, conceded that the Applicant correctly states that an error of law is committed if the Tribunal finds a fact that is not open on the evidence and if that fact is critical to VCAT’s ultimate conclusion. In making these submissions, the Respondents also direct attention to sub-para 45(iv) of the Tribunal’s reasons. In relation to this paragraph, the Respondents submit: Does she mean two things?: ie, that (1) the defendants had the ability to access the rented premises during each AirBnB stay and (2) the defendants had the ability to make a guest who overstays leave the property or does she mean one thing? — the ability of the defendants to access the rented premises during each AirBnB stay to make a guest who overstays leave the property. It is submitted that the Member was only meaning one thing because it is more consistent with the analysis that precedes paragraph 45. Subparagraph 45(iv) is the last factor in paragraph 45 and therefore it makes sense that it relates to the last factor considered in the preceding paragraphs. The last factor considered in the preceding paragraphs (paragraph 44) is the fact that the AirBnB agreement says ‘the Host is entitled to make the Guest leave’. Moreover, the Respondents submit that the Applicant has entered into the territory of engaging in an ‘overly pernickety’ reading of the Tribunal’s reasons and that it is certainly not clear that the Tribunal is saying that the Respondents had unfettered access to the apartment during each AirBnB stay. Additionally, it is said that it should be borne in mind that the Applicant has the onus of establishing on the evidence that a vitiating error of law occurred, and not a mere possibility that such an error did occur. I do, however, reject the Respondents’ submissions as to the meaning to be ascribed to para 45(iv) of the Tribunal’s reasons. Moreover, I do not regard the process of seeking to understand that reasoning process — and the Applicant’s submissions in this respect — as being ‘overly pernickety’ and outside the scope of the permitted appeal process from such a tribunal. In my view, para 45(iv) is clear in its language and structure. In my view, it identifies two time periods — the time period for the agreed AirBnB stay and the separate and following time period, namely, the time after the expiration of the agreed time or period of the AirBnB stay. Thus, the matters that the Tribunal has expressly taken into account in making findings as to the ‘legal consequences of the relationship’ — the heading in the Tribunal’s reasons to the material, of which para 45 is central — are the ability of the Respondents, the tenants, to access the Apartment during the time of the AirBnB stay and the ability of the tenants to require the AirBnB guests to leave at the expiration of the agreed period of that stay. As I observed during the course of the hearing of this appeal, the ability of a landlord or a licensor to require its tenant or licensee to depart at the expiration of the lease term or the term of the licence is the same — though the means of enforcing this position may differ. Consequently, in the present circumstances, the ability of the Respondents, the tenants, to require AirBnB guests to depart after the agreed period of occupation is not an indicia of the type of legal relationship that exists as between the Respondents, the tenants, and the AirBnB guests. In other words, it is irrelevant to the question of legal characterisation. The Applicant submits that the answer to this question — Question 1 — should be ‘no’. It is contended that the question should be answered in this way because there was no evidence or other material to support the finding by the Tribunal that the Respondents were able to access the Apartment when the entire Apartment had been made available for occupation by AirBnB guests. Moreover, I reject the position put by the Respondents that this was merely a finding of fact because, as has been observed, para 45(iv) is expressly contained within the Tribunal’s reasons with respect to the legal consequences of the relationship between the Respondents, the tenants, and the AirBnB guests. Additionally, it is clear from the various authorities discussed that the question whether or not a person is granted exclusive possession of a property is a 333

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matter of significance in the characterisation of that occupation, whichever view is ultimately taken with respect to that characterisation. More particularly, in support of the Applicant’s position, there was nothing in the AirBnB Agreement to support the Tribunal’s finding that the Respondents, the tenants, had the ability to access the rented premises, the Apartment, during each AirBnB stay. The reference in that agreement to ‘licence’ is no more than a label, and there are numerous authorities for the proposition that such a label, though it may have some relevance to characterisation, is not decisive and that the courts will look to the substance of the agreement thus labelled in order to characterise it as a lease or a licence. In the context of the Tribunal’s finding in para 45(iv), the label ‘licence’ does not of itself confer a right on the Respondents, the tenants, to access the Apartment when the entire Apartment has been made available to AirBnB guests. Rather, the effect of the Agreement, fully analysed, does, in my view, mean that those guests enjoyed exclusive possession of the Apartment during their stay. It would be entirely inconsistent with the nature and purpose of the AirBnB Agreement were it to be otherwise. This position is, in my view, also confirmed by the relevant AirBnB listing to which reference has been made — that is the listing for the occupation of the whole Apartment, not a single bedroom. The listing relevantly said that ‘I am leaving to allow you to have it all to yourself’. The Respondents did not lead any evidence in the Tribunal to support the ability to access finding. … The Respondents submit that it was open to the Tribunal to conclude that the tenants retained the right to enter the Apartment because: ... a. The fact that the AirBnB agreement says ‘the Host is entitled to make the Guest leave’ presupposes the Host has retained possession. There is no mention of regaining possession in the AirBnB agreement; b. The agreement does not explicitly give the AirBnB guests a ‘demise’ or exclusive possession; and c. The surrounding circumstances dictate that the defendants would still have access. It can be inferred that the tenant’s personal possessions were still in the apartment. These stays were short. It was open for the Tribunal member to find that if the defendants needed, for example, to access a document, or any of their personal possessions that they had left behind, the guests could not have stopped them doing so. In my view, however, these matters do not detract from the position that there was no evidence or other material before the Tribunal to support its finding that the Respondents, the tenants, were able to access the Apartment during each AirBnB stay. Moreover, the issue raised with respect to a host being entitled to make the guest leave is, for the preceding reasons, a second element of para 45(iv) and does not provide any indicia one way or the other in the circumstances as to whether or not the occupation by the AirBnB guests was as tenants or licensees. True it is that the AirBnB Agreement does not use the word ‘demise’ or expressly provide for exclusive possession. This is not surprising, it was an agreement devoid of legalese and legal terminology, but its use of more common language does not prevent the Tribunal or a court undertaking the proper process of construing its provisions according to their substance. As to surrounding circumstances, it is mere speculation as to whether and to what extent the Respondents, the tenants, left their personal possessions in the Apartment. An example was raised by the Respondents in the course of the hearing postulating the position that might follow if the Respondents had left important documents in the Apartment, such as a driving licence. Common sense would dictate that, in these circumstances, a polite inquiry would be made of the AirBnB guests by the Respondents, the tenants, for permission to enter the Apartment to retrieve the relevant document or documents — and it is hardly likely that common courtesy 334

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and common sense would see that request denied. Moreover, if the AirBnB guests were to allow the tenants access, this would be with their permission and, in those circumstances, this would be quite consistent with the characterisation of their occupation as a lease, rather than a licence. There is, however, no evidence of any problems of access of this nature and, indeed, having regard to the evidence, that the tenants were, during the relevant AirBnB stay, away on holidays or staying with friends, the position would seem to be that no access would have been required. Additionally, the point was made by the Applicant that, given the short period of the AirBnB occupation, problems of this kind were unlikely to occur. The evidence was that the Respondents, the tenants, retained keys to the Apartment — a position which is entirely unsurprising — and, as I observed during the hearing, it would be expected that any landlord or their agents would retain keys to the premises. Clearly, this fact alone is not decisive in terms of the characterisation of the nature of the AirBnB guests’ occupation. Additionally, the Respondents’ offer in the AirBnB website material to assist AirBnB guests with respect to the premises or surrounding attractions is not, in my view, as the Respondents would put it, only consistent with characterisation of the occupation as a licence. There is no doubt that the sensible landlord, caring for their premises and reversionary interest, will always seek to assist their tenant and will readily attend to repairs and difficulties with the leased premises — either under the terms of the lease, under statutory requirements or for commercial reasons. For these reasons, I am of the opinion that there was no evidence or other material to support the finding by the Tribunal that the Respondents were able to access the Apartment during each AirBnB stay. Moreover, this finding was critical to VCAT’s ultimate conclusion: namely, that the AirBnB guests did not have exclusive possession of the Apartment and that, as a consequence, there had been no sub-lease of the Apartment by the Respondents, the tenants. This was part of one of the — clearly cumulative — matters that VCAT ‘took into account’ in ultimately concluding that the AirBnB guests did not have exclusive possession. In my view, it cannot be said that VCAT would necessarily have reached that conclusion had it not made the finding in relation to the Respondents’ ability to access the Apartment during each AirBnB stay. Since that finding was critical to VCAT’s ultimate conclusion, the Tribunal committed a vitiating error of law in respect of the first question of law.

Question 2 — When determining whether a person has exclusive possession of a premises, is it relevant to consider whether that person can be made to leave the premises if they stay longer than the period that has been agreed for them to stay? The second question in the Amended Notice of Appeal asks whether, when determining whether a person has exclusive possession of premises, it is relevant to consider whether that person can be made to leave the premises if they stay longer than the period that has been agreed for them to stay. I accept that this is a question of law, because it asks whether the correct legal test — as to exclusive possession — was identified or applied. The AirBnB Agreement provides, in this respect, that: If a Guest stays past the agreed checkout time without the Host’s consent, they no longer have a license to stay in the Listing and the Host is entitled to make the Guest leave. The Respondents contend that this is not the sort of term that typically appears in a lease with respect to a tenant yielding up possession to a landlord. In this respect, reference is made to the separate judgments of Taylor, Menzies and Windeyer JJ in Radaich v Smith to the effect that a significant indicator of a lease was that the tenant undertook upon the expiration or sooner determination of the lease immediately to ‘give up possession of the said building occupied by her for the purpose of the said business’. 335

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Reference is also made by the Respondents to the joint judgment of Gleeson CJ, Gaudron, Gummow and Hayne JJ in Western Australia v Ward, where their Honours said: The language of re-entry is aptly used in connection with a lease. It is, however, not apt to speak of re-entry in connection with licences or other interests any more than it is apt to speak of recovery of possession by the grantor of a contractual licence from the grantee. On this basis, the Respondents submit that it is therefore significant that the AirBnB Agreement does not use the language of re-entry or recovery of possession. Rather, it is said, it uses language that is consistent with the right of a licensor to make a licensee who overstays beyond the licence leave the property. Moreover, the Respondents submit that the language used in the AirBnB Agreement presupposes that the Respondents retained possession. I accept the Respondents’ submission that it is entirely appropriate to look at the written terms of an agreement and to draw inferences about the type of rights those terms assume. In this respect I note the example provided where such an approach has been taken to interpret terms that state the conditions upon which a landlord may enter a premises as carrying the implication that exclusive possession has been granted. I do not, however, otherwise accept the Respondents’ submissions in this respect for more general and more particular reasons, to which I now turn. More generally, I am of the view that in characterising the effect of an agreement cast in commonplace terms, attention must be focused on substance, rather than the presence or absence of technical language which might commonly be found in more formal documents. The substance of the provisions to which the Respondents refer quite clearly indicates, in my view, that when the term, the period, of occupation by the AirBnB guests expires, those guests are to leave the Apartment. As I have already observed, this position would follow, whether or not the occupation is characterised as a lease or a licence. Thus, in substance, this provision is no different from that referred to by the judges in Radaich v Smith. In this respect, I particularly reject the Respondents’ submission that the language used in this provision of the AirBnB Agreement presupposes the Respondents retain possession. In my view, no such presupposition is inherent in the provisions of the AirBnB Agreement with respect to the position at ‘check out time’. Once the ‘check out time’ has arrived, the term, the period, of occupation agreed has expired and whatever the nature of that occupation, the Respondents, the tenants, are entitled to possession of the Apartment and to require the guests to leave. It does not follow at all that the entitlement to possession of the tenants at this time — post check out time — indicates or requires any prior right to possession of the Apartment on their part. More generally, at common law a landlord has the ability to make an overstaying tenant leave the property in the same way as a licensor can evict an overstaying licensee. Consequently, at common law a person’s ability to make an overstaying guest leave does not tend in favour or against a finding of exclusive possession prior to that entitlement arising — the commencement of the overstaying period. Moreover, the fact that the Act requires a landlord to give a notice to vacate does not alter that conclusion. Thus, if the AirBnB Agreement were subject to the Act, the provision in question would be invalid and the Respondents could not make the overstaying guest leave without first giving a notice to vacate. The Tribunal, in determining whether the AirBnB guests had exclusive possession of the Apartment, ‘took into account’ the ability of the Respondents to make an overstaying guest leave the property. This is, in my view, clear from a reading of para 45(iv) of the Tribunal’s reasons  — which should be read in the manner I have previously indicated. By taking into account the Respondents’ ability to make an overstaying guest leave the Apartment, the Tribunal appears to have assumed that the AirBnB Agreement was a licence, because, if it were a lease, the Respondents would not have had that ability without first giving a notice to vacate. In assuming that the AirBnB Agreement was a licence, the Tribunal did, in my opinion, 336

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impermissibly assume the answer to the very question it had to determine. For these reasons, whether the Respondents were able to make an overstaying guest leave the Apartment was not relevant to the question of whether that guest was in exclusive possession of the Apartment during their stay. It follows that, by taking into account the Respondents’ ability to make an overstaying guest leave the Apartment, VCAT took an irrelevant matter into account. By taking a matter into account that was not relevant to the question whether the AirBnB guests were in exclusive possession during their stay, the Tribunal either identified the wrong legal test — as to exclusive possession — or applied the correct test wrongly. Either way, the Tribunal committed a vitiating error of law. Again, it cannot be said that the Tribunal would necessarily have reached the same ultimate conclusion as to exclusive possession if it had not made the finding in relation to the Respondents’ ability to make an overstaying guest leave the Apartment. Thus, as indicated, the error was therefore vitiating.

Question 3 — When determining whether a person has exclusive possession of a premises, is it relevant to consider whether the premises is a person’s principal place of residence? The third question in the Amended Notice of Appeal asks whether, when determining whether a person has exclusive possession of premises, it is relevant to consider whether that premises is a person’s principal place of residence. I accept that the question is a question of law because it asks whether the correct legal test, as to exclusive possession, was identified or applied. … The Respondents submit that the Tribunal was, here, taking into account the fact that the understanding between the Respondents, the tenants, and the AirBnB guests was that the AirBnB guests were to have short term use of the tenants’ home. It is said that the understanding was that the Respondents otherwise live at the premises. Moreover, the Respondents contend that this fact is relevant to whether or not exclusive possession was intended to be taken and given because it is a factor that suggests the Agreement would not give the AirBnB guests the right to exclude the Respondents from the premises. In my view, the submissions of the Respondents in this respect should be rejected, and this question — Question 3 — should be answered, ‘no’, for the reasons to which I now turn. It is clear from the passages in VCAT’s reasons to which reference has been made that, when determining whether the AirBnB guests had exclusive possession of the Apartment, the Tribunal ‘took into account’ the ‘retention’ by the Respondents, the tenants, of the Apartment as their principal place of residence before, during and after each stay by an AirBnB guest. This matter is, however, not relevant to whether an AirBnB guest had exclusive possession of the Apartment. This is because a person may grant a lease in respect of their principal place of residence — for example, when going away on an overseas holiday — in the same way that they can grant a licence in respect of that property. It follows that the ‘retention’ by the Respondents of the Apartment as their principal place of residence — even during an AirBnB stay — does not tend in favour or against a finding of exclusive possession. It is, in truth, entirely neutral on the question. Consequently, it is not a matter of any logical relevance to the question in issue. For these reasons, by taking into account the ‘retention’ by the Respondents of the Apartment as their principal place of residence, the Tribunal took into account a matter irrelevant to the question of whether the AirBnB guests were in exclusive possession during their stay. By so doing, the Tribunal either identified the wrong legal test, as to exclusive possession, or applied the correct legal test wrongly. Either way, VCAT committed a vitiating error of law. Again, it cannot be said that the Tribunal would necessarily have reached the same ultimate conclusion as to exclusive possession if it had not made the finding in relation to the Respondents’ ‘retention’ of the Apartment as their principal place of residence. It follows, as indicated, that the error was consequently vitiating. 337

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Conclusions and the question of remitter For the preceding reasons, I am of the opinion that the AirBnB Agreement for occupation of the whole of the Apartment is properly to be characterised as a lease between the Respondents, the tenants, and the AirBnB guests for the period of occupation agreed between them. It follows that their entering into this Agreement is, having regard to their own tenancy of the Apartment, a  sub-lease. Consequently, the Respondents, the tenants, are in breach of the provisions of their lease of the Apartment, namely, cl 54 of the ‘Additional Terms’ which does not permit sub-letting without the written authorisation from the landlord or the landlord’s agent.

Commentary 7.9  The decision by Croft J makes it clear that the AirBnB accommodation is to be  differentiated from hotel accommodation in the sense that it offers exclusive possession of a residential premises rather than temporary accommodation. The fact that the possession may be of a short duration was found not to preclude it from having an exclusive character and from being classified as a lease. That said, Croft J made it clear that while exclusive possession may be an indicia that the parties have entered into a lease it does not provide conclusive evidence of the existence of a lease — particularly where there are no other indicia of a lease or evidence that the parties entered a landlord and tenant relationship, there is no payment or request for rent and the length of the occupancy is uncertain: Mine Subsidence Board v Frank and Louisa Kozak (2017) 51 WAR 304 at [23] per Hamill J. The facts in Swan went beyond the bare conferral of exclusive possession. Payment was granted for a specific period of time. The fact that payment for the accommodation was done online, as a lump-sum payment, did not alter this position. As Croft J noted, ‘Modern commercial law readily accommodates electronic transactions and there is no basis for treating agreements such as AirBnB agreements — whether they are leases or licences in their particular circumstances — any differently’. The ramifications of this decision are interesting. Clearly, on the facts, the characterisation of the agreement as a lease meant that the landlord was in a position to refuse consent to the tenant who was providing the premises as AirBnB accommodation. Further, the failure by the tenant to seek consent from the landlord amounted to a breach of the lease agreement. The characterisation of the AirBnB agreement as a lease effectively means that landlords are able to ensure that tenants do not put the premises online for the purpose of short-term accommodation without first obtaining the consent of the landlord. This is because s 81 of the Residential Tenancies Act 1997 (Vic) sets out that a tenant must not assign or sublet the whole or any part of the rented premises without the landlord’s written consent. The landlord is not permitted to unreasonably withhold its consent to the assignment or subletting. If a tenant makes a property available through AirBnB and the AirBnB agreement is considered a lease (and the tenant is considered to have ‘sublet’ the property), and has done so without the landlord’s consent, the tenant will be in breach and the landlord will have grounds to issue a notice to vacate. Further, the characterisation of the AirBnB agreement as a lease means that should the landlord sell the lease premises, and those premises are subject to an approved AirBnB agreement, the new purchaser will take those premises subject to the AirBnB lease where it is taken in possession. This is because a tenancy in possession constitutes an exception to the indefeasible title of a subsequent registered interest holder. See further the discussion on the exceptions to indefeasibility in Chapter 11. 338

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7.10  Revision Questions 1. How is a lease categorised according to common law and why? 2. Describe the proprietary and contractual aspects of the lease. 3. What is the statutory formality requirement for creating a valid legal lease where the duration is for three years? 4. Is exclusive possession determined according to an assessment of the intention of the parties or the consequences of the grant? 5. Is it possible to intend to confer exclusive possession when the grant is only for a very short duration (for example, a couple of nights)? Would the position be different if the AirBnB agreement was for one room within a house, where the tenant continued to reside? 6. One of the arguments raised in Bruton was that the tenancy was founded on the notion of estoppel (tenancy by estoppel is discussed further at 7.16). In the words of Lord Hoffmann: … it is not the estoppel which creates the tenancy, but the tenancy which creates the estoppel. The estoppel arises when one or other of the parties wants to deny the ordinary incidents or obligations of the tenancy on the ground that the landlord had no legal estate. The basis of the estoppel is that having entered into an agreement which constitutes a lease or tenancy, he cannot repudiate that incident or obligation. Do you think that the estoppel principles should result in the party who has relied upon the representation acquiring a proprietary title greater than that held by the person who made the representation? 7. What are some of the implications underpinning the recognition of short-term leases such as that which was upheld in Swan v Uecker?

Certainty Requirements 7.11  All leasehold estates exist for a defined period of time and it is therefore imperative that the duration be certain. The period must, in the words of Blackstone, ‘have a certain beginning and a certain end’ (Commentaries, 2nd ed, 1766 at 143) and any ambiguity associated with the term will necessarily invalidate the lease. This means that it must be clear exactly when the lease is to commence and how long it is to continue. Where a lease is clearly set out to commence on a particular date and to continue for a specific period of time, such as six months or a year, there will be no problem in satisfying these criteria. Where, however, the lease is set out to commence on a particular date and to continue until the happening of an event, which is not certain to occur, or alternatively, where the lease is set out to commence on the happening of an event which is not certain to occur, the situation is less clear. For example, if a lease is to exist from 1 January 2017 ‘until the tenant wins TattsLotto’ or if a lease is to commence ‘when the tenant wins TattsLotto’, the lease will be invalid. In the first example, the duration of the lease is uncertain and in the second example the commencement date is uncertain. Both examples are uncertain because the event upon which the period is based is a mere possibility. In Lace v Chantler [1944] 1 All ER 305 a lease was set out to exist ‘for the duration of the war’. Lord Greene MR concluded that the lease was invalid, adding that: A term created by a leasehold tenancy agreement must be a term which is either expressed with certainty and specifically, or is expressed by reference to something which can, at the 339

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time when the lease takes effect, be looked to as a certain ascertainment of what the term is meant to be.

This decision was subsequently confirmed by the House of Lords in Prudential Assurance Co Ltd v London Residuary Body [1992] 2 AC 386. In that case the court held at 387 that a lease was expressed to: … continue until the said land is required by the Council for the purposes of the widening of Walworth Road and the street paving works rendered necessary thereby and the Council shall give two months’ notice to the tenants at least prior to the day of determination when the said land is so required.

Lord Templeman concluded that the lease was invalid for uncertainty. His Honour noted that a lease will either be certain or uncertain. It cannot be validated where it is partly certain — because one party to the lease is in a position to determine it; however, the other party is not. His Lordship noted that a yearly tenancy is ordinarily ‘saved from being uncertain’ because each party has power by notice to determine at the end of any year. However, an agreement where nobody, or only one party had a power to unilaterally determine the lease (as on the facts) could not be held to constitute a yearly tenancy and was therefore, not ‘saved from being uncertain’. Lord Templeman made the following comments at 391: A lease can be made for five years subject to the tenant’s right to determine if the war ends before the expiry of five years. A lease can be made from year to year subject to a fetter on the right of the landlord to determine the lease before the expiry of five years unless the war ends. Both leases are valid because they create a determinable certain term of five years. A lease might purport to be made for the duration of the war subject to the tenant’s right to determine before the end of the war. A lease might be made from year to year subject to a fetter on the right of the landlord to determine the lease before the war ends. Both leases would be invalid because each purported to create an uncertain term. A term must either be certain or uncertain. It cannot be partly certain because the tenant can determine it at any time and partly uncertain because the landlord cannot determine it for an uncertain period. If the landlord does not grant and the tenant does not take a certain term the grant does not create a lease.

It has been held that a lease for the duration of a life or lives is not void for uncertainty. See: Greco v Swinburne Ltd [1991] 1 VR 304. Such an arrangement could be construed as creating a freehold life tenancy and this was accepted in Burke v Dawes (1938) 59 CLR 1. See also Perpetual Trustee Co v Smith (2010) 186 FCR 566 at [50]. A periodic lease will usually satisfy the requirement because it exists for the period and at least another period of notice must be given before it can be extinguished. It has, however, been suggested that periodic tenancies and leases for life should not have strict certainty criteria applied: see Re Midland Railway Company Agreement v British Railways Board [1971] Ch 725 at 733 per Russell LJ; and Perpetual Trustee Company Ltd v Smith [2010] 186 FCR 566 at [48]. In Haslam v Money for Living (Aust) Pty Ltd (2008) 172 FCR 301 the Federal Court concluded that the rule that a lease must be for a period that is specified in duration need not apply to periodic tenancies. Hence, a lease given to an occupant to reside in the premises ‘for the remainder of her life’ did not offend the certainty principles. Middleton J noted at [27] that ‘the concept of tenant extends beyond that of a strict “tenancy” to include the freehold interest of a life interest, obviously equitable or legal’. Moore and Stone JJ agreed in Perpetual Company Trustee v Smith (2010) 186 FCR 566 at [48], noting that ‘whilst the essential characteristic of a fixed-term lease is that it must be of a specified maximum duration, this rule may not apply to periodic leases or leases for life’. 340

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Tenancies at will and at sufferance are not so straightforward. A tenancy at will may be extinguished at the will of either party without notice and is therefore personal in nature. Unlike the periodic tenancy, a tenancy at will is assessed retrospectively and may be as long or as short as the parties desire. It may be that a tenant at will has a right of exclusive possession during the currency of the tenancy, but it has no defined duration and while conventionally classified as a leasehold estate, at common law there is no notice period required for a tenancy at will to be terminated. This means that either the tenant of the landlord may terminate the tenancy at any point. This will occur by either express or implied demand of possession: Commonwealth Life (Amalgamated) Assurance Ltd v Anderson (1946) 46 SR (NSW) 47, 49. In this respect, a tenancy at will holds a position that is akin to both a lease and a licence. Similarly, the tenancy at sufferance may be extinguished immediately by either party. The tenancy at sufferance will arise, usually during short periods of time, where a tenant remains in possession of leased premises upon the expiration of the lease without receiving either express consent or objection from the landlord. The sort of situation where a tenancy at sufferance may arise is where, for example, a tenant continues in possession for a short period during lease re-negotiation. In such a situation, the landlord has not expressly assented to the tenancy; however, the failure to object means that the tenant could defend a trespass action. Both the tenancy at will and the tenancy at sufferance do not, in substance, satisfy the formal certainty requirements for creating a valid lease because there is no certainty as to exactly when either lease will be determined. Nevertheless, both are utilised as interim devices aimed at supporting the continuation or renegotiation of more formalised, fixed or periodic leases. Hence, these quasi tenancies are excluded from the orthodox certainty requirements.4

Equitable Leases 7.12  A leasehold interest that is not enforceable at law may, nevertheless be enforceable

under the equitable jurisdiction. The equitable jurisdiction will enforce a lease in circumstances where a clear intention to confer a lease can be established and the circumstances are such that the lease is not enforceable under common law or statute. Ordinarily, the reason that an intended lease is not enforceable at law is because the lease has not complied with the formality requirements necessary for the creation of a valid estate in land. Equity, following the maxims requiring it to give regard to ‘substance over form’ and ‘deem that to be done which ought to be done’, will validate an agreement where a lease is intended and exclusive possession is conferred, despite a failure to comply with the statutory formalities. There are different grounds upon which a lease may be validated in equity and these are discussed below. In all cases, however, the basic assumption is that the equitable jurisdiction will uphold a tenancy where it would be unconscientious to deny it. 7.13  One of the most established forms of equitable lease arises under what is known as the Walsh v Lonsdale doctrine. According to this principle, the equitable jurisdiction will uphold an agreement to grant a lease, despite its non-compliance with legal formalities, in circumstances where the court determines that the agreement is specifically enforceable. The position is outlined in the following extract from the Walsh v Lonsdale decision:

4. Anderson v Bowles (1951) 84 CLR 310. 341

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—  Walsh v Lonsdale  — (1882) 21 Ch D 9 (Eng (CA)) Facts: In 1879 the defendant agreed to lease a mill to the plaintiff for a term of seven years. The lease agreement was never executed. The agreement set out that the plaintiff would pay rent in accordance to the number of looms in operation. The defendant could require the plaintiff to pay a year’s rent in advance (plus arrears) in circumstances where quarterly rent was not paid in advance. The plaintiff did not pay rent in advance and the defendant demanded a year’s rent in advance and the balance of rental owing. The defendant then took possession of the mill and sought the legal remedy of distress. The issue was whether the lease was valid and if so, whether the legal remedy of distress could apply. Jessell MR: 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. 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 LJ concurred.]

Commentary 7.14  The conclusion of the court in Walsh v Lonsdale makes it clear that a specifically

enforceable agreement to grant a lease will be enforced within the equitable jurisdiction that has the same force as a legal lease. Taken literally, however, the conclusions of Jessell MR suggest that there is no distinction between common law and equity since the enactment of the Judicature Act. While both legal and equitable leases confer a good title for the duration of the lease upon the tenant, the distinction between legal and equitable interests has not been obliterated by the Judicature Act and institutions such as the trust depend upon it. The Judicature Act was purely procedural in effect and was never intended to procure the substantive jurisdictional alterations suggested by Jessell MR. The equitable lease established by the Walsh v Lonsdale decision is based upon the enforceability of the lease agreement. Where a binding contract to grant a lease exists, for which a decree of specific performance is available, the lease is created because of its enforceability in the equity jurisdiction. In Chan v Cresdon (1989) 89 ALR 522, the parties executed a registrable instrument of lease pursuant to an agreement for lease. The instrument of lease contained a guarantee of the lessee’s obligations by a third party guarantor. This set out that in consideration of the guarantor entering into the lease, the guarantor guaranteed the performance of the lessee’s obligations and indemnified the lessor against damages and expenses that may

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arise from the failure by the tenant to pay moneys owing or from a breach by the tenant of a lease covenant or condition. The registrable lease instrument was never registered. The lessee sued on the guarantee (but not the indemnity) and the issue was whether the guarantee could be applied to the lessee’s obligations given that the lease was unregistered. The majority of the High Court (Mason CJ, Brennan, Deane, and McHugh JJ) held that the failure to register the lease did not render it void and s 43 of the Real Property Act 1861 (Qld), which provided that, until registration, no instrument was ‘effectual to pass any estate or interest’ in land, was not a bar to the creation of a tenancy for a term of less than three years. Their Honours held that the effect of s 129(1) of the Real Property Act (Qld) was that, where conditions would previously have brought into existence a tenancy from year to year under the common law, a tenancy at will is implied, terminable by a month’s notice (expiring at any time). They went on to consider whether the guarantee applied to this lease and concluded that while an equitable lease was enforceable by specific performance, this was insufficient to ‘establish liability on the part of the appellants as guarantors. What they guaranteed was the “obligations [of the tenant] 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 …’ (at 256–258). Their Honours further stated at 529: For the 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.

Hence, the guarantors had ‘guaranteed’ the obligations of the tenant under the lease, but only in its character as a legal lease. They did not guarantee the obligations arising under an equitable lease because such a lease was based upon an ‘antecedent agreement’ that was subsequently evidenced by the unregistered instrument rather than the instrument itself. As such, while the equitable lease incorporated the terms of the unregistered lease, liability to pay rent under the equitable lease was not an obligation under the lease, which the guarantors were bound to uphold. These conclusions were followed by Ward J in the New South Wales Supreme Court in Barecall Pty Ltd v Hoban [2009] NSWSC 1104, and the New South Wales Court of Appeal in Pozetu Pty Ltd v Alexander James Pty Ltd [2016] NSWCA 208, where Sackville AJA noted at [74] that he was ‘inclined to agree’ that that if the agreement for a lease was effective only as a contract and did not create a lease estate that was enforceable in equity, guarantors would not be liable to meet any default under the agreement for lease. By contrast, in Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168, Edelman J held that a guarantee did apply to an equitable lease because the words used were sufficiently broad to encompass obligations arising under an equitable lease. See also: Cao v Baccello Pty Ltd as trustee for The Mondello Family Trust [2020] WASCA 82 at [78], where Murphy, Beech and Vaughan JJA held that the wording was wide enough to encompass a tenancy in equity. The conclusions of the High Court in Chan v Cresdon reinforce the clear distinction between a legal and an equitable lease. A legal lease will confer a legal title to land upon a tenant and may be supported by relevant common law remedies. An equitable lease amounts to an agreement to create a lease that is enforceable in equity in circumstances where the equitable jurisdiction will award a decree of specific performance. See also 343

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Parkview Qld Pty Ltd v Commonwealth Bank of Australia [2013] NSWCA 422 at [122] and Quest Rose Hill Pty Ltd v the Owners Corporation of Strata Plan 64025 (2012) 16 BPR 31,387 at [233]. In such a situation, the landlord will retain the estate; however, the tenant will acquire an equitable title that is enforceable against the land. The equitable lease is only enforceable between the parties privy to the lease agreement and is subject to the inherent discretionary considerations relevant to the application of equitable relief.5

The doctrine of part performance 7.15  An equitable lease may also be enforceable under the doctrine of part performance

where it can be established that despite the absence of a written memorandum of contract, acts have been performed that are unequivocally referable to the alleged lease agreement: see Lighting by Design (Australia) Pty Ltd v Cannington Nominees Pty Ltd [2008] 35 WAR 520 at [47]. The equitable relief most commonly provided when acts of part performance can be established is specific performance of the contract. For example, where a tenant enters into possession of premises and starts to pay rent, these acts would constitute acts of part performance so that, despite the lack of a written agreement, the equitable jurisdiction may be prepared to issue a decree of specific performance.

Tenancy by estoppel 7.16  A further situation where the application of relief in equity may produce an

enforceable lease is where an estoppel can be raised. Equity may be prepared to validate a lease where a landlord has represented that a tenant has exclusive possession for a defined period of time. The estoppel doctrine will preclude a landlord from denying that such a representation has been made.6 The elements of the equitable tenancy by estoppel were discussed by the House of Lords in Bruton v London & Quadrant Housing Trust [2000] 1 AC 406. According to Lord Hoffmann at 431: ‘The basis of the estoppel is that having entered into an agreement which constitutes a lease or tenancy, he cannot repudiate that incident or obligation’. Lord Hoffmann went on to conclude that estoppel is not the source of the tenancy but rather, a shield to protect an agreement, which constitutes a tenancy, from being denied. His Lordship stated at 416: ‘it is the fact that the agreement between the parties constitutes a tenancy that gives rise to an estoppel and not the other way round’. Estoppel in the equitable jurisdiction functions as a shield to prevent a party from unconscionably enforcing strict legal rights and denying the validity of an agreement to confer a lease which the landlord has induced and which the tenant has relied upon, where such a denial will cause detriment to the tenant: see also Morton v Woods [1867] LR 4 QB 293. Where an estoppel can be raised, equity will treat the agreement, which is ineffective at law, as an enforceable contract and compel a landlord to ‘perfect’ the lease.

5. See also R v Tower Hamlets London Borough Council [1999] QB 109. 6. Arfaras v Vosnakis  [2016] NSWCA 65;  Sidu v Van Dyke  [2014] HCA 19;  251 CLR 505;  Tadrous v  Tadrous  [2012] NSWCA 16;  DHJPM Pty Ltd v Blackthorn Resources (2011) 285 ALR 311;  83 NSWLR 728 (distinguished); Thorner v Major (2009) 1 WLR 776; Cobbe v Yeoman’s Row Management Ltd (2008) 1 WLR 1752; Jennings v Rice [2003] 1 P & CR 8; Giumelli v Giumelli (1999) 196 CLR 1; The Commonwealth v Verwayen  (1990) 170 CLR 394;  Waltons Stores (Interstate) Ltd v Maher  (1998) 164 CLR 387; Ramsden v Dyson (1886) LR1HL 129; Dillwyn v Llewelyn (1862) 4 De GF & J 517; 45 ER 1284. 344

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It is quite common for a tenancy by estoppel to arise before a landlord has acquired legal title, particularly in the context of a contract for the sale of land where the purchaser may negotiate with a third party to lease them the property prior to settlement and the formal receipt of legal title. In this situation, the act of the purchaser would be sufficient to generate a tenancy by estoppel. In Haslam v Money For Living (Aust) Pty Ltd (2008) 250 ALR 419 Middleton J made it clear at [35] that: A tenancy by estoppel arises most commonly on a fee simple conveyance, where the purchaser actually leases the property to a tenant before the purchaser acquires any interest in the land. In such a situation, if the landlord later acquires the necessary interest, usually the legal fee simple estate, the tenant will then automatically acquire a legal tenancy by question of law under the principle of ‘feeding the estoppel’.

It will not, however, be possible to ‘feed the estoppel’ if the title that the landlord eventually acquires is different to that which the lease is based upon.7 The tenancy by estoppel must comply with the relevant requirements for establishing an estoppel in equity. This type of estoppel can arise in both residential and commercial contexts and an important element is the reasonableness of the reliance upon the representation. Determining this can involve an admixture of contextual issues relevant to both commercial practice and, in some cases, family context. In Doueihi v Construction Technologies Australia Pty Ltd [2016] NSWCA 105 the parties had agreed on the rent, the term, an option to renew and the area to be occupied. In light of this, Gleeson JA (with whom Beazley P and Leeming JA agreed) held that there was no expectation of the need to negotiate and settle the terms of a lease and formalise the relationship entered into a contract and, in the circumstances, it was not unreasonable for the parties to rely upon what the court described as the ‘honour of the family’ as a component in assessing the overall reasonableness of the reliance. On the facts, the close connection of the parties, the understanding that it was not usual family practice to require the execution of a formal legal lease, and Mr Doueihi’s behaviour in standing in silence while CTA installed its manufacturing plant, which Mr Doueihi knew to be expensive, all contributed to the reasonableness of the reliance upon the representation that a lease would be given.8 7.17  A further issue of relevance is the certainty or otherwise of the representation involved. The High Court assessed the relevance of an ambiguous representation in the decision of Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 333 ALR 384. The decision is extracted below:

—  Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd  — (2016) 333 ALR 384 Facts: The tenants, Cosmopolitan Hotel (Vic) Pty Ltd held leases in two areas in the Crown Casino complex in which they operated two restaurants. In early 2005, negotiations commenced between the tenants and the Crown for two new leases. The new leases that were entered into by the Crown and the tenant at this time were for a period of 5 years and did not include an option to renew. Clause 2.3 of the lease stated that the Crown was to give at least 6 month’s

7. See also Cooma Clothing Pty Ltd v Create Invest Develop Pty Ltd [2013] VSCA 106 at [21]–[22]. 8. See Doueihi v Construction Technologies Australia Pty Ltd [2016] NSWCA 105 per Gleeson JA especially at [186]–[194]. See also A Silink, ‘Equitable Estoppel in “Subject to Contract” Negotiations’ (2011) 5 Journal of Equity 252. 345

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notice to the tenants prior to the expiration of the lease stating whether the landlord would renew the lease and on what terms, whether the landlord would allow the tenants to occupy the premises on a monthly tenancy after the expiry date or whether the landlord would require the tenant to vacate the premises by the expiry date. One of the conditions of the leases was the requirement of a major refurbishment. The tenant’s representative, Mr Zampelis, was concerned about the cost involved, and therefore sought to obtain a commitment from the Crown, at the point of negotiation, that would enable the tenants to continue to trade after the expiration of the five year lease. The Crown was unwilling to offer any further term of the lease. The tenants ended up signing the leases. In December 2009 the Crown gave notice to the tenants, pursuant to clause  2.3, requiring the tenants to vacate the premises. The tenants brought proceedings in VCAT alleging a series of representations had been made, by representatives of the Crown to Mr Zampelis, to the effect that the tenants would be ‘looked after’ which caused them to reasonably believe that they would be given a further five years at the expiration of their lease. The tenants claimed to have been induced by the representations and that these representations either generated a collateral contract which the Crown was bound to honour or a tenancy by estoppel arose which prevented the Crown from denying the obligation to confer an additional five years. VCAT did not find that representations had been made but did find in favour of a collateral contract and awarded damages for the breach by reference to profits the tenants would have made under hypothetical renewed leases. The Court of Appeal (Warren CJ, Whelan and Santamaria JJA) subsequently held that a tenancy by estoppel was made out. The High Court, by majority, held that the Court of Appeal had erred in finding that a tenancy by estoppel was made out on the facts (although it was correct to hold that no collateral contract existed.) The grounds of the appeal to the High Court concerned the issue of whether a promissory estoppel can be established from an ambiguous representation without the need to establish the way in which the representation was understood by the representee and whether the understanding was, in the circumstances, reasonable and actually relied upon. CJ French, Kiefel and Bell JJ:

Estoppel? It has long been recognised that for a representation to found an estoppel it must be clear. In Low v Bouverie, it was said that the language used must be precise and unambiguous. This does not mean that the words used may not be open to different constructions, but rather that they must be able to be understood in a particular sense by the person to whom the words are addressed. The sense in which they may be understood provides the basis for the assumption or expectation upon which the person to whom they are addressed acts. The words must be capable of misleading a reasonable person in the way that the person relying on the estoppel claims he or she has been misled. The statement that the tenants would be ‘looked after at renewal time’ is not capable of conveying to a reasonable person that the tenants would be offered a further lease. In submissions on this appeal the tenants for the first time sought to characterise the estoppel for which they contended as a proprietary estoppel. The tenants may have been encouraged to do so by the reasons of Warren CJ, where reference was made to cases where a party was held to be estopped from resiling from their promise to grant a proprietary interest notwithstanding the lack of precise detail in the promise. This is not a case of that kind. It appears that the tenants sought to characterise the estoppel as proprietary because they considered that a less stringent view is taken for the test for certainty of the representation in cases dealing with promises with respect to interests in land than is the case with respect to other interests. The tenants conceded that a consideration of the requirements of proprietary and promissory estoppels might require the resolution of a question, as yet unresolved, as to whether there is a single, unified doctrine of estoppel. They did not explain how that resolution is to be achieved.

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This is not the case to consider these questions. Whether the estoppel claimed is proprietary in nature has never been an issue in these proceedings and has not been the subject of any substantial argument. It has never been the tenants’ case that the estoppel in question was proprietary rather than promissory. It is to be inferred from the VCAT’s decision. Concerning s 126(1) of the Instruments Act that it was the tenants’ submission that the subject matter of the promise in question was not an interest in land. In any event, the tenants’ case fails at another level. Not only must the representation be such as to be able to create the assumption or expectation in question, it must be shown that that assumption was in fact acted upon. This derives from the basal purpose of the doctrine of estoppel, which is to avoid a detriment by compelling the party who has created an assumption, or expectation, on which the innocent party has acted, to adhere to it. Attention is then directed to the expectation said to have been created by Crown and whether Mr Zampelis acted upon it. The expectation that VCAT said Crown engendered in the tenants was that they would be offered further five year leases at renewal time on terms to be decided by Crown. But that is not what the tenants submitted that Mr Zampelis was led to believe. They submitted that he said that he assumed that there would be a renewal of the leases, or an offer of renewal, on the same terms and conditions as the 2005 leases. That is what the tenants argued induced him to hand over the executed leases. It was not his evidence, and it was no part of the tenants’ case, that he had acted on the basis of an expectation in the terms identified by the VCAT. Keane J:

Contract and equity The tenants submitted that they have always contended that their claim that Crown is estopped from denying the existence of the collateral contract was founded upon proprietary estoppel because performance of the collateral contract would have secured further five year leasehold interests for the tenants. They argued that it was only in the reasoning of the Court of Appeal that their claim was categorised as one of promissory estoppel. It was said that this occurred only because the Court of Appeal attributed an artificially narrow meaning to the statement made by Crown. It may also be noted here that the tenants’ argument proceeded on the assumption that promissory and proprietary estoppel are distinct doctrines. The argument between the parties proceeded upon this assumption, which was not challenged by any suggestion that proprietary estoppel is a doctrine which is, or ought to be, subsumed within promissory estoppel. Crown submitted that it was not open to the tenants to assert that they have always grounded their claim in proprietary estoppel. In this regard, Crown argued that the tenants denied that s 126 of the Instruments Act applied to the contract, and the Tribunal expressly accepted that the collateral contract was not a contract for the disposition of an interest in land. On that basis, it was said that it cannot now be said that the estoppel for which the tenants contend is a proprietary rather than a promissory estoppel. There is force in this contention. There is also force in Crown’s contention that the tenants’ case was litigated as a matter of promissory estoppel, as is evident from the Tribunal’s conclusion that Crown was estopped ‘from denying the existence of the collateral contract.’ Further, the Tribunal’s conclusion echoes this Court’s conclusion in Waltons Stores, a case identified by Mason CJ and Wilson J as an example of promissory estoppel. It is important here to observe the differences between Waltons Stores and the present case. The most important difference for present purposes is that in  Waltons Stores  there was no question as to the certainty of terms of the agreement between the parties; the dispute was as to whether the parties were bound to those terms. In Waltons Stores, the parties had been negotiating the terms of a lease from the Mahers to Waltons. The Mahers proposed to demolish existing buildings on the land to be leased and to construct a new building to suit Waltons’ purposes. Waltons’ solicitor assured the Mahers’ solicitor that the terms of the proposed lease were agreed and the Mahers executed the final form of the lease, sent it to Waltons and began 347

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the construction work. Waltons did not sign the lease but said nothing to the Mahers about its reluctance to do so even though it knew that the demolition work had begun. Waltons did not inform the Mahers that it did not want to complete the transaction until the new building was 40 per cent complete. At trial, and in the Court of Appeal of the Supreme Court of New South Wales, it was held that Waltons was estopped from denying that there was a contract of lease between the parties. In this Court, a majority held that Waltons had not represented that it had, in fact, executed the lease, but was nevertheless estopped from resiling from its promise to execute the lease. The estoppel precluded the putative lessee from denying that the terms of the lease had been, or  would be, agreed. If the putative lessee were not so precluded, the lessors would be left having wasted their outlays on the construction of premises for the lessee. In addition, in the present case, in contrast with Waltons Stores, the issue whether the tenants would have been left worse off at the end of the leases depends on findings of fact that were not made by the Tribunal and which it was not invited to make. Most importantly, the tenants did not seek to litigate the contention that the original leases were not long enough to enable them to recoup, with or without profit, their outlays on refurbishment or, more precisely, the outlays they would not have made but for the statement Crown was found to have made to Mr Zampelis. It is difficult to see that the case of estoppel advanced by the tenants in the Tribunal and the courts below could fairly be said to be other than a case of promissory estoppel given that it was advanced as an alternative to the collateral contract case, that it was concerned to bind Crown to a promise to make an offer, and that the tenants argued that they were not seeking to establish an interest in land. That having been said, however, it is not necessary to resolve the taxonomical dispute between the parties. In Giumelli v Giumelli, this Court observed that difference of views in the decided cases as to whether there is a single unified or unifying doctrine of estoppel has yet to be resolved. This case is not the occasion to resolve that difference. Broadly speaking, however, the categories of promissory and proprietary estoppel serve a common purpose of protecting a party from a detriment which ‘would flow from a party’s change of position if the assumption (or expectation) that led to it were deserted.’ Giving effect to this purpose may require different approaches in different contexts, but the purpose which underpins both iterations of the doctrine of estoppel was explained in Grundt v Great Boulder Pty Gold Mines Ltd. There, Dixon J said that: The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations. Dixon J described the ‘basal purpose of the doctrine’ as being: … to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. It is because the ‘opposite party’ is responsible for creating the assumption on which the party asserting the estoppel acted that the estoppel comes into play to prevent that party suffering a detriment. For the purposes of the present case, it may be accepted that the separate categories of promissory and proprietary estoppel allow for different approaches to the determination of whether the ‘opposite party’ is responsible for creating that assumption in different contexts.

Promises and property interests Crown relied upon the proposition affirmed by Mason and Deane JJ in Legione v Hateley that a representation must be ‘clear’, ‘unequivocal’ and ‘unambiguous’ before it can found a promissory estoppel. Nothing in the subsequent decisions of this Court has detracted from that requirement, which addresses the concern that a doctrine which is apt to preclude a party to a contract from relying upon its terms should not be so broad in its operation as to deny the 348

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party the benefit of its bargain by dint of representations which are so equivocal or ambiguous that they could not be given effect as terms of a contract. This concern was acknowledged in Legione by Mason and Deane JJ, who cited with approval the speech of Lord Hailsham of St Marylebone LC in Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd: … it would really be an astonishing thing if, in the case of a genuine misunderstanding as to the meaning of an offer, the offeree could obtain by means of the doctrine of promissory estoppel something that he must fail to obtain under the conventional law of contract. I share the feeling of incredulity expressed by Lord Denning MR in the course of his judgment in the instant case when he said: If the judge be right, it leads to this extraordinary consequence: A letter which is not sufficient to  vary  a contract is, nevertheless, sufficient to work an estoppel — which will have the same effect as a variation. It would tend to reduce the law to incoherence if a representation, too uncertain or ambiguous to give rise to a contract or a variation of contractual rights and liabilities, were held to be sufficient to found a promissory estoppel. Practical considerations such as the need of commerce for certainty, both as to the terms to which parties have agreed to be bound, and as to whether their bargaining process has concluded, also provide strong support for this approach. The decision in  Waltons Stores  was coherent with the law of contract. Indeed, the result which was reached in Waltons Stores by the application of equitable principles fully accords with the result which might have been reached by a contractual analysis, so far as the making of a binding contract is concerned where no question of uncertainty of terms arises. In this regard, as long ago as Brogden v Metropolitan Railway Co, it was held that where terms of agreement were drawn up by the plaintiff in the action and presented to the defendant in the action, who filled in some parts left blank, wrote ‘approved’ on the document, and returned it to the agent of the plaintiff, who put the document in his desk, and the parties later traded on the terms of the document, the circumstance that it had not been formally executed by either party was no obstacle to the conclusion that the parties had indicated by their conduct that they had bound themselves to a contract in the terms of the document. It is pertinent to observe that Brogden was a decision to which very great chancery judges in Lords Cairns, Hatherley and Selborne were party, along with Lord Blackburn, the greatest common law judge of his time. The principal practical difference between promissory and proprietary estoppel arises from the circumstances in which each is deployed: the former operates in relation to contracts, whereas the latter is concerned with the recognition of interests in property by way of relief against unconscionable conduct. Proprietary estoppel affords relief against unconscionable conduct where departure from an assurance means that the representor’s conduct is to be regarded as contrary to good conscience. In proprietary estoppel, it is necessary to consider both the subjective reliance of the representee and the extent to which the representor can, in good conscience, be held to be responsible for the representee’s actions. The representor is not acting contrary to good conscience in refusing to conform its conduct to the predicament produced by the representee’s unreasonable misunderstanding of a representation made to it.

Certainty and conscience Where a contractual right or liability is to be altered, coherence in the law requires that the representation which is said to bring about that alteration should be no less certain in its terms than would be required for an effective contractual variation. Accordingly, Warren CJ erred in holding that ‘there is a lower standard of certainty for estoppel than in contract law’ in so far as her Honour was dealing with a claim of promissory estoppel. Her Honour erred in treating what was said by Hodgson JA in Sullivan as applicable to such a case. In Sullivan, Hodgson JA said:

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Generally, a promise or representation will be sufficiently certain to support an estoppel if it was reasonable for the representee to interpret the representation or promise in a particular way and to act in reliance on that interpretation, thereby suffering detriment if the representor departs from what was represented or promised. Generally, if there is a grey area in what is represented or promised, but it was reasonable for the representee to interpret it as extending at least to the lower limit of the grey area and to act in reliance on it as so understood, I see no reason why the court should not regard the representation or promise as sufficiently certain up to this lower limit. Hodgson JA made these observations in relation to a claim for proprietary estoppel where, although the representee’s understanding that she was being promised accommodation for life was an unreasonable understanding of the representation made to her, it was reasonable of her to understand that she would be no worse off by altering the circumstances of her accommodation. It is apparent that Hodgson JA proceeded on the basis that the terms on which the representee was to occupy the house offered by the representors were to be no less favourable to her than the representee’s current arrangements, which she gave up in reliance on the representation made to her. His Honour concluded that the representee’s action ‘was what the [representors] intended she should do, and it was reasonable for her to do it.’ The concern that estoppel should not operate incoherently with the law of contract does not arise where proprietary estoppel is invoked precisely because there is no charter of contractually based rights and obligations governing the parties’ relationship. Even in such cases, however, as Hodgson JA held, the assurance or representation on which the party claiming the benefit of the estoppel relies must be sufficiently clear that the expectation which that party asserts was both actually, and reasonably, engendered by the assurance or representation. In Giumelli this Court explained the doctrinal basis of relief by way of proprietary estoppel as involving the recognition of a constructive trust of property whereby the legal title of the owner of property is subjected by order of the court to limitations necessary to meet the requirements of good conscience. Where the expectation of the party asserting the estoppel which led to detrimental reliance was not reasonably attributable to the conduct of the ‘opposite party’, then the conscience of the opposite party is not fixed with an obligation not to resile from the expectation. In Low v Bouverie, Bowen LJ said: … an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed. In Woodhouse, Lord Hailsham LC explained that these observations by Bowen LJ excluded: … far-fetched or strained, but still possible, interpretations, whilst … insisting on a sufficient precision and freedom from ambiguity to ensure that the representation will (not may) be reasonably understood in the particular sense required. Observance of this limit on the operation of estoppel in equity ensures that it is not allowed to operate to underwrite unrealistic expectations or wishful thinking. Such an operation would be especially pernicious in a commercial context; but even in a non-commercial context estoppel should not be allowed to operate as an instrument of injustice. The tenants, in their argument invoking proprietary estoppel, submitted that the Tribunal found as a matter of fact that Crown’s statement meant that an interest in land would be granted. The tenants emphasise that the Tribunal found that they ‘expected that there would be an offer of a renewed lease, at renewal time, that they would be free to accept.’ In the tenants’ submission, the Court of Appeal was wrong to depart from that finding, and to attribute a narrower meaning to the representation. 350

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In truth, this finding of the Tribunal highlights the flaw in the tenants’ case. That is that the expectation found by the Tribunal was not of a grant of an interest in land but of an offer on terms which they would be ‘free’ to accept. The obvious problem is that such an offer might well come to nothing because Crown was entitled to give full effect to its own self-interest in setting the terms of the offer. And any interest in land to be granted to the tenants necessarily depended on reaching an agreement upon the terms of an enforceable agreement for a leas. The difficulties with this aspect of the tenants’ argument are not avoided by categorising the tenants’ case as one of proprietary, rather than promissory, estoppel. Mr Zampelis’ evidence was that he was assured of the grant of further five year leases and that it was this assurance that he acted upon. This evidence was not accepted. The tenants’ case, based on Mr Zampelis’ evidence, was that they were induced to act by the assurance of five year leases on the same terms as the original leases. That case was rejected as a matter of fact by the Tribunal; as was the tenants’ alternative case, adopted late in the day, that the assurance was of five year leases on the same terms mutatis mutandis. In addition, no one in Mr Zampelis’ position could reasonably have understood the statement found to have been made to him as an assurance of such an outcome. One thing that was unequivocally clear from the course of negotiations as found by the Tribunal was that Crown was refusing to bind itself to such an outcome. No other basis was suggested as the basis for holding that Crown was conscience-bound to hold its title subject to an interest in favour of the tenants. As to the Court of Appeal’s reliance on  Sullivan,  Senior Counsel for Crown said of the observations by Warren CJ and Whelan JA that their Honours did not identify what the ‘grey area’ or ‘lower limit’ was, or, indeed, that the tenants had any expectation within the ‘grey area’ or the ‘lower limit’. No case had been advanced by the tenants of a ‘grey area’ or a ‘lower limit’ of what was meant by ‘looked after’. These submissions should be accepted. In none of its manifestations does estoppel operate by imputing to the party asserting the estoppel an expectation or reliance which might be thought to be a proportionate or fair response to the statement of the opposite party. In Sidhu v Van Dyke, French CJ, Kiefel, Bell and Keane JJ said: Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact. It is actual reliance by the promisee, and the state of affairs so created, which answers the concern that equitable estoppel not be allowed to outflank  Jorden v Money  by dispensing with the need for consideration if a promise is to be enforceable as a contract. It is not the breach of promise, but the promisor’s responsibility for the detrimental reliance by the promisee, which makes it unconscionable for the promisor to resile from his or her promise. In Giumelli v Giumelli Gleeson CJ, McHugh, Gummow and Callinan JJ approved the statement of McPherson J in Riches v Hogben that: ‘It is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which it gives rise.’ The tenants placed substantial reliance upon the decision of the Victorian Court of Appeal in Flinn v Flinn. In truth, that decision does not assist them. The putative collateral contract asserted in that case was held to be too uncertain to be enforceable: it was held that a promise to leave property by will on condition that the donee pay a reasonable sum to a third person could not give rise to an enforceable contract because there was no criterion by which to determine what was reasonable. There is ‘no general standard of reasonableness’ to which appeal might be made to solve the problem. In Flinn the expectation that was held to ground the estoppel that the Court of Appeal enforced was informed by explicit descriptions of the property to be granted under the will and articulation of the conditions on which the grant would be made. 351

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Conclusion In summary, in the course of the negotiations, a promise of a renewal of the leases had been explicitly rejected. It was clear beyond reasonable misunderstanding that Crown refused to bind itself to renew the leases on terms acceptable to the tenants, or, indeed, at all. On the findings made by the Tribunal as to the expectation engendered by Crown’s statement to Mr Zampelis, he did not act upon an expectation that the tenants would be granted renewed leases on terms acceptable to them. In addition, no one in his position could reasonably have expected a renewal of the leases for five years on the same terms and conditions as had been agreed in the leases or on terms reasonably corresponding to those terms. That being so, any claim based on estoppel was bound to fail. And the tenants had advanced no other basis for such a case. Nettle J (dissenting): When this matter was before VCAT, the tenants put their claim in estoppel as an alternative to their claim in collateral contract. So put, it was that because Mr Boesley gave the assurance and the tenants acted in reliance upon it to their detriment, Crown was estopped from denying that it was bound to offer to renew the existing Leases for a term of five years on the same terms and conditions as the existing Leases, or at least on the same terms and conditions mutatis mutandis as the existing Leases. By contrast, VCAT’s conclusion on estoppel was that Crown was not so estopped but estopped only from denying that it was bound to offer to renew the Leases for a further term of five years on such terms and conditions as it might choose in its discretion. As will be recalled, the primary judge held that the claim of estoppel failed because, on the facts as found by VCAT, the assumption or expectation which a reasonable person in Mr Zampelis’ position would have formed on the basis of the assurance was that Crown would offer to renew the Leases on such terms and conditions as Crown might choose in its discretion, as opposed to the same terms and conditions as the existing Leases, and because there was no evidence or determination by VCAT of whether Mr Zampelis would have been induced to act as he did if he had understood that the assurance meant no more than that Crown would offer to renew the Leases on such terms and conditions as Crown might choose in its discretion. Each member of the Court of Appeal held that that was not correct, although for different reasons. Warren CJ reasoned that the primary judge was in error in approaching the matter on the basis of what the assurance would have meant to a reasonable person in Mr Zampelis’ position. Her Honour considered that the claim was to be determined by a process of four steps. The first was to ascertain what Mr Zampelis took the assurance to mean. The second was to ascertain whether it was reasonable for Mr Zampelis to have interpreted the assurance in that fashion. The third was to determine whether the tenants had acted in reliance on the assurance to their detriment. The fourth was to determine the minimum equity. Her Honour accepted that Mr Zampelis took the assurance to mean that Crown would offer to renew the Leases for a term of five years on the same terms and conditions as the existing Leases. Her Honour also found that, although the assurance was capable of a range of meanings, it was not unreasonable for Mr Zampelis to construe it as he did. Her Honour further found that the tenants had acted in reliance on the assurance and suffered detriment by incurring expenditure on the fit out works. On that basis, Warren CJ held that the matter should be remitted to VCAT for determination of the measure of relief to be accorded to the tenants, which her Honour posited should be at the ‘lower limit of the representation’; meaning, presumably, in accordance with the least onerous to Crown of the several possible meanings which could reasonably have been drawn from the assurance. Whelan and Santamaria JJA considered that the primary judge was correct in holding that VCAT made an error in failing to ‘analyse or consider what [VCAT] had found as to what had been said to Mr Zampelis and as to what that meant’. But their Honours were also of the view that VCAT and the primary judge were at fault in that ‘[n]either VCAT nor the [primary] 352

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judge have addressed estoppel on the basis of the factual findings which VCAT made but by reference to the “lower limit” of what was meant by “looking after” the tenants at renewal’. Like Warren CJ, therefore, although for a different reason, Whelan and Santamaria JJA concluded that the matter should be remitted to VCAT to determine ‘what equitable relief, if any, should be granted’. Their Honours said that the ‘enquiry [should] involve an analysis of what Crown should do to relieve [the tenants] from the detriment they have suffered because Crown resiled from its representation’ but that it should not extend to the grant of new leases or anything in the nature of expectation loss.

Certainty of the representation Crown attacked the Court of Appeal’s reasoning at a number of levels. Its starting point was to contend that the tenants had put their estoppel claim in VCAT as a claim of promissory estoppel and that, because the assurance lacked contractual certainty, the claim was bound to fail. Counsel for Crown called in aid Mason and Deane JJ’s statement in Legione that ‘[t]he requirement that a representation must be clear before it can found an estoppel is … applicable to any doctrine of promissory estoppel’ and their Honours’ reference with apparent approval to the statement of Lord Denning MR in Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd that a higher standard of clarity is required to found a promissory estoppel than is required to found an agreed variation of contract. In  Woodhouse AC, Lord Denning stated that was so because it was clear from Low v Bouverie and Canada and Dominion Sugar Co Ltd v Canadian National (West Indies) Steamships Ltd that a representation must be clear and unequivocal in order to work an estoppel. Crown’s contention should not be accepted. The notion that it takes a representation of contractual certainty to found a promissory estoppel is misplaced. As Warren CJ observed, what is determinative in cases of promissory estoppel is whether the party sought to be estopped has played such a part in creating an assumption or expectation in the mind of a claimant, in reliance on which the claimant has acted to the claimant’s detriment, that it would be unconscionable for the estopped party to depart from the assumption or expectation before allowing the claimant reasonable time in which to revert to the status quo ante or, in some cases, at all. Mason and Deane JJ’s statement in  Legione  that the requirement that a representation must be clear before it can found an estoppel is to be understood in that sense. So are Lord Denning’s references in Woodhouse AC to Low v Bouverie and Canada and Dominion Sugar Co. Neither of the latter cases supports the proposition that a statement must be objectively unambiguous in order to found a promissory estoppel, still less that it must be more certain in terms than is required to found an agreed variation of contract. Low v Bouverie was decided in the immediate aftermath of Derry v Peek. The beneficiary of a trust sought a loan from a client of a firm of solicitors on the security of the beneficiary’s life interest in the trust and the solicitors sought advice from the trustee as to whether the trustee held any mortgage or knew of any other encumbrance over the beneficiary’s interest in the trust. The trustee replied that he held a mortgage from the beneficiary for the charge of interest on money advanced to the beneficiary and two policies of life insurance on the beneficiary’s life as security for the moneys advanced to him, both of which were mortgaged, but, in effect, that the trustee was not aware of any other security. Acting in reliance on the trustee’s reply, the solicitors went ahead and made the loan to the beneficiary. When the beneficiary later defaulted in repayment of the loan, the solicitors discovered that the beneficiary’s interest in the trust was in fact subject to six prior mortgages and that, although the trustee had notice of the prior mortgages, at least in the sense that they were receipted in the deed by which he was appointed as trustee some three years before, the trustee had forgotten of their existence when responding to the solicitors’ enquiry. The client sued the trustee for breach of warranty and also for equitable relief on the basis that the trustee was estopped from denying that the only encumbrances on the beneficiary’s interest in the trust were those which the trustee 353

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had mentioned. It was held that the claim for breach of warranty failed because there was no intention to enter into contractual relations, and that the claim of estoppel failed because the meaning which the solicitors sought to attribute to the trustee’s reply went beyond the meaning that it could reasonably bear in the circumstances. Bowen LJ encapsulated the latter point as follows: [I]n order to entitle the Plaintiff to relief, we must find here such an estoppel as would justify a claim for relief based upon the hypothesis that the Defendant is precluded from denying the truth of the fact which he is supposed to have asserted. Now, an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed. … I have come to the conclusion that the Defendant did not make any clear statement of the character which the Plaintiff alleges. I think that his language would be reasonably understood as conveying an intimation of the state of his belief, without an assertion that the fact was so apart from the limitation of his own knowledge; and therefore that no relief here can be granted. (emphasis added) Canada and Dominion Sugar  Co  was to a similar effect albeit in a different context. It concerned a ‘received for shipment’ bill of lading in respect of a quantity of sugar shipped on the respondent’s steamship which stated that the sugar was received ‘in apparent good order and condition’ but contained on the margin a stamped endorsement ‘[s]igned under guarantee to produce ship’s clean receipt’. In fact, the sugar had suffered damage before shipment and the ship’s receipt stated ‘[m]any bags stained, torn and resewn’. The appellant, which was the indorsee of the bill of lading, sued the respondent, alleging that it was estopped by the bill of lading from denying that the sugar was shipped in good condition. The claim in estoppel failed, although once again not because of any lack of contractual certainty. To the contrary, as the Privy Council observed with reference to the passage of the judgment of Bowen LJ in  Low v Bouverie which is set out above: ‘[a] question … of estoppel must be decided on ordinary common law principles of construction and of what is reasonable, without fine distinctions or technicalities’. The claim of estoppel failed because ‘the language of the bill of lading, read fairly, and as a whole’ did not bear the meaning which the indorsee sought to attribute to it. As the Privy Council observed if the statement ‘[r]eceived in apparent good order and condition’ at the head of the bill of lading had stood alone, the bill of lading would have been a ‘clean’ bill of lading and in the relevant context that would have meant that there was no clause or notation modifying or qualifying the statement as to the condition of the goods. But, because the bill bore on its face the qualifying words ‘[s]igned under guarantee to produce ship’s clean receipt’, it would reasonably have conveyed to a businessman that the statement as to good order and condition could not be taken to be unqualified. Additionally, whatever degree of certainty might be necessary to found a promissory estoppel of the kind considered in  Legione  — and it is to be observed that, although the representation in that case was not certain, it was held by a majority to be sufficient to estop the vendor from rescinding — proprietary estoppels of the kinds exemplified in  Dillwyn v Llewelyn and Ramsden v Dyson do not require any particular degree of objective certainty and proprietary estoppels of those kinds are a form of promissory estoppel. As Lord Scott of Foscote (with whom Lord Hoffmann, Lord Brown of Eaton-under-Heywood and Lord Mance agreed) observed in  Cobbe v Yeoman’s Row Management Ltd,  proprietary estoppel is a sub-species of promissory estoppel: The estoppel becomes a ‘proprietary’ estoppel — a sub-species of a ‘promissory’ estoppel — if the right claimed is a proprietary right, usually a right to or over land but, in principle, equally available in relation to chattels or choses in action. 354

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Arguably, the present was a case of proprietary estoppel, because what was alleged was in effect that the tenants had acted to their detriment in carrying out the refurbishment works to a high standard on the faith of an assurance that, if they did so, they would be granted a further term. But, in any event, as Brennan J observed in  Waltons Stores (Interstate) Ltd v Maher unless cases of proprietary estoppel are to be attributed to a different equity from that which explains non-proprietary promissory estoppel, ‘[i]t does not accord with principle to hold that equity, in seeking to avoid detriment occasioned by unconscionable conduct, can give relief in some cases but not in others’. And, although his Honour was there speaking of whether promissory estoppel can apply in cases in which there is no pre-existing legal relationship between the parties, the logic of the proposition applies equally to the degree of certainty required in each case. The foundational principle on which equitable estoppel in all its forms is grounded is that equity will not permit an unjust or unconscionable departure by a party from an assumption or expectation of fact or law, present or future, which that party has caused another party to adopt for the purpose of their legal relations. Consequently, the notion that there is or should be some a priori distinction between the degree of objective certainty required to found a promissory estoppel compared to a proprietary estoppel runs counter to principle. The idea of ‘one overarching doctrine of estoppel’ rather than a series of independent rules may not yet have ‘won general acceptance.’ But, in as much as the recognised categories of equitable estoppel are instances of the operation of the more general foundational principle, the determination of whether it is unconscionable for the charged party to depart from an assumption or expectation created in the mind of the claimant must always depend on the particular facts and circumstances of the case. The recognised applications of established categories of promissory estoppel are not necessarily exhaustive of the cases in which equity will intervene  and, even if they were, it would not follow that because it has been found in the context of one relationship that a designated level of certainty was required, the same degree of certainty would be necessary in the context of a different relationship or in different circumstances. Finally on this aspect of the matter, as Warren CJ emphasised, since the object of equitable estoppel in all its forms is to prevent the detriment which a representee would suffer if the representor were unjustly or unconscionably to depart from the assumption or expectation created in the mind of the representee, relief should be accorded only to the extent of the minimum content of the assumed state of affairs from which it would be unjust or unconscionable for the representor to depart. Frequently, that may not extend to compelling the representor to fulfil the assumption or expectation as opposed to compensating the representee for the detriment suffered. Hence, although an equivocal or objectively ambiguous representation would be incapable of forming a binding contract, it may yet found a promissory estoppel. The equivocal or objectively ambiguous nature of the representation is but one, albeit important, consideration in the determination of whether and to what extent the assumption or expectation is fairly and reasonably to be attributed to the representation and thus the measure of relief which is to be accorded.

Commentary 7.18  The majority in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd held the

representations were too vague and uncertain to constitute a representation that would give rise to a promissory estoppel. The statement that the tenants would be ‘looked after at renewal time’ was not, according to the majority, capable of conveying to a reasonable person that the tenants would be offered a further lease at the point of renewal. Keane J at [10] felt that it would reduce the ‘law to incoherence if a representation, too uncertain or 355

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ambiguous to give rise to a contract or a variation of contractual rights and liabilities, were held to be sufficient to found a promissory estoppel’. This was, his Honour felt, particularly true in the context of commerce. Additionally, French CJ, Kiefel and Bell JJ held that it was necessary for the tenants to have not only proved that the representation was created, but also to prove that it was acted upon and this was a consequence of the basal purpose of estoppel, which was the avoidance of the detriment flowing from actual reliance. Their Honours felt that it could not be shown that the tenants acted on the basis of an expectation in the terms identified by VCAT, namely, that the tenants would be offered further 5-year leases at renewal time on terms to be decided by the landlord. In a strong dissent, Nettle J argued that it was ‘misplaced’ to argued that a representation for promissory estoppel must be one of contractual certainty. His Honour argued that the equitable foundation of the action would appear to preclude this given that, as Warren CJ outlined in the Court of Appeal, ‘what is determinative in cases of promissory estoppel is whether the party sought to be estopped has played such a part in creating an assumption or expectation in the mind of a claimant, in reliance on which the claimant has acted to the claimant’s detriment, that it would be unconscionable for the estopped party to depart from the assumption or expectation before allowing the claimant reasonable time in which to revert to the  status quo ante  or, in some cases, at all.’ Nettle J further held that an ambiguous representation will be an ‘important consideration’ in determining the minimum equity to do justice in the circumstances, noting that this may often be an award of compensation rather than the enforcement of a tenancy. In this regard, relevant factors include whether the representation was made at a time when the promisor sought to influence the acts of the promise. Context is particularly important. Was the representation made with the implication that the promise could rely on what was said when making decisions regarding future conduct such that it is reasonable to interpret the words as a clear commitment? This can occur even where the representation is unclear. As outlined by Lord Hoffman in Thorner v Major [2009] 1 WLR 776 at [3]: ‘The fact that the promisor spoke in oblique and allusive terms does not matter if it was reasonable for [the promisee], given his knowledge of [the promisor] and the background circumstances, to have understood him to mean not merely that his present intention was to leave [the promisee] the farm but that he would definitely do so’.

7.19  Revision Questions 1. Why must a lease have a ‘certain beginning and a certain end’? 2. How do the tenancy at sufferance and the tenancy at will fail to comply with the certainty requirements for the creation of a valid will? 3. For an equitable lease to arise under the Walsh v Lonsdale principle, the existence of an enforceable agreement between the landlord and the tenant to confer exclusive possession for a specific duration of time must be established. The lease agreement must be one for which the courts would be willing to issue a decree of specific performance in equity. In what circumstances do you think a court would not be willing to enforce a lease agreement? 4. In Chan v Cresdon the equitable lease complied with the elements of the Walsh v Lonsdale rule but the majority argued that the ‘equitable’ lease could not bind the guarantors who had agreed to guarantee the obligations of the lessee. Is this interpretation too restrictive?

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5. Is the tenancy by estoppel simply a sub-category of the Walsh v Lonsdale equitable lease? How does each category differ? 6. How do the conclusions in Crown v Cosmopolitan Hotel (Vic) Ltd alter, if at all, the equitable foundation of the tenancy by estoppel?

Common Law Rights and Duties 7.20  The lease is essentially a contractual arrangement between the landlord and the

tenant and the contract itself is the primary source of many landlord and tenant rights and duties. Beyond the usual covenants included in the lease contract, there are a range of implied common law covenants. The implied common law rights and duties are regarded as fundamental and are therefore inherently applicable to all lease agreements in the absence of any express provision to the contrary.

Reasonable habitability 7.21  Common law imposes no specific obligation upon a landlord to repair the leased

premises unless they are leased out as furnished dwellings: Cruse v Mount [1933] Ch 278. Hence, where leased premises are furnished, the landlord may be obliged to keep the furnishings in a state of reasonable repair in order to comply with contractual obligations. However, where the leased premises remain unfurnished, common law will not require the landlord to keep the premises in a state of reasonable habitation (subject to general duty of care responsibilities and any specific statutory provisions relevant to residential or retail tenancies discussed further below). The obligation to keep furnished premises in a state of reasonable repair only imposes an obligation to keep the premises in a state of repair commensurate with the condition of the premises at the commencement of the lease. It does not mean that the premises must be repaired to an improved state than that they were in at the commencement of the lease: Penn v Gatenex Co Ltd [1958] 2 QB 210; nor does the duty apply to furnishings or appliances included within the dwelling: Homebush Abattoir Corporation v Bermira Pty Ltd (1991) NSW ConvR 55-579. Where this common law covenant is breached, the tenant may obtain damages for breach of contract.

Landlord’s duty of care 7.22  The common law now accepts that landlords owe a specific duty of care towards

their tenants, obliging them to take reasonable care to avoid any foreseeable risk of injury to the tenant and members of the tenant’s household. This principle was outlined by the Australian High Court in Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313; 146 ALR 572 and was subsequently revised in Jones v Bartlett (2000) 75 ALJR 1. An extract of the decision in Jones v Bartlett is set out below.

—  Jones v Bartlett  — (2000) 75 ALJR 1 Facts: The appellant suffered injury when, on the evening of 27 November 1993, he walked into a glass door which separated the dining room and the games room of the house which his parents were renting from the respondents. The house was built in the late 1950s. The accident occurred because the appellant walked into the door without looking to see whether it was open or closed. The appellant argued that the respondent had breached a duty of care in failing to 357

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have an expert inspect the premises before they were let to his parents and in failing to have the glass in the door replaced with thicker glass compliant with updated safety standards. In 1989 the standard for glass thickness was 10 mm whereas in 1957 it was 4 mm. No inspection report on the glass was carried out by the landlord. Gleeson CJ: In the present case, we are not concerned with a dwelling house that was dilapidated or tumble-down, or that contained negligently installed and dangerous electrical wiring. There was nothing about the premises that alerted, or should have alerted, the owners to any unusual danger. The premises were constructed in accordance with the standards prevailing at the time, and, so far as appears from the evidence, were adequately maintained. There is no such thing as absolute safety. All residential premises contain hazards to their occupants and to visitors. Most dwelling houses could be made safer, if safety were the only consideration. The fact that a house could be made safer does not mean it is dangerous or defective. Safety standards imposed by legislation or regulation recognise a need to balance safety with other factors, including cost, convenience, aesthetics and practicality. The standards in force at the time of the lease reflect this. They did not require thicker or tougher glass to be put into the door that caused the injury unless, for some reason, the glass had to be replaced. That, it is true, is merely the way the standards were framed, and it does not pre-empt the common law. But it reflects common sense. In Phillis v Daly, Mahoney JA said: There are dangers on any premises. A room may have a desk or a table. There is a danger that, if I fall, I will hit my head on it and my skull will be fractured. If the desk or table were not there, I would suffer little or no harm. And the danger is obvious: people do slip and fall. And the injury may be serious. But the obvious foreseeability of such an injury and its seriousness does not involve that, if a person falls and hits his head on a table, there must have been a breach of duty by the occupier of the room. And this notwithstanding that people may live without tables and that tables may be easily removed. … The alleged negligence of the respondents was said to consist of an omission, rather than an act. The omission was said to be the failure to have an expert assessment of the premises at the time of the lease, in circumstances where it was supposed that such an assessment would, in turn, have resulted in a recommendation to replace the glass in the door (an unwarranted supposition). That occurred before the lease was entered into. Consequently, attention was directed to those parts of the judgments in Northern Sandblasting which dealt with a duty to arrange for an inspection before lease. The question of non-delegability of a duty was important in Northern Sandblasting, where the negligence of an electrical contractor was responsible for the condition of the premises. Its significance in the present case is merely rhetorical. It might have become important if, for example, Mr Fryer had been engaged to inspect the premises and he had carelessly failed to notice the thickness of the glass in the door, although even then there would have been an issue as to whether he would or should have recommended its replacement. The rejection of Cavalier v Pope was anticipated by King CJ, in the Supreme Court of South Australia, in Parker v South Australian Housing Trust, who said that it was inconsistent with the modern doctrine of liability for negligence as it has developed since Donoghue v Stevenson. As Dawson J pointed out in Northern Sandblasting, under the ordinary principles of the modern law of negligence, the duty was a duty to take reasonable care to avoid foreseeable risk of injury to the appellant; the practical extent of the duty was governed by the circumstances of the case. There is no ground in principle for imposing upon the respondents an obligation greater than an obligation to take reasonable care to avoid foreseeable risk of injury to their prospective tenants and members of their household. The critical question is as to what is reasonable. The judgment of the Full Court, with which I agree, to the effect that there was no failure to take reasonable care, was a judgment of fact. It cannot be circumvented by an attempt to formulate 358

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the legal duty with greater particularity, in a manner which seeks to pre-empt the decision as to reasonableness. Lord Macmillan observed in Donoghue v Stevenson that the law can only refer to the standards of the reasonable person to determine whether a duty of care exists. The same standards determine whether the duty has been broken. ‘The criterion of judgment must adjust and adapt itself to the changing circumstances of life.’ The capacity to adjust and adapt, which is inherent in the test of reasonableness, would be diminished if a more particular test were formulated. There is no reason to seek to do so. Whether it is reasonable to require an owner of the premises to have them inspected by an expert before letting depends upon the circumstances of the case. There is no answer which is of universal application. Deciding what the answer should be in a particular case involves a factual judgment, and does not provide the occasion for the imposition of a requirement of the law. The claim in negligence must fail. Gummow and Hayne JJ: The starting point is to consider the relationship between the landlord and tenant. In Northern Sandblasting, in a passage with which Gummow J agreed, Dawson J said of the duty of care between the landlord and a guest lawfully upon the premises that it was: … that which arises under the ordinary principles of the law of negligence, namely, a duty to take reasonable care to avoid foreseeable risk of injury to the respondent. The nature and extent of the duty in the particular instance depends upon the circumstances of the case. This statement also holds true of the duty between the landlord and tenant. However, it is only the beginning of the inquiry. The difficulty lies in determining the nature and extent of any duty that exists and that which constitutes a breach thereof. The ‘circumstances’ to be considered may differ between landlord and tenant and landlord and other persons. There is no necessary correlation between the respective duties, although the latter is likely to be less stringent than the former. This case, like Northern Sandblasting, is concerned with a letting for residential purposes. What follows is to be understood with that in mind. That which is required in respect of premises let for commercial or educational or other purposes may well differ, but that is not for decision in this case. The basis upon which a landlord’s duty in respect of residential tenancies is to rest is a matter of debate. One candidate is the element of ‘control’ the landlord exercises over the premises at the time the tenant moves into occupation, in particular, the opportunity this affords for inspection by an expert engaged by the landlord. With respect, we agree with the view of the learned editors of Prosser and Keeton on The Law of Torts that this is a fiction devised to meet the case and not a particularly helpful one. For example, it would not cover cases in which the landlord never had control, either de facto in the case of back-to-back tenancies, or de jure in the case where a landlord assumes ownership after the tenant has gone into possession. The learned editors point out that: [i]t seems obvious that the lessor’s ‘control’, even under a covenant, is a fiction devised to meet the case, since he has no power to exclude any one, or to direct the use of the land, and it is difficult to see how his privilege to enter differs in any significant respect from that of any carpenter hired to do the work. Like Priestley JA in Avenhouse v Hornsby Shire Council — an economic loss case — we prefer to return to what his Honour called ‘the foundational case for all modern consideration of the duty of care in Anglo-Antipodean law’. Lord Atkin in Donoghue v Stevenson asked whether the relations between the parties in question was so ‘close and direct’ that the act complained of directly affected the plaintiff as a person whom the defendant ‘would know would be directly affected by his careless act’. The relationship between landlord and tenant is so close and direct that the landlord is obliged to take reasonable care that the tenant not suffer injury. In  considering the degree of care which must be taken, and the means by which a tenant 359

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may be injured, it must be borne in mind, as already discussed, that ordinarily the landlord will surrender occupation of the premises to the tenant. Thus, the content of any duty is likely to be less than that owed by an owner-occupier who retains the ability to direct what is done upon, with and to the premises. Broadly, the content of the landlord’s duty to the tenant will be conterminous with a requirement that the premises be reasonably fit for the purposes for which they are let, namely habitation as a domestic residence. This does not exceed the content of statutory requirements in various Australian jurisdictions, many of which were enacted to overcome the perceived deficiencies of the rule in Cavalier v Pope. The present is not a case such as Crimmins v Stevedoring Industry Finance Committee where the existence of a regime established by statute is essential to the formulation of a duty of care, breach of which is relied upon for an action in tort. However, the trend apparent in statute law is a relevant matter in considering the state of development of the common law. In the present field, affecting the daily lives and transactions of a very large proportion of the population, the Court should be slow to hold that the content of a common law duty rises above that which has been imposed by statute in various Australian jurisdictions. Premises will not be reasonably fit for the purposes for which they are let where the ordinary use of the premises for that purpose would, as a matter of reasonable foreseeability, cause injury. The duty requires a landlord not to let premises that suffer defects which the landlord knows or ought to know make the premises unsafe for the use to which they are to be put. The duty with respect to dangerous defects will be discharged if the landlord takes reasonable steps to ascertain the existence of any such defects and, once the landlord knows of any, if the landlord takes reasonable steps to remove them or to make the premises safe. This does not amount to a proposition that the ordinary use of the premises for the purpose for which they are let must not cause injury; it is that the landlord has acted in a manner reasonably to remove the risks. What constitutes the taking of reasonable steps will, as Dawson J noted in Northern Sandblasting, depend on all the circumstances of the case. What is reasonable for premises let for the purpose of residential housing may be less demanding than for premises let for such purposes as the running of a school, or the conduct of a hotel or club serving liquor. Moreover, the reasonableness of steps to be taken will be affected by the terms of the lease, including the level at which the rental is pitched, the obligations the parties allocated inter se and any specification of limited purposes to which the premises be put. It will also be affected by the terms of any applicable statutes, such as residential tenancy statutes. In some jurisdictions, there may be statutory requirements which supplant any common law duty or which impose a higher duty than the common law. The notion of reasonable fitness prompts three inquiries. The first concerns the presence of dangerous defects. The second, the taking of reasonable care to ascertain them. The third, the exercise of reasonable care to remove them or otherwise to make the premises safe.

Dangerous defects and ordinary use What then may constitute a dangerous defect? The defective flooring in Cavalier v Pope and Voli v Inglewood Shire Council would be obvious examples. So also the tap in Northern Sandblasting; a tap would not be expected to deliver an electrical shock to the person operating it. Likewise live wires or live electrical circuits that are misinstalled, or so exposed as to be liable to be brushed against accidentally; a light switch or light outlet that delivered a shock to one turning it on with dry hands; stairs that could not bear the weight of a person; and a roof that could not support a tenant authorised to be or to work upon it. It may also be that an untempered pane of glass prone to shatter or to explode when a door is opened or closed, or when wind blows against it, would be a dangerous defect. However, that is not this case. Some dangerous defects will exist at the time of entry into a tenancy agreement while others might develop during the course of the tenancy. It may be attractive to divide the class of ‘dangerous defects’ between these two heads, but the evidence may sometimes be insufficient 360

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to determine which of these is the case in respect of any particular dangerous defect. Rather, a better approach is to look at the origin of the defect, particularly whether it arises from faulty design or workmanship, at whatever stage, or whether it arises from a lack of repair. Those responsible for negligent design or building will ordinarily be liable as primary tortfeasors. Liability for disrepair will ordinarily fall upon the party with the obligation to repair. Liability for negligent repair ordinarily will fall on the repairer. The thread running through these cases is that a dangerous defect will, or may, cause injury to persons using the premises in an ordinary way. They are defects in the sense that they are more than dangerous; they are dangerous in a way not expected by their normal use. Many domestic items might be said to be dangerous: gas ovens, caged fans, hard floors, electrical circuits and panes of glass may cause serious or even fatal injuries. However, they are ordinarily only dangerous if misused. They will only be defective if they are dangerous when being used in a regular fashion and ordinarily would not be dangerous when so used. Moreover, the danger must appear in the course of the use of the premises for the purpose for which they were let. The reasonableness of the conduct engaged in by the person injured will be important. The danger may arise only to those performing acts unauthorised or uncontemplated as part of the purpose for which the tenancy was let. If so, there ordinarily will not be a dangerous defect. The actions contemplated and authorised by the purposes of the lease will depend on all the circumstances of the case. Often they will be expressed by the instrument of lease itself. Thus, ordinarily it will not be an incident of use of residential premises to climb trees situated thereon; nor ordinarily will it be a reasonable use of premises if the tenants do something, such as perform repairs, which they are forbidden to do by the terms of the lease which grants occupancy. It is not necessary for present purposes to pursue this line of reasoning any further. The injury to the appellant was caused by his using the premises in the usual course of an occupancy of residential premises. The glass door, on the facts found by the Commissioner, was not a dangerous defect in the necessary sense. The premises were reasonably fit for the purpose of residential occupancy, both at the commencement of the tenancy (the relevant time according to the appellant) and at the time of the appellant’s injury. There was no breach of the respondents’ duty of care owed to the tenants. It is not suggested that any higher duty was owed to a permitted occupant such as the appellant. Further, no liability can arise from danger due to disrepair, as the effect of cl 2.11 of the Lease was to impose upon the tenants, not the respondents, an obligation to keep the glass door in the same condition as it was at the commencement of the Lease, although, as the Commissioner had emphasised, the effect of cl 2.12 was that permission to authorise repairs was a matter for the respondents. In any event, at the trial, the question of reasonable fitness of the premises had not turned upon any failure to maintain or repair the glass door. The trial was determined on defective design or construction and failure to inspect the door before allowing the appellant and his family into residence. What has been said is sufficient to dispose of the appellant’s case in so far as it rests upon the existence and breach of a duty of care owed to him by the respondents. However, we should deal shortly with the second and third matters referred to above: the taking of reasonable care to ascertain dangerous defects, and to remove them or otherwise to make the premises safe.

Ascertaining dangerous defects The diligence required to ascertain dangerous defects will not in the ordinary case require the institution of a system of regular inspection for defects during the currency of the tenancy. In Northern Sandblasting, Kirby J said of a posited requirement of inspections of domestic electricity systems: If correct in principle, it would require regular inspections against the risk of other perils, eg gas supply, floorboards, balustrades, etc. In the absence of evidence about the 361

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prevalence of, and need for, any such inspections of rented accommodation, there was no foundation for imposing such a duty on landlords leasing residential premises. …

Discharging the duty of care and delegability The duty of care encompasses an obligation to see to the removal of known defects rendering the residential premises unsafe and to make them reasonably safe by that removal. Many landlords, as a practical matter, will be unable to perform and, in some cases, be prohibited by law from performing the necessary repairs. Accordingly issues will arise as to whether it is sufficient for the landlord to engage a competent contractor to deal with the defects. Put another way, the question will be whether the duty to take reasonable care is ‘personal’ and ‘non-delegable’. To characterise a duty in this way involves, in effect, the imposition of strict liability. The content of the principle by which this characterisation is effected remains unclear, notwithstanding what was said by Mason J, after a review of the authorities, in Kondis v State Transport Authority. The relationships referred to by his Honour turn more on the nature of the relationship than of the characteristics of the individuals within it. For example, patients in hospitals and children in schools manifest a dependence or vulnerability which, while it may trigger the non-delegable duty, is not necessarily to be seen in the relationship of landlord and tenant. As Kirby J pointed out in Northern Sandblasting: Whereas, as a class, landlords might generally be in a better position than tenants, to carry the risk of unexpected harm in demised premises, this would not always be so. Finally, the position of a glass door in a house cannot be compared with a landowner bringing onto the land a dangerous substance or allowing a dangerous activity to be performed on the land. In Northern Sandblasting, a case involving electricity, five members of this Court rejected the submission that the landlord had been under a duty which was non-delegable in nature. (It will be convenient later in these reasons to indicate the standing of Northern Sandblasting in the light of the reasoning in this judgment.) The content of the landlord’s duty in a case such as the present is not one of strict liability, to  ensure an absence of defects or that reasonable care is taken by another in respect of existing defects. It is not a duty to guarantee that the premises are safe as can reasonably be made. It remains to consider whether a landlord owes to others upon residential premises a lesser duty than that owed to the tenants themselves.

Other occupiers and entrants … However, dangerous defects are unlikely to discriminate between tenants and those on the premises whether as an incident of a familial or other personal relationship, as in this case, Cavalier v Pope, and Northern Sandblasting, or some other social or business relationship or occasion. The landlord’s duty to take reasonable care that the premises contained no dangerous defects, owed in the sense earlier described to the tenants, extends to those other entrants we have identified. Nevertheless, the duty of the landlord owed to these third parties, in many cases, will be narrower than that owed to them by an occupier such as a tenant. An example of facts not involving the placing of a duty on the landlord is a slippery floor; an unsecured gate to a fenced swimming pool may be another. The duty of care of the landlord to the third party is only attracted by the presence of dangerous defects in the sense identified earlier in these reasons. These involve dangers arising not merely from occupation and possession of premises, but from the letting out of premises as safe for purposes for which they were not safe. What must be involved is a dangerous defect of which the landlord knew or ought to have known. It is unnecessary here to pursue this aspect of the case further. This is because, as indicated above, in the present case treating the appellant as in as good a position as his parents, the 362

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tenants, there was no breach of duty by the respondents. The glass door was not a dangerous defect in the relevant sense.

Northern Sandblasting … Northern Sandblasting thus is an example of a decision of an ultimate appellate court in which there is no majority in favour of either of the two grounds for decision. Further, as regards the non-delegable duty ground, all members of the Court dealt with it and a majority was against it; of those judges who dealt with the other ground for decision, a majority of them was against it. … In that light, we turn to consider Northern Sandblasting against the principles we have sought to expound earlier in this judgment. … Importantly, as Brennan CJ noted, the untidy work of the tradesman that caused the tangled mess of wires occurred before the tenants were let into possession, and Toohey J observed that ‘[t]here was no evidence to establish when the earth wire became disconnected’. The third feature concerned the major earth wire, which was also connected to the water pipes of the premises as an additional safety measure. Near these pipes, at the base of ‘a power pole outside the property’, was a metal spike, which was connected to the neutral wire on the power pole. The result, Brennan CJ stated, was that, if electrical charge were conducted to the water pipes and if the additional measure were effective, the current would be ‘conducted along the pipes and through the ground’ to the metal spike, whence it would be conducted back along the neutral wire to the general power system. However, as sometimes occurs and as occurred in that case, the ground between the pipes and the metal spike was a poor conductor of electricity, so that no conduction would occur and the water pipes would retain the electrical current. The cause of the accident was that, when the hotplate was switched on, the active wire in the hotplate snagged the earth wire and made it live. The broken connection in the neutral link had the result that the current in the earth wire was not conducted into the domestic switch box. If this had occurred, the current would have blown a fuse situated there. Instead, the current was conducted into the water pipe system and, because of the lack of connection between the system and the metal spike, remained there until the plaintiff, standing in bare feet on wet ground, touched an outside tap and so completed the circuit. Such a characterisation of the facts leads to the following conclusions. First, the wiring in the stove was a dangerous defect; it made the earth wire active. Secondly, the defective condition of the wiring in the domestic switch box was a dangerous defect in the sense explained earlier in these reasons. It did not actively present a danger but removed a safety measure designed to neutralise any electrical hazards that might arise regarding activation of the earth wire. Thirdly, and for the same reason, the additional safety measure comprised by the metal spike was also a dangerous defect. … Hence, the only duty in the landlord — which seems to have been the party with the obligation to repair but was prohibited from performing the repairs otherwise than by engaging a licensed electrician — was limited to a duty to engage a licensed and ostensibly competent electrician to repair the stove. There was no breach of this duty, as Mr Briggs was found to have been such an electrician. However, in the event, he was negligent. Liability for the dangerous defect created by the negligent repair work lay solely in the party who caused it — the electrician — and could not be extended to the landlord. That being so, and the landlord’s duty being limited to a duty to engage a licensed contractor to have the stove repaired, it was not then to be conflated with the electrician’s duty to repair the stove without negligence on his part. The effect of so doing would extend the duty to perform the repairs competently from the electrician to the landlord so that it became a duty to ensure the repairs were made competently such that the plaintiff was not exposed to any danger from them. In our view, such a process would be impermissible. The first step must be to determine whether the landlord was under any duty and only then may it be determined 363

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whether that duty was delegable. The only relevant content of the landlord’s duty was to engage a licensed electrician to repair the defective stove. Whether or not this was delegable, it was not delegated; nor was it breached. The appeal should be dismissed with costs.

Commentary 7.23 In Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313; 146 ALR 572, Toohey and McHugh JJ held that the landlord had a non-delegable duty with respect to the stove repairs which it had undertaken to have carried out. Toohey J (at CLR 349) considered that there were evidentiary and general difficulties in finding a breach of duty as a result of a failure to inspect the stove. Brennan CJ and Gleeson J each held that there was a more general duty of care with Brennan CJ, finding that the standard of care was the same as is required of occupiers towards those who enter occupied premises by consent and for reward and the duty requires landlords to carry out inspections of the premises. Gaudron J felt that the duty should not be limited to defects of which the landlord is aware at the beginning of a lease, given the extent to which members of the household are dependent upon the landlord for their safety. The exact nature of the duty of care owed by the landlord was further explicated by the High Court in Jones v Bartlett where Gleeson CJ noted that the content of the landlord’s duty to the tenant is based upon a requirement that the premises be reasonably fit for the purposes for which they are let, namely habitation as a domestic residence. In Ahluwalia v Robinson [2003] NSWCA 175, Hodgson JA at [23](with whom Sheller and Bryson JJA agreed) stated: Jones v Bartlett makes it clear that, in the absence of a contract supportive of a higher duty, the  duty of a landlord in relation to the safety of premises does not in general require a landlord to commission experts to inspect premises to look for latent defects, nor is it a duty to make premises as safe as reasonable care can make them. In general terms, the duty of the landlord is to be determined by reference to foreseeable risk of harm and what a reasonable person would do in response to that risk. Hence, in Swift v Wearing-Smith [2016] NSWCA 38 the New South Wales Court of Appeal considered whether the owners of a premises had a duty of care to guests falling from a first floor verandah as a result of a balustrade giving way. The court held that the harm was caused by rust and corrosion that was not apparent from the surface and was not apparent in a purchase report. Hoben JA held that in the absence of ‘some specialised knowledge on their part, there was no reason why the appellants should have been on notice that apart from some “surface rust” there could have been a corrosive process attacking the bolts. Similarly, there was no basis for finding that in the absence of some specialised knowledge, the appellants would have appreciated that since they could not visually observe the state of the bolts, they should obtain expert opinion on that issue. The identified risk of harm was not reasonably foreseeable.’ (at [131])

Following these decisions by the High Court, the duty of care of a landlord can be stated in a variety of ways (as summarised by the different judgments in Jones v Bartlett): • a duty to take reasonable care to avoid foreseeable risk of injury to the tenant and members of the tenant’s household (as adopted by Gleeson CJ); • a duty to take reasonable care to put and keep the premises in a safe state of repair (Gaudron J); 364

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• a duty not to let premises that suffer from a defect making them unsafe for the use to which they are to be put (Gummow and Hayne JJ); • a duty to take reasonable care to avoid foreseeable risk of injury from defects of which they were on notice or of which they would reasonably become aware (Kirby J). The content of this duty does not necessarily impose on the landlord an obligation to inspect the premises before leasing them to the tenant; however, the particular circumstances may mean that the landlord must assume such a responsibility. Where a landlord is obliged to inspect, the inspection should be carried out carefully, making sure that the premises are fit for habitation, that any obvious defects are repaired, that any defects relevant to the specific character of the tenants taking occupation are repaired, and that consistent inspections of the property are carried out. This tortious responsibility requires the landlord to make sure that any defects which could, with reasonable foreseeability, cause injury, are properly repaired. An assessment of the scope of the particular duty and the type of injuries that may be ‘reasonably foreseeable’ from a particular defect will depend upon the circumstances of each case. In Sakoua v Williams (2005) 64 NSWLR 588, Mason P at [8] found that the duty articulated by the High Court in Jones v Bartlett required the landlord to fix defects of which he was aware, or those of which he should have been aware at the commencement of the lease. In Loosefit Pty Ltd v Marshbaum [2011] NSWCA 372 the New South Wales Supreme Court evaluated a decision by the trial judge to award damages to the plaintiff for personal injuries sustained when she fell while descending a flight of stairs from premises located on the first floor of a shopping complex in Mosman. Loose Fit was the lessee and occupier of the gym and the staircase. The plaintiff argued that the lessee had breached its duty of care in failing to install a handrail in the upper section of the stairs where she fell. The plaintiff did not sue the owners, although Loose Fit cross-claimed. The trial judge held that Loose Fit had breached its duty of care to the plaintiff but dismissed the cross-claim against the owner on the grounds that the duty of care articulated in Jones v Bartlett was simply a duty to ensure that the premises leased to Loose Fit did not contain ‘dangerous defects’ and the absence of a handrail did not constitute a dangerous defect. Loose Fit appealed on both claims. Sackville J concluded that Jones v Bartlett does not stand for the proposition that a landlord of commercial premises breaches the duty of care owed to an entrant onto the premises only if the entrant is injured by a ‘dangerous defect’. His Honour held at [90] that the questions which ‘have to be addressed are whether there was a foreseeable risk of harm to the entrant and, if so, what (if anything) a reasonable person in the landlord’s position would have done in response to that risk. The existence of a ‘dangerous defect’ might be an important consideration in answering those questions, but it is not necessarily the only decision.’ His Honour concluded that the owners had breached their duty of care because a reasonable person in the position of the owners would have installed a handrail on the upper level of the staircase before entering into the lease.

Duty to Provide Tenant with Quiet Possession/Duty Not to Derogate 7.24  The duty not to interfere with the tenant’s quiet possession and the duty not to

derogate from the grant are extensions of the contractual obligation of the landlord to provide exclusive possession. A landlord that interferes with the quiet possession of a tenant 365

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or derogates from the grant issued will be in breach of this implied common law covenant and damages based upon breach of covenant will be available to the tenant. In order to prove that a landlord has breached the duty to provide the tenant with quiet possession, it must be established that the landlord has personally carried out the infringing acts. For example, if a landlord resides in an adjoining property and makes a lot of noise or prevents the tenant from conducting the business that was the purpose of the law, the common law duties will be infringed. The behaviour must, however, substantially interfere with the quiet possession or purpose of the lease in order to constitute an infringement. In Browne v  Flower [1911] 1 Ch 219 at 228, Parker J discussed the elements necessary to prove a breach of the duty to provide a tenant with quiet possession: It appears to me that to constitute a breach of such a covenant there must be some physical interference with the enjoyment of the demised premises, and that a mere interference with the comfort of persons using the demised premises by the creation of a personal annoyance such as might arise from noise, invasion of privacy, or otherwise is not enough.

Subsequently, his Honour considered the elements of a breach of the duty not to derogate from a grant noting at 226: … if the grant or demise be made for a particular purpose, the grantor or lessor comes under an obligation not to use the land retained by him in such a way as to render the land granted or demised unfit or materially less fit for the purpose for which the grant or demise was made.

To constitute a derogation from grant in the context of a lease there must be some act rendering the premises ‘unfit or materially less fit’ for the particular purpose for which the demise was made: Browne & Flower [1911] 1 Ch 219 at 226. In Gordon v Lidcombe Developments Pty Ltd [1966] 2 NSWR 9 at 15 Street J concluded that there should be a substantial disturbance or disruption, and that the test would be satisfied ‘if the degree to which the premises are rendered less fit is so extreme as in the practical sense to render them unfit’. Mere interference with convenience or amenities such as privacy and tranquillity will not be sufficient: Nordern v Blueport Enterprises Ltd [1996] 3 NZLR 450. It is not, however, necessary to establish ‘practical frustration of the purpose of the lease’: Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 QdR 1 at 10; Project Blue Moon Pty Ltd v Fairway Trading Pty Ltd [2000] FCA 127 at [10] per Gallop, Mathews and Sundberg JJ. In Southwark London Borough Council v Tanner [1999] 3 WLR 939, the House of Lords held that a breach of quiet possession is not limited to direct and physical injury to land and, to this extent, rejected the earlier conclusions of the court in Browne v Flower.9 In interpreting the test set out by Parker J for determining whether or not a breach of the duty not to derogate from a grant had occurred, Street J in Gordon v Lidcombe Development Pty Ltd [1966] 2 NSWR 9 at 15–16 concluded: In attempting to define the degree to which premises must be rendered materially less fit in order to meet Parker J’s established test, I am of the view that premises will be regarded as having been rendered unfit for the demised purpose if the facts even though falling short of establishing absolute unfitness, are sufficient to enable the court to conclude that the premises are for practical purposes to be fairly regarded as having been rendered unfit.

The duty to provide the tenant with quiet enjoyment and not to derogate from the grant are closely linked. In Southwark London Borough Council v Tanner [1999] 3 WLR 939 the 9. See also Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1 at [10] per McPherson JA; Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 304 at [151]. 366

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close connection was discussed and Lord Millett concluded at 957 that ‘The principle is the same in each case: a man may not give with one hand and take away with the other’.10 In Purple Tangerine Pty Ltd v Australian Financial Loan Pty Ltd [2013] VSC 411 the Victorian Supreme Court concluded that the question in both quiet possession and non-derogation cases is whether there is substantial interference with the lessee’s occupation. In that case, restrictions on the use of toilet facilities by the installation of an alarm system was found to constitute a substantial interference amounting to a derogation of grant. Significantly, because the conceptualisation of the non-derogation principle has been articulated in terms of an implied grant, its operation will always depend upon the scope and purpose of the relevant grant in issue. Hence, the scope and extent of the obligation of a landlord not to derogate from grant must be determined from the surrounding circumstances and the provisions of the leases: Specialist Diagnostic Services Pty Ltd (Formerly Symbion Pathology Pty Ltd) v Healthscope Ltd (2012) 41 VR 1 at [109]; Higgins v Australian Capital Territory [2020] ACTSC 19 at [97] per Crowe AJ. Hence, in Bankstown Trotting Recreational Club Ltd v Chisholm [2016] NSWCA 274, Darke J held that the grant of an easement, which interfered with a lessees exclusive right to use a carpark, did constitute a breach of the non-derogation principle because the grant was clearly inconsistent with the lessees right to exclusive possession. It has been suggested that the photographing and filming of tenant’s possessions for the purpose of advertising may not amount to a breach of quiet possession given that it does not disturb the occupation of the tenants. However, most of the concerns of tenants, landlords and agents focus on the fundamental role of online advertising in selling and leasing a property, and the fact that this exposure may leave many tenants feeling vulnerable. To this end, in its investigation of this issue, the Victorian Law Reform Commission made the following recommendations: When exercising the express right to enter to take advertising images: (a) The landlord or landlord’s agent must not take, or permit to be taken, an advertising image where the tenant has objected in writing to the image being taken because it would show: (i) a possession that directly identifies the tenant or another occupant, (ii) a possession that reveals sensitive information about the tenant or another occupant, regardless of whether that occupant’s identity is also revealed, or (iii) a valuable possession which places the tenant at a heightened risk of theft and it would be unreasonable to expect the tenant to remove or conceal the possession. (b) The landlord or landlord’s agent must not take, or permit to be taken, an advertising image showing a tenant’s possessions where the tenant has objected in writing to the image being taken because: (i) the tenant or other occupant is at risk of family or personal violence, and (ii) the image would show possessions that may reveal the identity of that occupant to the person posing the risk. (Photographing and filming tenants’ possessions for advertising purposes [2015] VLRC 31 at p 9.)

Tenant’s Duty to Use the Premises in a Tenant-Like Manner 7.25  The tenant owes an implied obligation to use the premises in a tenant-like manner.

This implied common law duty will exist irrespective of any express covenant to repair that may be included within the lease. The common law duty requires the tenant to refrain

10. See also Spathis v Hanave Investment Co Pty Ltd [2002] NSWSC 34; Aussie Traveller Pty Ltd v Marklea Pty Ltd [1998] 1 Qd R 1. 367

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from intentionally damaging the property, to look after the property in order to ensure that it is reasonably maintained and to notify the landlord or agent of any structural defects as soon as possible. In Warren v Keen [1954] 1 QB 15, Denning LJ in the English Court of Appeal made the following comments at 17: The only duty of the tenant is to use the premises in a husbandlike, or what is the same thing, a tenant like, manner. That is how it was put by Sir Vicary Gibbs CJ, in Horsefall v Mather (Holt NP 7) and by Scutton and Atkin LJJ, in Marsden v Edward Heyes Ltd [1927] 2 KB 7 at 8. But what does it mean — ‘to use the premises in a tenantlike manner’? It can, I think best be shown by some illustrations. The tenant must take proper care of the premises. He must, if he is going away for the winter, turn off the water and empty the boiler; he must clean the chimneys, when necessary, and also the windows; he must mend the electric light when it fuses; he must unstop the sink when it is blocked by his waste. In short, he must do the little jobs about the place which a reasonable tenant would do. In addition, he must not, of course, damage the house wilfully or negligently; and he must see that his family and guests do not damage it — if they do, he must repair it. But, apart from such things, if the house falls into disrepair through fair wear and tear or lapse of time or for any reason not caused by him, the tenant is not liable to repair it.

Miscellaneous tenant duties 7.26  The tenant also holds implied obligations to pay rents and taxes specified within

the lease agreement and to yield up possession at the conclusion of the lease, including the handing over of the key and the removal of all effects. The obligation of the tenant to yield up possession is not merely to vacate the premises but rather, to make sure that the landlord is able to actually enter into possession. Hence, the tenant must make sure that the property is clean, accessible and unoccupied: Henderson v Squire [1868] LR 4 QB 170. A tenant, like a life estate holder, may also be liable under the tortious doctrine of waste if they commit a positive act of damage to the leased premises (voluntary waste) or if they fail to keep the premises in good repair (permissive waste): see Imperial Acts Application Act 1969 (NSW) s 32; Regis Property Co Ltd v Dudley [1959] AC 370.

Express contractual duties 7.27  In addition to the common law implied duties associated with the lease interest, all lease contracts will contain covenants agreed upon between the landlord and the tenant when taking out a lease. These covenants will generally include or relate to obligations concerning the payment of rent, notice of an intention to terminate, insurance and rate payment obligations and circumstances in which the tenant should notify the landlord. Other covenants may be included, as specifically agreed upon by the parties and these covenants may, in some circumstances, modify common law or statutory duties imposed upon landlords and tenants. In constructing the scope and nature of the lease contracts, a number of interpretative rules have evolved. First, all lease terms will be interpreted according to the overall content of the lease and regard may be given to the surrounding circumstances. Second, in the event of any ambiguity, a covenant will be construed, as a last resort, in favour of the person receiving the benefit; however, where the matter relates to a breach involving forfeiture, the ambiguity will be resolved in favour of the tenant: Downie v Lockwood [1965] VR 257; Emhill Pty Ltd v Bonsoc Pty Ltd (No 2) [2007] VSCA 108 at [72]. See also Glasshouse Investments Pty Ltd v MPJ Holdings Pty Ltd [2005] NSWSC 546 where Young CJ at [15] noted that courts take an approach to commercial leases that ensure a ‘sensible commercial operation. Attention is paid to the words the 368

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parties have chosen to use in their document, to the genesis of the transaction, the background and context and the market in which the parties are operating. No hard and fast rules can be set: the exercise of construction is neither to be uncompromisingly literal nor unswervingly purposive.’ Where a lease agreement is entered into and the agreement does not expressly set out any covenants concerning that agreement, the ‘usual covenants’ will be implied. The usual covenants were summarised in Hampshire v Wickens (1878) 7 Ch D 555 to be: (i) payment of rent (subject to the right of the landlord to re-enter the premises and terminate the lease where rent is not paid); (ii) payment of rates and taxes; (iii) for the tenant to keep the premises in good repair; and (iv) for the landlord to be entitled to re-enter the premises in order to inspect any repairs. The usual covenants may change or be adapted according to the nature and circumstances of the lease: Chester v Buckingham Travel Ltd [1981] 1 WLR 96. The implication of a term should be differentiated to an inferred term. An implied term gives effect to the parties presumed intention: Codelfa Construction Pty Ltd v State Rail Authority of NSW  (1982) 149 CLR 337, 346 per Mason J; Regreen Asset Holdings Pty Ltd v Castricum Brothers Australia Pty Ltd [2015] VSCA 286 per Warren CJ, Kyrou and McLeish JJA at [72]–[73]. On the other hand, an inferred term is a term that the parties actually intended to form part of their contract but did not reduce to writing or clearly articulate orally, thus requiring the court to infer it from the parties’ communications: Regreen Asset Holdings Pty Ltd v Castricum Brothers Australia Pty Ltd [2015] VSCA 286 per Warren CJ, Kyrou and McLeish JJA at [73]. In all commercial contracts, if the parties have not reduced all the terms of their agreement to a complete written form, the court must first identify the actual terms by inference before going on to consider whether any additional terms should be implied. As outlined by McHugh and Gummow JJ in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 442: ‘If the contract has not been reduced to complete written form, the question is whether the implication of the particular term is necessary for the reasonable or effective operation of the contract in the circumstances of the case; only where this can be seen to be true will the term be implied’. Necessity in this context refers to what the contract will implicitly require and a term will generally not be regarded as ‘necessary’ if the contract is effective without it: McMahon v National Foods Milk Ltd (2009) 25 VR 251at [13] per Nettle JA. Outside of the usual implied terms, courts will be very cautious when implying additional terms into a lease contract but may do so to achieve business efficacy: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266, 283 per Lord Simon of Glaisdale, Viscount Dilhorne and Lord Keith of Kinkel; Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979)144 CLR 596, 605–606 per Mason J, Gibbs and Stephen J. It may also be possible to imply a term on the basis of custom and usage in circumstances where the term is so well known, that all parties can be reasonably assumed to have imported it: Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, 236–237. In Liverpool City Council v Irwin [1977] AC 239 a lease contract was entered into between tenants and a council with respect to a flat in a large block. The tenants held implied easements over the common parts of the block and the House of Lords held that there was an implied obligation upon the council to maintain of those common parts. Lord Wilberforce stated at 254F: The relationship accepted by the corporation is that of landlord and tenant: the tenant accepts obligations, accordingly, in relation inter alia to the stairs, the lifts and the chutes. All these 369

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are not just facilities, or conveniences provided at discretion: they are essentials of the tenancy without which life in the dwellings, as a tenant, is not possible. To leave the landlord free of contractual obligation as regards these matters, and subject only to administrative or political pressure, is, in my opinion, inconsistent totally with the nature of this relationship. The subject-matter of the lease (high-rise blocks) and the relationship created by the tenancy demand, of their nature, some contractual obligation on the landlord.

His Honour held that for a covenant to be implied, it must give ‘business efficacy’ to the contract such that if the absence of the covenant had been noted by both parties at the commencement of the lease, both, acting reasonably, would have ‘agreed without hesitation’ to its insertion. Endorsing this approach, Gibson LJ in McAuley v Bristol City Council [1992] QB 134 at [36] concluded that in constructing lease covenants, there was no reason why ‘the principles by reference to which the court determines whether a right can be implied in favour of a landlord, which he may assert against the tenant, should differ from those applicable for implying an obligation to be imposed upon a landlord which the tenant may assert against the landlord’. In Mediterranean Salvage and Towage Ltd v Seamar Trading and Commerce Inc [2010] 1 All ER (Comm) 1, Sir Anthony Clarke MR, after reviewing the approach taken in Liverpool City Council v Irwin, stated at [18] that the significance of the determination was that it stressed ‘the importance of the test of necessity. Is the proposed implied term necessary to make the contract work?’11 This was confirmed by Hildyard J in J N Hipwell & Son v Szurek [2018] EWCA Civ 674 at [26], who held that ‘the touchstone is always necessity and not merely reasonableness, and the term is implied as a matter of fact in the particular case, rather than as a matter of law and as a legal incident of contracts of an identified type’.

Specific statutory duties 7.28  Statute now significantly reinforces the general and contractual rights and duties

applicable to landlords and tenants within specific residential and retail lease agreements. A brief overview of some of the provisions in residential and retail tenancies legislation in New South Wales, Victoria and Queensland follows. These brief extracts provide an overview of the way in which the comprehensive statutory provisions supplement and reinforce the common law rights and duties of landlords and tenants holding residential or retail tenancies. The provisions regulate duties relating to repair, rent, notice, assignment, and sub-letting and, in the context of the retail legislation in particular, rental review. A comprehensive examination of the nature and effect of these provisions is beyond the scope of this book. EXTRACT

Residential Tenancies Act 2010 (NSW) — ss 32–34, 38–39, 41, 44, 50–52, 55 and 63 32  Kinds of payments that tenant may be required to pay for residential tenancy agreement A person must not require or receive from a tenant any payment for or in relation to 11. See also Attorney-General of Belize v Belize Telecom Ltd [2009] 2 All ER (Comm) 1; Sam Management Services (Aust) Pty Ltd v Bank of Western Australia Ltd [2009] NSWCA 320 at [28]. 370

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renewing, extending or continuing a residential tenancy agreement, other than the following: (a) rent, (b) a rental bond, (c) any other amounts or fees prescribed by the regulations. 33  Payment of rent by tenant (1) A tenant must pay the rent under a residential tenancy agreement on or before the day set out in the agreement. (2) A landlord must not require a tenant to pay more than 2 weeks rent in advance under a residential tenancy agreement or to pay rent for a period of the tenancy before the end of the previous period for which rent has been paid. A tenant may pay more than 2 weeks rent if the tenant wishes to do so. (3) A landlord must not knowingly appropriate rent paid by the tenant for the purpose of any amount payable by the tenant other than rent. (4) This section is a term of every residential tenancy agreement. 34  Acceptance of rent by landlord (1) A landlord must accept payment of unpaid rent by a tenant if: (a) the landlord has given a termination notice on the ground of failure to pay rent under the residential tenancy agreement, and (b) the tenant has not vacated the residential premises. Maximum penalty: 10 penalty units. A residential tenancy agreement may generally not be terminated by the Tribunal, or possession of residential premises be recovered, on the ground of failure to pay rent if the tenant repays the rent or complies with an agreement to do so (see section 89). (2) This section is a term of every residential tenancy agreement. 38  Utility charges payable by tenant (1) A tenant must pay the following charges for the residential premises: (a) all charges for the supply of electricity, gas (except bottled gas) or oil to the tenant at the residential premises if the premises are separately metered, (b) all charges for the supply of bottled gas to the tenant at the residential premises, (c) all charges for pumping out a septic system used for the residential premises, (d) any excess garbage charges relating to the tenant’s use of the residential premises, (e) any other charges prescribed by the regulations. (2) This section is a term of every residential tenancy agreement. 39  Water usage charges payable by tenant (1) A tenant must pay the water usage charges for the residential premises, but only if: (a) the premises are separately metered or the premises are not connected to a water supply service and water is delivered to the premises by vehicle, and 371

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Australian Property Law (b) the premises contain water efficiency measures prescribed by the regulations for the purposes of this section, and (c) the charges do not exceed the amount payable by the landlord for water used by the tenant.

(2) A tenant is not required to pay the water usage charges unless the landlord gives the tenant a copy of the part of the water supply authority’s bill setting out the charges, or other evidence of the cost of water used by the tenant. (3) A landlord must give the tenant not less than 21 days to pay the water usage charges. (4) A tenant is not required to pay the water usage charges if the landlord fails to request payment from the tenant within 3 months of the issue of the bill for those charges by the water supply authority. (5) Subsection (4) does not prevent a landlord from taking action to recover an amount of water usage charges later than 3 months after the issue of a bill for those charges, if the landlord first sought payment of the amount within 3 months after the issue of the bill. (6) A landlord must ensure that the tenant receives the benefit of, or an amount equivalent to, any rebate received by the landlord in respect of any water usage charges payable or paid by the tenant. Tenants under social housing tenancy agreements may be subject to different provisions in relation to the payment of charges for water usage (see Division 3 of Part 7). (7) This section is a term of every residential tenancy agreement. 41  Rent increases (1) The rent payable under a residential tenancy agreement may be increased only if: (a) the tenant is given a written notice by the landlord or the landlord’s agent specifying the increased rent and the day from which it is payable, and (b) the notice is given at least 60 days before the increased rent is payable. (1A) Subsection (1) does not apply to a  fixed term agreement  for a fixed term of less than 2 years that specifies the date on which, and the amount by which, the rent payable under that agreement will be increased. This subsection does not affect the operation of subsection (2) in relation to the renewal of a fixed term agreement. (1B) The rent payable under a periodic agreement may not be increased more than once in any period of 12 months. (2) Notice must be given by the landlord or the landlord’s agent of a rent increase proposed during the term of a residential tenancy agreement and of a rent increase under a proposed residential tenancy agreement between a landlord and one or more of the landlord’s existing tenants. (3) A rent increase is not payable by a tenant unless the rent is increased in accordance with this section or the rent is increased by the Tribunal. (4) The residential tenancy agreement is varied to specify the increased rent from the date the rent is increased in accordance with this section. (5) Notice of a rent increase must be given by a landlord or landlord’s agent in accordance with this section even if details of the rent increase are set out in the residential tenancy agreement.

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(6) Notice of a rent increase may be cancelled or varied (so as to reduce the increase) by a subsequent written notice given to the tenant by or on behalf of the landlord. Any such later notice takes effect from the date on which the earlier notice was to take effect. (7) Notice of a rent increase is not required to be given by a landlord or landlord’s agent if the increase arises because of the end of, or a reduction in, a rent reduction. (8) Subsections (1)–(7) are terms of every residential tenancy agreement. (9) A landlord or landlord’s agent must not contravene this section. Maximum penalty: 20 penalty units. (10) The Tribunal must not make an order that a rent increase is not payable because this section has not been complied with unless the application for the order is made not later than 12 months after the rent is increased. 44  Tenant’s remedies for excessive rent (1) Excessive rent orders The Tribunal may, on the application of a tenant, make any of the following orders: (a) an order that a rent increase under an existing or proposed residential tenancy agreement is excessive and that, from a specified day, the rent for residential premises must not exceed a specified amount, (b) an order that rent payable under an existing or proposed residential tenancy agreement is excessive, having regard to the reduction or withdrawal by the landlord of any goods, services or facilities provided with the residential premises and that, from a specified day, the rent for residential premises must not exceed a specified amount. (2) Time limit for excessive rent increase applications An application for an order that a rent increase is excessive must be made within the period prescribed by the regulations after notice of the increase is given. (3) Applications on withdrawal of goods or services A tenant may, before the end of a tenancy, make an application that the rent is excessive, having regard to the reduction or withdrawal of any goods, services or facilities provided with the residential premises, even if those goods, services or facilities were provided under a separate or a previous contract, agreement or arrangement. (4) Determination of excessive rent For the purposes of making an order under this section, the Tribunal may declare that amounts payable under a contract, agreement or arrangement under which goods, services or facilities are provided to the tenant are rent. (5) The Tribunal may have regard to the following in determining whether a rent increase or rent is excessive: (a) the general market level of rents for comparable premises in the locality or a similar locality, (b) the landlord’s outgoings under the residential tenancy agreement or proposed agreement, (c) any fittings, appliances or other goods, services or facilities provided with the residential premises, (d) the state of repair of the residential premises, (e) the accommodation and amenities provided in the residential premises, (f) any work done to the residential premises by or on behalf of the tenant, 373

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Australian Property Law (g) when the last increase occurred, (h) any other matter it considers relevant (other than the income of the tenant or the tenant’s ability to afford the rent increase or rent).

(6) Effect of excessive rent order An order by the Tribunal specifying a maximum amount of rent: (a) has effect for the period (of not more than 12 months) specified by the Tribunal, and (b) binds only the landlord and tenant under the residential tenancy agreement or proposed residential tenancy agreement under which the rent is payable. A tenant under a social housing tenancy agreement may also apply for an order that rent is excessive if a rent rebate is cancelled (see section 141 (1)). 50  Tenant’s right to quiet enjoyment (1) A tenant is entitled to quiet enjoyment of the residential premises without interruption by the landlord or any person claiming by, through or under the landlord or having superior title (such as a head landlord) to that of the landlord. (2) A landlord or landlord’s agent must not interfere with, or cause or permit any interference with, the reasonable peace, comfort or privacy of the tenant in using the residential premises. Maximum penalty: 10 penalty units. (3) A landlord or landlord’s agent must take all reasonable steps to ensure that the landlord’s other neighbouring tenants do not interfere with the reasonable peace, comfort or privacy of the tenant in using the residential premises. (4) This section is a term of every residential tenancy agreement. 51  Use of premises by tenant (1) A tenant must not do any of the following: (a) use the residential premises, or cause or permit the premises to be used, for any illegal purpose, (b) cause or permit a nuisance, (c) interfere, or cause or permit any interference, with the reasonable peace, comfort or privacy of any neighbour of the tenant, (d) intentionally or negligently cause or permit any damage to the residential premises, (e) cause or permit a number of persons to reside in the residential premises that exceeds any number specified in the residential tenancy agreement. (e) cause or permit a number of persons to reside in the residential premises that exceeds any number specified in the residential tenancy agreement. (2) A tenant must do the following: (a) keep the residential premises in a reasonable state of cleanliness, having regard to the condition of the premises at the commencement of the tenancy, (b) notify the landlord of any damage to the residential premises as soon as practicable after becoming aware of the damage. (3) On giving vacant possession of the residential premises, the tenant must do the following: (a) remove all the tenant’s goods from the residential premises, 374

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(b) leave the residential premises as nearly as possible in the same condition, fair wear and tear excepted, and, if there is a condition report, as set out in the condition report applicable to the premises when the agreement was entered into, (c) leave the residential premises in a reasonable state of cleanliness, having regard to the condition of the premises at the commencement of the tenancy, (d) remove or arrange for the removal from the residential premises of all rubbish, having regard to the condition of the premises at the commencement of the tenancy, (e) return to the landlord all keys, and other opening devices or similar devices, provided by the landlord to the tenant. (4) In this section: ‘residential premises’ includes everything provided with the residential premises (whether under the residential tenancy agreement or not) for use by the tenant. (5) This section is a term of every residential tenancy agreement. 52  Landlord’s general obligations for residential premises (1) A landlord must provide the residential premises in a reasonable state of cleanliness and fit for habitation by the tenant. (1A) Without limiting the circumstances in which residential premises are not fit for habitation,  residential premises  are not fit for habitation unless the  residential premises — (a) are structurally sound, and (b) have adequate natural light or artificial lighting in each room of the premises other than a room that is intended to be used only for the purposes of storage or a garage, and (c) have adequate ventilation, and (d) are supplied with electricity or gas and have an adequate number of electricity outlet sockets or gas outlet sockets for the supply of lighting and heating to, and use of appliances in, the premises, and (e) have adequate plumbing and drainage, and (f) are connected to a water supply service or infrastructure that supplies water (including, but not limited to, a water bore or water tank) that is able to supply to the premises hot and cold water for drinking and ablution and cleaning activities, and (g) contain bathroom facilities, including toilet and washing facilities, that allow privacy for the user. (1B) For the purposes of subsection (1A)(a),  residential premises  are structurally sound only if the floors, ceilings, walls, supporting structures (including foundations), doors, windows, roof, stairs, balconies, balustrades and railings — (a) are in a reasonable state of repair, and (b) with respect to the floors, ceilings, walls and supporting structures — are not subject to significant dampness, and (c) with respect to the roof, ceilings and windows — do not allow water penetration into the premises, and (d) are not liable to collapse because they are rotted or otherwise defective. 375

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Australian Property Law (1C) The  Secretary  may exempt any specified  premises  or any specified class of premises from the operation of all or any part of this section. An exemption may be unconditional or subject to conditions.

(2) A landlord must not interfere with the supply of gas, electricity, water, telecommunications services or other services to the residential premises unless the interference is necessary to avoid danger to any person or to enable maintenance or repairs to be carried out. (3) A landlord must comply with the landlord’s statutory obligations relating to the health or safety of the residential premises. Such obligations include obligations relating to swimming pools under the Swimming Pools Act 1992. (4) This section is a term of every residential tenancy agreement. 55  Access generally by landlord to residential premises without consent (1) A landlord, the landlord’s agent or any other person authorised by the landlord may enter residential premises during a residential tenancy agreement without the consent of the tenant, and without giving notice to the tenant, only in the following circumstances: (a) in an emergency, (b) to carry out urgent repairs, (c) if the landlord, landlord’s agent or person has made a reasonable attempt to obtain entry with consent and has reasonable cause for serious concern about the health or safety of the tenant or any other person that the landlord, landlord’s agent or person believes is on the residential premises, (d) if the landlord forms a reasonable belief that the residential premises have been abandoned, (e) in accordance with an order of the Tribunal. (2) A landlord, the landlord’s agent or any other person authorised by the landlord may enter residential premises during a residential tenancy agreement without the consent of the tenant, after giving notice to the tenant, only in the following circumstances: (a) to inspect the residential premises, not more than 4 times in any period of 12 months, if the tenant has been given not less than 7 days written notice each time, (b) to carry out or assess the need for necessary repairs (other than urgent repairs) to, or maintenance of, the residential premises, if the tenant has been given not less than 2 days notice each time, (c) to carry out, inspect or assess the need for work for the purpose of compliance with the landlord’s statutory obligations relating to the health or safety of the residential premises, if the tenant has been given not less than 2 days notice each time, (d) to value the property, not more than once in any period of 12 months, if the tenant is given not less than 7 days notice each time, (d1) to take photographs, or make a visual recording, of the interior of the premises for the purposes of advertising the residential premises for sale or lease not more than once in the period of 28 days preceding the commencement of marketing the residential premises for sale or lease or the termination of the agreement, if the tenant is given — (i) reasonable notice, and 376

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(ii) a reasonable opportunity to move any of the tenant’s possessions that can reasonably be moved out of the frame of the photograph or the scope of the recording, (e) to show the premises to prospective tenants, a reasonable number of times during the period of 14 days preceding the termination of the agreement, if the tenant is given reasonable notice each time, (f) if the landlord and tenant fail to agree under section 53 to show the premises to prospective purchasers, not more than twice in any period of a week, if the tenant is given not less than 48 hours notice each time. (3) This section does not apply to any part of premises to which the tenant does not have the right of exclusive occupation. (4) This section is a term of every residential tenancy agreement. 55a  Publishing photographs of residential premises with tenant’s consent (1) A  landlord  or  landlord’s agent must not publish any photograph taken or visual  recording made of the interior of residential premises in which any of the tenant’s possessions are visible without first obtaining the written consent of the tenant. Maximum penalty — 20 penalty units. (2) A tenant must not unreasonably withhold consent required to be obtained under this section. (3) Without limiting subsection (2), it is not unreasonable for the  tenant  to withhold consent if the tenant is in circumstances of domestic violence, within the meaning of section 105B. (4) In this section, a photograph or visual recording is ‘published’ if it is — (a) publicly exhibited in, on, over or under any building, vehicle or place (whether or not a public place and whether on land or water), or in the air in view of persons being in any street or public place, or (b) disseminated by means of a website, email or other electronic communication, or (c) in the case of a photograph — (i) inserted in any newspaper, periodical publication or other publication, or (ii) contained in any flyer or other document sent or delivered to any person or thrown or left on premises occupied by any person. (5) A photograph or visual recording is not published if it is disseminated solely between the  landlord  and the  landlord’s agent for purposes relating to carrying out an inspection of the residential premises, maintenance or repairs. (6) This section is a term of every residential tenancy agreement. 63  Landlord’s general obligation (1) A landlord must provide and maintain the residential premises in a reasonable state of repair, having regard to the age of, rent payable for and prospective life of the premises.

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(2) A landlord’s obligation to provide and maintain the residential premises in a reasonable state of repair applies even though the tenant had notice of the state of disrepair before entering into occupation of the residential premises. (3) A landlord is not in breach of the obligation to provide and maintain the residential premises in a reasonable state of repair if the state of disrepair is caused by the tenant’s breach of this Part. (4) This section is a term of every residential tenancy agreement.

EXTRACT

Residential Tenancies Act 1997 (Vic) — ss 7, 31, 40, 45, 62–63, 65, 72, 81 and 85 Purposes The main purposes of this Act are — (a) to define the rights and duties of landlords and tenants of rented premises; and (b) to define the rights and duties of rooming house owners and residents of rooming houses; and (c) to define the rights and duties of caravan park owners, caravan owners and residents; and (d) to provide for the inexpensive and quick resolution of disputes under this Act; and … (f) to provide for a centralised system for the administration of bonds; and (g) to provide for the establishment of the Residential Tenancies Bond Authority; and (h) to provide for the regulation of caravan parks and movable dwellings … Application 7  Premises used primarily as a residence This Act applies to a tenancy agreement if the rented premises are used primarily for residential purposes even if a trade, profession or business is also carried on by the tenant on those premises. Security Deposits (Bonds) 31  What is the maximum bond? (1) Subject to this Act, a person must not demand or accept in relation to a tenancy agreement a bond the total of which exceeds — (a) the amount of rent payable under the tenancy agreement for one month, unless an order is in force under section 33; or (b) the maximum amount of the bond determined under an order in force under section 33. (2) Sub-section (1) does not apply to a tenancy agreement — 378

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(a) relating to premises that, immediately before the tenancy agreement was entered into, were the landlord’s principal place of residence; and (b) that states that fact; and (c) that states that the landlord intends to resume occupancy of the premises on the termination of the tenancy agreement. (3) Sub-section (1) does not apply to a tenancy agreement if the amount of rent payable under a tenancy agreement for 1 week exceeds — (a) $350; or (b) if a greater amount is prescribed for the purposes of this section, that greater amount. Rents Payable 40  Limit on rent in advance (1) A landlord must not require a tenant to pay rent under a tenancy agreement more than 1 month in advance. (2) Sub-section (1) does not apply if the amount of rent payable for each week under the tenancy agreement exceeds — (a) $350; or (b) if a greater amount is prescribed for the purposes of section 31, the greater amount. 45  Tenant may complain to Director about excessive rent (1) A tenant may apply to the Director to investigate and report if the tenant — (a) considers that the rent under a tenancy agreement is excessive having regard to the fact that the landlord has reduced or withdrawn services, facilities or other items provided with the rented premises; or (b) has received a notice of a rent increase and the tenant considers that the proposed rent is excessive. (2) An application under sub-section (1)(b) must be made in writing within 30 days after the notice of the rent increase is given. (3) As soon as practicable after receiving an application, the Director must — (a) carry out an investigation; and (b) give a written report to the tenant and a copy of the report to the landlord. (4) The report of the Director must — (a) include a statement informing the tenant of the tenant’s right under section 46 to apply to the Tribunal for an order in respect of the proposed rent; and (b) take into account the matters referred to in section 47(3). Notice 62  Tenant must give notice of damage A tenant who becomes aware of damage to the rented premises must as soon as practicable give notice to the landlord specifying the nature of the damage.

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Duties 63  Tenant must keep rented premises clean A tenant must keep the rented premises in a reasonably clean condition except to the extent that the landlord is responsible under the tenancy agreement for keeping the premises in that condition. 65  Landlord’s duty in relation to provision of premises (1) A landlord must ensure that on the day that it is agreed that the tenant is to enter into occupation, the rented premises are vacant and in a reasonably clean condition. (2) A tenant is not required to enter into occupation of premises which do not comply with sub-section (1). (3) If premises do not comply with sub-section (1), the tenant is not required to pay rent for the rented premises in respect of the period beginning on the agreed day on which the tenant is to enter into occupation of the premises and ending on the day on which the tenant actually enters into occupation. Urgent Repair Obligations 72  Urgent repairs (1) A tenant may arrange for urgent repairs to be carried out to the rented premises if — (a) the tenant has taken reasonable steps to arrange for the landlord or the landlord’s agent to immediately carry out the repairs; and (b) the tenant is unable to get the landlord or agent to carry out the repairs. (2) If the tenant carries out repairs under sub-section (1) — (a) the tenant must give the landlord 14 days written notice of the repairs carried out and the cost; and (b) the landlord is liable to reimburse the tenant for the reasonable cost of the repairs or $1000, whichever is less. (3) If urgent repairs are required to an item that uses or supplies water and that item does not have at least a prescribed level of rating in a prescribed rating system, and that item cannot be repaired, the tenant may replace it with an item that has a rating that is of or above a prescribed level of rating in a prescribed rating system. (4) This section does not apply to fixtures, furniture or equipment supplied by the tenant. Assigning and Sub-Letting 81  Assignment and sub-letting by a tenant (1) A tenant under a tenancy agreement must not assign or sub-let the whole or any part of the rented premises without the landlord’s written consent. (2) A landlord must not unreasonably withhold consent to the assignment or sub-letting of the whole or any part of the rented premises. (3) An assignment or sub-letting of the whole or any part of the rented premises without the landlord’s consent is invalid unless the Tribunal has determined that consent is not required.

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85  Entry of rented premises A landlord or the landlord agent has a right to enter rented premises together with any persons who are necessary to achieve the purpose of the entry — (a) at any time agreed with the tenant if the tenant has consented not more than 7 days before the entry; or (b) for a purpose set out in section 86, at any time between 8 a.m. and 6 p.m. on any day (except a public holiday) if at least 24 hours notice has been given to the tenant in accordance with section 88.

EXTRACT

Retail Tenancies Act 2003 (Vic) — ss 1, 11, 17, 21, 33, 35 and 61 Purposes 1  Main purpose The main purpose of this Act is to replace the scheme in the Retail Tenancies Reform Act 1998 with a new scheme to enhance — (a) the certainty and fairness of retail leasing arrangements between landlords and tenants; and (b) the mechanisms available to resolve disputes concerning leases of retail premises. Application 11  Application generally (1) his Act applies to a retail premises lease that is — (a) entered into after the commencement of this section; or (b) renewed after the commencement of this section, whether the lease was entered into before or after that commencement. (2) Except as provided by Part 10 (Dispute Resolution), this Act only applies to a lease of premises if the premises are retail premises (as defined in section 4) at the time the lease is entered into or renewed. Disclosure Statements 17  Landlord’s disclosure statement (1) At least 7 days before entering into a retail premises lease, the landlord must give the tenant — (a) a disclosure statement in the form prescribed by the regulations (but the layout of the statement need not be the same as the prescribed disclosure statement); and (b) a copy of the proposed lease in writing. (1A) In the application of sub-section (1) to a sub-lease, a tenant who has been given a disclosure statement concerning a head-lease is only required to give a sub-tenant — 381

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Australian Property Law (a) a copy of that disclosure statement; and (b) details of any changes of which the tenant is aware, or could reasonably be expected to be aware, that have affected the information in the disclosure statement since it was given to the tenant.

(2) If a tenant has not been given the disclosure statement before entering into a retail premises lease, the tenant may give the landlord, no earlier than 7 days and no later than 90 days after entering into the lease, a written notice that the tenant has not been given the disclosure statement. … Minimum Period 21  Minimum 5 year term (1) The term of a retail premises lease, including any further term or terms provided for by an option for the tenant to renew the lease, must be at least 5 years or, if the term remaining under any head lease under which the landlord holds the retail premises is 5 years or less, the length of that remaining term less one day. Note: The landlord or tenant may, in accordance with the lease or this Act, be able to terminate the lease before the end of the term if, for example, there has been default, relocation, demolition or damage to the retail premises. (2) In applying sub-section (1), an option conferred after the lease was entered into must be disregarded. … Rent 33  Rent based on turnover (1) A provision in a retail premises lease that the rent is to be determined either fully or partly by reference to the turnover of the business is void unless the lease specifies how the rent is to be determined. Note: If the provision is void, see section 34. (2) If a retail premises lease specifies how the rent is to be determined fully or partly by reference to the turnover of the business, the tenant must give the landlord — (a) within 14 days after the end of each month for which the rent is to be determined in that way or such longer period as the lease provides, a statement in writing giving the turnover during that month or other period to which the statement relates; and (b) within 28 days after the end of each year for which the rent is to be determined in that way or such longer period as the lease provides and at the end of the lease or on an assignment of the lease — (i) a statement of the turnover; and (ii) an audit report from an independent accountant stating that in his or her opinion the statement fairly presents the turnover of the business during that year or other period to which the statement relates. (3) A tenant who gives the landlord statements for a period in accordance with subsection (2) satisfies any obligation under the lease to provide turnover figures or statements for that period. 382

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35  Rent reviews generally (1) If a retail premises lease provides for a review of the rent payable under the lease or under a renewal of the lease, the lease must state — (a) when the reviews are to take place; and (b) the basis or formula on which the reviews are to be made. (2) The basis or formula on which a rent review is to be made must be one of the following — (a) a fixed percentage; (b) an independently published index of prices or wages; (c) a fixed annual amount; (d) the current market rent of the retail premises; (e) a basis or formula prescribed by the regulations. Assignment 61  Procedure for obtaining consent to assignment (1) A retail premises lease is taken to provide as set out in this section. (2) A request for the landlord’s consent to an assignment of the lease must be in writing and the tenant must provide the landlord with such information as the landlord reasonably requires about the financial resources and business experience of the proposed assignee. (3) Before requesting the landlord’s consent, the tenant must give the proposed assignee — (a) a copy of any disclosure statement given to the tenant concerning the lease; and (b) details of any changes of which the tenant is aware, or could reasonably be expected to be aware, that have affected the information in the disclosure statement since it was given to the tenant.

EXTRACT

Retail Shop Leases Act 1994 (Qld) — ss 3, 22, 22A, 24–25 and 27 3  Object of Act The object of this Act is to promote efficiency and equity in the conduct of certain retail businesses in Queensland. 21B  Lessor’s disclosure obligation to prospective lessee (1) At least 7 days before a prospective lessee of a retail shop enters into a retail shop lease (the ‘prescribed disclosure date’), the lessor must give the prospective lessee — (a) a draft of the lease; and (b) a disclosure statement. (2) However, for the purposes of complying with subsection (1) in relation to a disclosure statement, it is sufficient if, after the  prescribed disclosure date  but before the prospective lessee enters into the lease — 383

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Australian Property Law (a) the lessor gives the prospective lessee the disclosure statement; and (b) the prospective lessee gives the lessor — (i) a waiver notice; and (ii) unless the prospective lessee is a major lessee — a legal advice report for the lease under  section  22D  which states the lawyer has given the prospective lessee advice about the legal meaning and effect of the waiver.

(3) Also, this section does not apply to a renewal of a retail shop lease under an option. (4) In this section — ‘waiver notice’, for a prospective retail shop lease, means a written notice signed by the prospective lessee stating that the prospective lessee agrees to waive the lessor’s obligation to give a disclosure statement for the lease by the prescribed disclosure date. 21F Lessor’s failure to comply with disclosure obligation (1) A lessee may terminate a retail shop lease by giving written notice to a lessor within 6 months after the lessee enters into the lease if — (a) the lessor does not comply with section 21B or 21E; or (b) a disclosure statement when given to the lessee under section 21B or 21E is a defective statement. (2) For the purposes of this section, a  disclosure statement  is a ‘defective statement’ if it — (a) is incomplete in a material particular; or (b) contains information that is false or misleading in a material particular. (3) However, a disclosure statement is not a defective statement merely because — (a) it omits information that is irrelevant to the lease; or (b) its layout does not comply with that of the approved form. (4) The lessee can not terminate the lease under subsection (1) because a disclosure statement is a defective statement if — (a) the lessor acted honestly and reasonably in giving the disclosure statement; and (b) the lessee is in substantially as good a position as the lessee would be if the disclosure statement were not a defective statement. (5) The lessor is liable to pay to the lessee the reasonable compensation decided by way of the dispute resolution process for loss or damage suffered by the lessee because of the noncompliance or defective statement. (6) Termination of the lease under  subsection  (1)  does not affect any right, privilege or liability acquired, accrued or incurred under the lease for any period before the termination. (7) In this section — ‘disclosure statement’ includes — (a) a statement mentioned in section 21C (3) (c) (ii) or 21D (4) (c) (ii); and (b) a written statement given under  section  21E  that updates the details of an earlier disclosure statement. 22A  Prospective lessee’s disclosure obligation to lessor Before entering into a retail shop lease, the prospective lessee must give the lessor a disclosure statement. 384

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24  Lessee’s obligations to make particular payments (1) A retail shop lease must not contain a provision requiring the lessee to make any payment other than for the following — (a) rent; (b) if specified in the lease, the following — (i) the lessor’s outgoings, or the specified part of the lessor’s outgoings, for the retail shopping centre or leased building in which the leased shop is situated; (ii) damages for breach of a term of the lease; (iii) an indemnity given by the lessee to the lessor for loss or damage suffered by the lessor as a result of the actions or omissions of the lessee or a person acting for the lessee; (iv) subject to subsection (3), interest on arrears of rent or outgoings; (c) the lessor’s reasonable legal or other expenses incurred in responding to a request by the lessee for — (i) a variation of the lease, including, for example, a rent concession; or (ii) the lessor’s consent to the lessee entering into a sublease or licence with another person in relation to the leased shop. (2) Subsection (1) applies whether the provision requires payment to be made — (a) to the lessor or someone else; or (b) by the lessee or someone else. (3) A retail shop lease may contain a provision requiring the lessee to make a payment for interest on arrears of rent or outgoings only if the interest rate, or the way in which the interest rate is to be calculated, is stated in the lease. … 25  Requirements if rent a percentage of turnover (1) This section applies if, under a retail shop lease, the rent is or may be calculated either in whole or part as a percentage of the turnover of the lessee’s business carried on, or to be carried on, in or from the leased shop. (2) The lease must specify the formula to be used to calculate the rent. 27  Timing and bases of rent reviews (1) If, under a retail shop lease, the rent payable under the lease or any renewal or extension of the lease is to be reviewed during the term of the lease or under an option to renew or extend the lease, the lease must state the timing of the reviews and the basis on which each review is to be made. (2) The rent may not be reviewed more than once in each year of the lease. (3) Subsection (2) does not apply to the first year of the lease. (4) The rent may be reviewed using different bases during the term of the lease, but each review must be made using only 1 basis.

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(5) The basis for a rent review must be a single basis consisting of 1 of the following — (a) the current market rent of the leased shop; (b) an independently published index of prices, costs or wages; (c) a fixed percentage of the base rent; (d) a fixed actual amount; (e) if the rent is determined as a base rent plus an amount equal to a percentage of the turnover of the lessee’s business — the average rental paid over the previous year, or the stated number of previous years, of the lease; (f) another basis prescribed by regulation; (g) a single basis formed by a combination of 2 or more bases mentioned in paragraphs (b) to (f). (6) If the rent is determined as a base rent plus an amount equal to a percentage of the turnover of the lessee’s business the review of the base rent must be made in accordance with subsections (4) and (5). (7) If, under a retail shop lease, the rent is to be reviewed during the term of the lease or any renewal or extension of the lease, the rent payable for the rental period after the timing of an invalid review is — (a) for an invalid review mentioned in subsection (11), definition invalid review, paragraph (a) — the same as the rent payable before the timing of the review; or (b) for an invalid review mentioned in subsection (11), definition invalid review, paragraph (b) — the rent worked out on 1 of the bases, chosen by the lessee, on which the review was made; (c) for an invalid review mentioned in subsection (11), definition invalid review, paragraph (c) — the rent worked out on 1 of the bases, chosen by the lessee, on which the review was to be made under the void provision. (8) Subsections (2) to (7) do not apply if — (a) the lessee is a major lessee; and (b) before the lessee entered into the lease the lessee gave the lessor a written notice stating that the lessee received appropriate financial and legal advice about the lease; and (c) the lease provides for the timing and basis for each review of the lease. (9) To remove any doubt, it is declared that neither of the following is a rent review — (a) an adjustment of the rent merely to enable the lessor to recover GST from the lessee; (b) a rent concession. (10) Nothing in this section prevents a retail shop lease limiting the amount by which the rent payable under the lease may be increased. (11) In this section — invalid review, of rent under the lease, means — (a) a review in a year of the lease, other than the first year, in which the rent is to be reviewed under the lease more than once; or (b) a review made under the lease using more than 1 basis; or (c) a review under a provision of a lease that is void under section 36(d) or (e).

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year, of the lease, means a period of 12 months starting on — (a) the day the lease is entered into; or (b) an anniversary of the day the lease was entered into; or (c) if, for a particular 12 month period, there is not an anniversary of the day the lease was entered into — the last day of the month corresponding to the month the lease was entered into.

7.29  Revision Questions 1. What is the difference between express lease covenants and implied ‘usual’ lease covenants? 2. Why does common law imply a range of general lease covenants? 3. In what circumstances do you think that a failure to inspect leased premises on the part of a landlord may lead to a breach in a duty of care? Is the duty of care that a landlord owes restricted to an obligation to remove ‘dangerous defects’? When will that obligation arise? 4. What is the scope and content of the landlord’s common law duty to repair and how does it compare with the statutory provisions applicable to residential leases in NSW and Victoria?

Assignment and Sub-Letting 7.30  Once validly created, the lease confers a leasehold title upon the tenant and the

landlord’s estate is transformed into a reversion. The leasehold title the tenant acquires is capable of being alienated because, as discussed in Chapter 6, this is one of the fundamental rights connected with all proprietary interests. Thus, a tenant may seek to ‘assign’ the lease to a third party by transferring the entire term. Alternatively, a tenant may seek to sublease the title by transferring a part of the term over to a third party and retaining title in the surplus. Consider the example below: EXAMPLE L grants a valid lease to T for a period of five years. After two years, T assigns the remaining three years of the lease (including any option to renew) to P. In this situation, T assigns the entire period of the lease over to P. This means that T no longer retains any interest in the tenancy and P acquires the leasehold title that T previously held. Alternatively, if after two years, T transfers a two-year portion of the remaining three-year period to P, T will be regarded as having sublet the premises to P for that two-year period. Where a sub-lease is created, P acquires a two-year tenancy and T retains a leasehold reversion which will revest at the expiration of P’s two-year lease. It is important to remember that a sub-lease does not involve the transfer of the entire interest to a third party but rather, the creation of a new lease. Thus, whereas before there was only one lease, the creation of a valid sub-lease produces two leases: the ‘head lease’ and the ‘sub-lease’. P holds the two-year sub-lease and T retains the head-lease. When the sub-lease expires, the interest will revest in possession with T who will then have a one year tenancy left under the head lease. For the duration of the sub-lease, P is the sub-lessee. For the duration of the sub-lease, T is 387

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the lessor under the sub-lease as well as retaining his status as the lessee under the head lease. While the sub-lease is operative, T retains what may be described as a ‘head-lease reversion’.

The nature of a lease assignment was explained by Gray J in Henningson v Nolan [2004] SASC 105 at [29]–[30]: A legal assignment of a lease is a transfer of the interest held by one party to another where the assignee takes over the remaining term of the lease. An assignment does not constitute the creation of a new lease. Subject to any express provision to the contrary, the right to assign is part of every estate. The result of an assignment is to alter relationships dependent upon privity of estate but not to alter those relationships dependent upon privity of contract. After transfer, where an assignment is accepted by a lessor, privity of estate exists between the lessor and the assignee.

Similarly, in Debonair Nominees Pty Ltd v J & K Berry Nominees Pty Ltd (2000) 77 SASR 261 at 265 Mullighan J stated: At common law an assignment of a lease does not create a new lease. It is effectively the transfer of the lease to the assignee who becomes the lessee of the premises Lang’s Commercial Leasing in Australia 12–030, 12–070. … The position is explained in W D Duncan, Commercial Leases in Australia (3rd ed, 1998) at 65: ‘Upon the creation of a valid lease, there is both privity of contract and privity of estate between lessor and lessee. The former arises from the existence of a contract between the parties and the latter arises from the tenure between the parties. Upon an assignment of the lease, that tenure is broken but the privity of contract remains. After the assignment, whilst there is privity of estate between the lessor and the assignee of the lease, the original lessee remains liable upon the express covenants.’ The continuing liability of the original lessee is for all breaches of covenants throughout the term of the lease, even after assignment because the privity of contract remains: Megarry & Wade, The Law of Real Property (5th ed, 1984) at 750 and R v Teller Home Furnishers Pty Ltd (In Liq) Electronic Industries v Horsburgh [1967] VR 313 at 319–320. This continuing liability is inconsistent with the creation of a new lease.

Qualification of the right 7.31  The right to assign or sub-let is an inherent right attaching to all leasehold interests

apart from the tenancy at will and the tenancy in sufferance: Allcock v Moorhouse [1882] 9 QBD 366. The assignment or sub-lease must be compliant with all legal formalities which means that where the lease to be disposed of or created exceeds three years, the assignment or sub-lease must be executed by deed and where it is under three years, evidenced in writing unless it is enforceable in accordance with the doctrine of part performance under the equity jurisdiction. Where a head-lease is registered it is appropriate for a sub-lease to be registered also in order to receive the same benefits that registration confers. The right to assign or sub-lease may, however, be removed or modified in particular circumstances. Many lease agreements contain covenants that either absolutely prohibit or which qualify the right of a tenant to assign or sub-let. A common covenant within the lease agreement is a covenant against assigning or sub-letting in the absence of the consent of the landlord. Where such a covenant exists, a failure to seek consent will constitute a breach. It is a well-established principle that where such a clause exists, consent by the landlord must not be unreasonably withheld.12

12. See Re Gibbs and Houlder Brothers and Co Ltd’s Lease [1925] Ch 198. 388

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A broad test for determining when a landlord has acted ‘unreasonably’ in withholding consent was outlined by Lord Denning MR in Bickel v Duke of Westminster [1977] QB 517. In that case, the Grosvenor Belgravia Estate refused to consent to the assignment of the head lease of a house in Burton Mews to a lady who, if she had become tenant under the head lease and had remained so for five years, would have been entitled to buy the freehold from the estate. Having referred to a number of earlier cases, Lord Denning made the following comments at 524: If those cases can properly be regarded as laying down propositions of law, I would agree that we ought to hold the landlords’ refusal to be unreasonable. But I do not think they do lay down any propositions of law, and for this reason. The words of the contract are perfectly clear English words: ‘such licence shall not be unreasonably withheld.’ When those words come to be applied in any particular case, I do not think the court can, or should, determine by strict rules the grounds on which a landlord may, or may not, reasonably refuse his consent. He is not limited by the contract to any particular grounds. Nor should the courts limit him. Not even under the guise of construing the words. The landlord has to exercise his judgment in all sorts of circumstances. It is impossible for him, or for the courts, to envisage them all. When this lease was granted in 1947 no one could have foreseen that 20 years later Parliament would give a tenant a right to buy up the freehold. Seeing that the circumstances are infinitely various, it is impossible to formulate strict rules as to how a landlord should exercise his power of refusal. The utmost that the courts can do is to give guidance to those who have to consider the problem. As one decision follows another, people will get to know the likely result in any given set of circumstances. But no one decision will be a binding precedent as a strict rule of law. The reasons given by the judges are to be treated as propositions of good sense — in relation to the particular case — rather than propositions of law applicable to all cases. It is rather like the cases where a statute gives the court a discretion. It has always been held that this discretion is not to be fettered by strict rules: and that all that can be properly done is to indicate the chief considerations which help to ‘arrive at a just conclusion’: see Blunt v Blunt [1943] AC 517; Ward v James [1966] 1 QB 273.

This approach was subsequently approved by the House of Lords in Ashworth Frazer Ltd v Gloucester City Council [2001] 1 WLR 218, where Lord Rodger concluded at [67] that ‘the test of reasonableness is to be found in many areas of the law and the concept has been found useful precisely because it prevents the law becoming unduly rigid. In effect, it allows the law to respond appropriately to different situations as they arise.’ Lord Bingham set out three overriding principles to be considered when deciding whether a landlord’s withholding of consent was reasonable (pp 2182–83): (a) There must be a connection between the landlord’s reasons and the relevant subject matter of the lease. (b) The question of whether the landlord’s conduct was reasonable is one of fact. (c) The question is whether the landlord’s conduct was reasonable, and not whether it was right or justifiable.

In deciding whether to give consent, a landlord is entitled to give regard to its property interests; however, a decision to refuse consent for extraneous commercial factors unconnected with the lease will generally be regarded as unreasonable. Masters Home Improvement Aust Pty Ltd v Aventus Cranbourne Thompson Road Pty Ltd [2019] VSC 428 at [146]–[148] per Croft J. Hence, the fact that a landlord may wish to resume possession of the property is, in itself, not a reasonable ground for refusing consent to a lease assignment: Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 611 per Mason P. 389

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Australian Property Law See also: Omar Property Pty Ltd & Ors v Amcor Flexibles (Port Melbourne) Pty Ltd (No 4) [2020] VSC 216 at [385]–[387] per Garde J. However, in International Drilling Fluids v  Louisville Investments (Uxbridge) Ltd [1986] Ch 513, Balcombe J noted that consent will not be unreasonably withheld if, in the circumstances, the same conclusion would have been met by a reasonable person because, for example, the lessor wanted to protect his premises from being used or occupied in an undesirable way.13 In some situations, withholding consent unreasonably can actually constitute an interference with the inherent right to assign. In Boss v Hamilton Island Enterprises Ltd [2010] 2 Qd R 115, Fraser JA in the Queensland Supreme Court held that it was unreasonable for Hamilton Island Enterprises to withhold consent to the assignment of a lease in circumstances where the assignee refused to agree to the imposition of more rigorous contractual provisions. His Honour held that HIE sought to put into effect an entirely new and very extensive contractual regime that was well outside the contemplation of the sub-lease that was being assigned. In those circumstances, what in substance would be assigned would not be the sub-lease, qualified by covenants designed to overcome any potential disadvantage to Hamilton Island Enterprises, but rather the sub-lease so heavily qualified as to alter the legal effect of essential rights, and in those circumstances the behaviour of Hamilton Island Enterprises not only amounted to an unreasonable withholding of consent, but an attempt to deprive the sub-lessee of their right to assign, by insisting that every intended assignee agree to vary the terms in a way that substantially affected the enjoyment of the land.

Privity of contract 7.32  A lease is essentially a contractual arrangement between the landlord and the

tenant. Where a tenant assigns the lease, the covenants entered into between the landlord and tenant will remain enforceable, but there will be no privity of contract between the landlord and the assignee unless there is a surrender of the original lease agreement and a re-grant to the new assignee. Where a tenant creates a sub-lease, there will be privity of contract between the landlord and tenant under the head-lease and privity of contract between the landlord and tenant under the sub-lease, but no privity of contract between the landlord under the head-lease and the tenant under the sub-lease.

Privity of estate 7.33  A lease confers a non-freehold estate on the tenant. Any person acquiring a lease

will acquire this title and it confers what is known as privity of estate between the landlord and the tenant. Privity of estate arises between the parties to a lease and therefore it can exist between the parties to a head-lease as well as the parties to a sub-lease. Where a landlord or tenant assigns their interest, privity of estate will arise between the new assignee and the remaining holder. Thus, where a landlord assigns her reversion, the tenant will hold privity of estate with the new owner and the privity of estate that the tenant enjoyed with the previous landlord will expire. Importantly, however, no privity of estate will exist between a landlord under a head-lease and a tenant under a sub-lease. The reason for this is because the sub-lessee does not take the full title from the sub-lessor; the sub-lessee does

13. See also Young CJ in Tamsco Ltd v Franklins Ltd (2001) 10 BPR 19,077 at [49]; JDM Investments Pty Ltd v Todburn Pty Ltd  [2000] NSWSC 349 at [25]–[30] per Hamilton J; Price v Perpetual Trustee (1955) 72 WN (NSW) 290 at 290–291; JB Northbridge Pty Ltd v Winners Circle Group Pty Ltd [2014] NSWSC 950 at [11] per Rein J. 390

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not replace the sub-lessor and therefore the privity of estate between the landlord under the head-lease and the sub-lessor does not expire and a new privity of estate arises between the sub-lessor and the sub-lessee. The relevance of distinguishing between privity of estate and privity of contract lies in the fact that it highlights the distinction between contractual and proprietary enforceability. Where a party holds privity of contract, all of the covenants set out in the lease contract will be enforceable by the parties to the agreement in accordance with ordinary contractual principles, but they will not be enforceable by parties who are not privy to the agreement. Privity of contract is, therefore, based upon the capacity of the parties to enforce the agreement. The covenants are therefore enforceable in personam. By contrast, where a party holds privity of estate, all of the covenants relevant to the estate may be enforced. In this situation, the covenants are enforceable in rem. This is particularly relevant where the estate passes to a third party. Where this occurs and there is no privity of contract, privity of estate may support the enforcement of those lease covenants that run with the estate with the assignee. Where the lease covenant(s) can be proven to have ‘touched and concerned’ the land they may continue to be enforceable. These can include both express and implied covenants. For example, in Ozibar Pty Ltd v Laroar Holdings Pty Ltd (No 2) [2016] QSC 82 at [156], McMeekin J in the Queensland Supreme Court held that it was not possible to claim a breach of the common law principle not to derogate against the grant without establishing the existence of privity of estate. It has been held that only a legal assignment of a leasehold estate will create privity of estate between the lessor and the assignee (and terminate the privity of estate previously existing between the lessor and lessee): Picton-Warlow v Allendale Holdings Pty Ltd [1988] WAR 107 at 110. An equitable assignment of the leasehold estate does not create privity of estate between the lessor and the assignee or terminate te privity of estate between the lessor and lessee. This is because privity of estate is a legal rather than an equitable relationship:  Manchester Brewery Co v Coombs  [1901] 2 Ch 608  at 614;  Purchase v Lichfield Brewery Company  (1915) 1 KB 184; MacDonald v Robins in Old Papa’s Franchise Systems Pty Ltd v Camisa Nominees Pty Ltd [2003] WASCA 11 at [41]–[42] per McLure J; Harvard Nominees Pty Ltd v Tiller (No 2) [2020] FCA 604 at [612] per Jackson J. EXAMPLE L leases land to T for five years. T assigns the entire five year lease to P. L signs the reversion to Z. P then sub-lets the lease to S for three years. S then assigns the entire three-year sublease to X. In this situation, there is privity of estate and privity of contract between L and T until L assigns the reversion to Z. Following this, there is privity of estate between T and Z until T assigns the entire five year lease to P. Following this, there is privity of estate between Z and P. Importantly, privity of contract existed between L and T but not between Z and P as no new lease contract is entered into. When P sub-lets to S, P retains privity of estate with Z because P has not passed over the entire estate. S does not acquire privity of estate or privity of contract with Z, but does acquire privity of estate and privity of contract with P because a new ‘sub-lease’ contract is entered into between P and S. When S assigns to X, X acquires privity of estate with P, because the entire sub-lease interest of S is transferred over but no privity of contract because new contractual relations are not entered into between X and P.

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7.34  The test for establishing whether a lease covenant touches and concerns the land

is discussed in P&A Swift Investments v Combined English Stores Group [1989] AC 632 extracted below:

—  P&A Swift Investments v Combined English Stores Group  — [1989] AC 632 Facts: A landlord entered into a sub-lease over business premises to a subsidiary of the defendant. The defendant acted as surety for the sub-lease, covenanting that the sub-lessee would pay the rent and observe all the covenants in the sub-lease. The landlord subsequently went into liquidation and the reversion was transferred to the liquidator (plaintiff). The benefit of the defendant’s surety covenant was not expressly assigned to the plaintiff. Subsequently, the sub-lessee defaulted on the rent and went into liquidation and the defendant refused to pay the rent owing pursuant to the surety covenant. The plaintiff was successful at first instance and the defendant appealed to the House of Lords. Lord Oliver of Aylmerton: The relationship between the landlord and a surety in a case such as the present is, of course, contractual only. The surety has no interest in the land the subjectmatter of the demise and there is thus no privity of estate. In seeking, therefore, to enforce the surety’s covenant, an assignee of the reversion cannot rely upon the Grantees of Reversions Act 1540, the provisions of which were substantially re-enacted in section 141 of the Law of Property Act 1925 and which apply only to covenants between landlord and tenant. His claim to enforce rests upon the common law rule, under which the benefit of the covenant would run with the land if, but only if, the assignee had the legal estate in the land and the covenant was one which ‘touched and concerned’ the land. There is no question but that the first of these conditions is complied with in the instant case, but it is said, first, that a reversion on a lease is not ‘land’ for the purposes of the application of the common law rule and, secondly, and in any event, that the covenant of a surety is no more than a covenant to pay a sum of money which is entirely collateral and does not therefore touch and concern the land. As to the first point, Mr Barnes has argued with his usual persuasiveness that although there is no specific authority on the point the reversion of a lease clearly could not have been treated as ‘land’ under the old common law rule since, if it had, the Grantees of Reversion Act 1540 would have been unnecessary. Certainly that seems to have been so as regards covenants between the tenant and his landlord, but, of course, the tenant’s covenants ordinarily endure only during the term of the lease and this may, therefore, have been peculiar to that particular relationship. There seems to be no logical reason in the case of a third party covenant why the mere fact that the land is let, either at the time of the covenant or of its transfer to a successor, should prevent the benefit from running with the land. Certainly it appears that some incorporeal hereditaments (for instance an easement) rank as ‘land’ for this purpose: see Gaw v Coras Iompair Eireann [1953] IR 232. As was pointed out by Romer LJ in Grant v Edmundson [1931] 1 Ch 1 at p 28, it is impossible in this area of the law to argue safely either by reason or by analogy for ‘the established rules concerning it are purely arbitrary, and the distinctions, for the most part, quite illogical.’ We are, in any event, concerned with what is the position in 1988 and not in 1539 and there being no direct decision upon the point I am, for my part, not prepared to assume that the common law has not developed in the four centuries which have elapsed since the Act of 1540 nor that ‘land’ for the purposes of the common law rule has not, over this period, come to bear the same meaning as it does in the context of landlord and tenant. In my opinion the question of whether a surety’s covenant in a lease touches and concerns the land falls to be determined by the same test as that applicable to the tenant’s covenant. That

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test was formulated by Bayley J in Congleton Corporation v Pattison (1808) 10 East 130 and adopted by Farwell J in Rogers v Hosegood [1900] 2 Ch 388 at 395: … the covenant must either affect land as regards mode of occupation, or it must be such as per se, and not merely from collateral circumstances, affect the value of the land. The meaning of those words ‘per se, and not merely from collateral circumstances’ has been the subject matter of a certain amount of judicial consideration and the judgment of Sir Nicolas Browne-Wilkinson VC in Kumar v Dunning [1987] 3 WLR 1167 (where the problem was identical to that in the instant case save that the covenant was giving on an assignment and not on the grant of the lease) contains a careful and helpful review of the authorities. No useful purpose would be served by repeating this here and I am both grateful for and content to accept both his analysis and his conclusion that the correct principle was that pronounced by Best J in Vyvyan v Arthur (1823) 1 B & C 410, 417, and approved by this House in Dyson v Foster [1909] AC 98: The general principle is, that if the performance of the covenant be beneficial to the reversion, in respect of the lessor’s demand, and to no other person, his assignee may sue upon it; but if it be beneficial to the lessor, without regard to his continuing owner of the estate, it is a mere collateral covenant, upon which the assignee cannot sue. The Vice-Chancellor stated his conclusion at p 1177: From these authorities I collect two things. First, that the acid test whether or not a benefit is collateral is that laid down by Best J, namely, is the covenant beneficial to the owner for the time being of the covenantee’s land, and to no one else? Secondly, a covenant simply to pay a sum of money, whether by way of insurance premium, compensation or damages, is a covenant capable of touching and concerning the land provided that the existence of the covenant, and the right to payment thereunder, affects the value of the land in whomsoever it is vested for the time being. It is objected that this states the matter too broadly because, for example, it is said that it would involve the conclusion that a simple covenant to pay an annuity of £x per annum to the owner for the time being of Blackacre would then be treated as a covenant touching and concerning the land because it would enhance the value of the land. This is, I think, to read the Vice-Chancellor’s words too literally, for it is, as it seems to me, implicit in them that he is referring to a monetary obligation related to something which issues out of or is to be done on or to the land. His approach to the problem (which again, I respectfully adopt) emerges from the following passage from his judgment at p 1174: The surety covenant is given as a support or buttress to covenants given by a tenant to a landlord. The covenants by the tenant relate not only to the payment of rent, but also to repair, insurance and user of the premises. All such covenants by a tenant in favour of the landlord touch and concern the land: ie the reversion of the landlord. The performance of some covenants by tenants relate to things done on the land itself (eg repair and user covenants). Other tenants’ covenants (eg payment of rent and insurance) require nothing to be done on the land itself. They are mere covenants for the payment of money. The covenant to pay rent is the major cause of the landlord’s reversion having any value during the continuance of the term. Where there is privity of estate the tenant’s covenant to pay rent touches and concerns the land: Parker v Webb (1822) 3 Salk 4. As it seems to me, in principle, a covenant by a third party guaranteeing the performance by the tenant of his obligations should touch and concern the reversion as much as do the tenants’ covenants themselves. This view accords with what, to my mind, is the commercial common sense and justice of the case. When, as in the present case, the lease has been assigned on the terms that the sureties will guarantee performance by the assignee of the lease, justice and 393

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common sense ought to require the sureties, not the original tenant, to be primarily liable in the event of default by the assignee. So long as the reversion is not assigned, that will be the position. Why should the position between the original tenant and the surety be rendered completely different just because the reversion has been assigned, a transaction wholly outside the control of the original tenant and the sureties? I entirely agree and would add only this. It has been said that the surety’s obligation is simply that of paying money and, of course, in a sense that is true if one looks only at the remedy which the landlord has against him in the event of default by the tenant. But for my part I do not think that this is a complete analysis. The tenant covenants that he will do or refrain from doing certain things which undoubtedly touch and concern the land. A surety covenants that those things shall be done or not done as the case may be. Now it is true that the remedy for breach will sound in damages only, but the primary obligation is the same, namely that that which is covenanted to be done will be done. Take for instance the tenant’s covenant to repair. There is nothing here requiring personal performance by the tenant. The effect of the covenant is that the tenant must procure the premises to be kept in repair. Equally, a guarantee by the surety of the repairing covenant is no more than a covenant or warranty that the guarantor will procure that the tenant, in turn, procures the premises to be kept in repair. The content of the primary obligation is, as it seems to me, exactly the same and if that of the tenant touches and concerns the land that of the surety must, as it seems to me, equally do so. Formulations of definitive tests are always dangerous, but it seems to me that, without claiming to expound an exhaustive guide, the following provides a satisfactory working test for whether, in any given case, a covenant touches and concerns the land: 1. The covenant benefits only the reversioner for time being, and if separated from the reversion ceases to be of benefit to the covenantee. 2. The covenant affects the nature, quality, mode of user or value of the land of the reversioner. 3. The covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect of the obligations only of a specific tenant). 4. The fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, to or in relation to the land. For my part, I am entirely satisfied that the decision of the Court of Appeal in Kumar v Dunning [1987] 3 WLR 1167 was correct and was reached for the correct reasons. The instant case is indistinguishable in any material respect. Nothing I think turns upon the precise terms of the covenant in either case. It follows that I would dismiss this appeal. [Lord Roskill, Lord Ackner, Lord Templeman and Lord Keith of Kinkel concurred]

Commentary 7.35  The conclusions of Lord Oliver of Aylmerton in P&A Swift Investments v Combined

English Stores Group make it clear that a covenant will touch and concern land where it affects the mode of occupation or value of the land. A covenant will not touch and concern land where it arises from collateral circumstances unrelated to the land. This was subsequently approved by the Australian High Court in Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237, 264–265. In Gumland, the High Court concluded that a covenant to pay rent is a covenant that touches and concerns the land because it affects the value of the land. The court noted that if the covenant were not enforceable, there would be a diminution in the value of the

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land. Subsequently, in Specialist Diagnostic Services Pty Ltd v Healthscope Ltd (2012) the Victorian Supreme Court of Appeal held that lease provisions restraining competition did touch and concern the land. Relying upon the conclusions of the High Court in Gumland, Buchanan, Mandie and Osborn JJA held at [201] that while this may have been an ‘indirect’ covenant, it was inextricably related to the obligation of the lessee to conduct a pathology business on the demised premises and therefore could not be ‘divorced from the lessor’s covenants buttressing those obligations’. On the facts of P&A Swift Investments v Combined English Stores Group a surety covenant by a third party that guaranteed the performance by the tenant of the obligation to pay rent was held to touch and concern the land in the same way as the primary covenant would have. Other situations where a covenant has been held to ‘touch and concern’ leased land include primary covenants that relate to the nature, quality or value of the leased premises, or the way in which the leased premises is used or enjoyed, or covenants that affect the landlord and/or the relationship between the landlord and tenant: Horsey Estate Ltd v Steiger [1899] 2 QB 79. Both the burden and the benefit of lease covenants that touch and concern the leased land will be enforceable against an assignee: Spencer’s Case (1583) 5 Co Rep 16a; 77 ER 72. It is, however, well established that the burden of a covenant will not run with an equitable lease.14 In Cooma Clothing Pty Ltd v Create Invest Development [2013] VSCA 106, Neave J rejected the idea that an assignment of the burden could pass with both legal and equitable leases, concluding at [27] that ‘the notion that there is no relevant difference between a legal covenant and an agreement under hand is a manifestation of the fusion fallacy which has been rejected in this country’ and that ‘until and unless an order for specific performance has been made and carried into effect, the holder of an equitable estate has no interest at law. Accordingly, while it is competent for a party to a contract for the grant of a lease to assign the benefit of the contract, the absence of privity of estate as between the putative lessor and the assignee means that the assignor is incapable of assigning the burden of the agreement to the assignee.’ Where the reversionary estate of a landlord is assigned, under common law it was impossible for a covenant to ‘touch and concern’ a future interest. This has been resolved by the introduction in each state of statutory provisions. See: Conveyancing Act 1919 (NSW) s 117; Property Law Act 1974 (Qld) s 117; Property Law Act 1958 (Vic) s 141; Law of Property Act 1936 (SA) s 37; Conveyancing and Law of Property Act 1884 (Tas) s 11A; Property Law Act 1969 (WA) s 77; Civil Law (Property) Act 2006 (ACT) s 400; Law of Property Act (NT) s 12.

Remedies Right of re-entry 7.36  Under common law a landlord may sue purely for the recovery of rent where a

lease covenant to pay rent is put in the lease agreement and the covenant is breached or, alternatively, the landlord may seek further relief. If a breach has occurred and a landlord wishes to prevent future breaches, the landlord may seek injunctive relief. Alternatively, a landlord may seek common law damages for the breach of a lease covenant. Where the breach is non-essential and therefore non-repudiatory, the landlord will be entitled to

14. See Purchase v Lichfield Brewery Co [1915] 1 KB 184, 187 (Horridge J) and 188–89 (Lush J); cf Boyer v Warbey [1953] 1 QB 234, 245–46 (Denning LJ). 395

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recover damages based upon the extent to which the landlord’s reversion has diminished in value but the breach will not entitle the landlord to repudiate the lease under common law. Further, a non-repudiatory breach will not automatically entitle the landlord to re-enter the premises; a right of re-entry must be expressly set out in the lease agreement; most lease agreements will, however, contain an express covenant entitling the landlord to ‘reenter’ the premises in circumstances where the tenant breaches one of the lease covenants. Where such a covenant is not included in the lease agreement, legislation may imply it. For example, the Transfer of Land Act 1958 (Vic) s 67(1) implies a range of covenants including, in s 67(1)(d), a right for a landlord to re-enter leased premises for non-payment of rent. This section is extracted below: EXTRACT

Transfer of Land Act 1958 (Vic) — s 67 67  Covenants to be implied in leases (1) In every instrument of lease under this Division there shall be implied the following covenants and powers — (a) that the lessee will pay the rent reserved by the lease at the times therein mentioned and all rates and taxes which may be payable in respect of the leased property during the continuance of the lease, except in so far as the same are or shall be payable exclusively by the owner of the property under any Act now or hereafter in force relating to local government; (b) that the lessee will keep and yield up the leased property in good and tenantable repair, accidents and damage from storm and tempest and reasonable wear and tear excepted; (c) that the lessor may with or without surveyors workmen or others once in every year during the term at a reasonable time of the day enter upon the leased property and view the state of repair thereof; (d) that if the rent or any part thereof is in arrear for the space of one month, although no legal or formal demand has been made for payment thereof, or in case of any breach or non-observance of any of the covenants expressed in the lease or by this Act declared to be implied therein on the part of the lessee and such breach or non-observance continuing for the space of one month, it shall be lawful for the lessor to re-enter upon and take possession of the leased property.

Similar legislation exists in other states: Conveyancing Act 1919 (NSW) s 5(1)(d); Property Law Act 1974 (Qld) s 107(d); Real Property Act 1886 (SA) s 125(3); Transfer of Land Act 1893 (WA) s 93(ii); Land Titles Act 1980 (Tas) s 67(b); Real Property Act 1925 (ACT) s 120(d); Real Property Act NT s 125(3).

Termination and repudiation 7.37  A landlord may terminate a lease in two circumstances. First, where an express

covenant entitling a landlord to terminate is set out in the lease agreement: see Campbell v Payne and Fitzgerald (1953) 53 SR (NSW) 537 at 539. Second, where a repudiatory breach has occurred, the lease may be terminated in accordance with common law principles.

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It can be difficult to prove that a breach is repudiatory, although it will clearly arise where a tenant consistently refuses to pay the rent. Repudiation is, however, a serious matter and is not to be lightly inferred: Ross T Smyth & Co Ltd v T D Bailey Son & Co [1940] 3 All ER 60 at 71; Shevill v Builders Licensing Board (1982) 149 CLR 620 at 633 per Wilson J; Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 32; Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 643, 657; Galafassi v Kelly (2014) 87 NSWLR 119. Hence, it has been held that a failure to carry out repairs to a tenanted property and install a new air conditions for 10 weeks did not, on the facts, amount to a repudiation: Red Pepper Property Group Pty Ltd v S 3 Sth Melb Pty Ltd [2019] VSC 4. In Harold R Finger & Co Pty Ltd v Karellas Investments Pty Ltd [2016] NSWCA 123, the New South Wales Supreme Court concluded that renegotiation of rent did not amount to repudiation. Ward JA at [128] held that repudiation was ‘a drastic conclusion’ and that it should only be held to arise in very clear cases where a refusal goes ‘to the root of the contract, to perform contractual obligations’. Where a repudiatory breach is established, relief against forfeiture may be granted in particular circumstances. In Jam Factory v Sunny Paradise [1989] VR 584, Ormiston J concluded at 591 that relief against forfeiture based upon non-payment of rent should ordinarily be granted in circumstances where the tenant has offered to pay rent in arrears because the ‘right of re-entry for non-payment of rent is primarily a security for that rent’.15 Legislation in all states makes it clear that where the tenant has paid all arrears of rent and costs into court or to the landlord at any time prior to the hearing for the recovery of possession, all proceedings shall cease. Where such arrears and costs are not paid prior to the hearing, relief may be granted at the discretion of the court: Property Law Act 1958 (Vic) ss 146 and 147; Property Law Act 1974 (Qld) ss 123 and 128; Conveyancing Act 1919 (NSW) ss 128–31; Landlord and Tenant Act 1936 (SA) ss 4, 5, 7 and 9; Supreme Court Civil Procedure Act 1932 (Tas) s 11(14), (14A); Law of Property Act (NT) ss 136–43. The usual principles of contract law have been held to apply to a lease: Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 57 ALR 609; Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237 at 259 [58]. Under contract law, when a contract is lawfully terminated it will release both parties from any future obligations, but not past obligations. In the words of Dixon J in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477, ‘rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected’. The lessor may recover damages for loss of bargain, with respect to the period of the balance of the lease subject to the lessor’s obligation to mitigate its loss. In determining whether a covenant is fundamental or not, a court may give consideration to a range of different factors including the intention of the contracting parties. Consider the following comments by Gibbs CJ in Shevill v Builders Licensing Board (1982) 149 CLR 620 at 627: It is clear that a covenant to pay rent in advance at specified times would not, without more, be a fundamental or essential term having the effect that any failure, however slight, to make payment at the specified times would entitle the lessor to terminate the lease. However, the parties to a contract may stipulate that a term will be treated as having a fundamental character although in itself it may seem of little importance, and effect must be given to any

15. See also V&O Princi Pty Ltd v Prestige Holdings Group Pty Ltd [2010] VSC 627 at [62]; Lontav Pty Ltd v Pineross Custodial Services [2011] VSC 278 at [104]. 397

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such agreement: see Wickman Tools v Schuler AG (1974) AC 235, at p 251. In other words, a right to forfeit a lease might arise ‘in the case of any breach of covenant however trifling, if the parties had agreed that a breach of that covenant should create a forfeiture.’

In Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 the High Court considered the issue of whether, following a repudiatory breach by a tenant, a landlord could recover damages based upon loss of future benefit that would have been received had the lease endured. While noting that such an award was denied in Shevill, the High Court distinguished the facts in Progressive noting that Shevill dealt with a termination arising upon repudiation, whereas Progressive dealt with a termination arising as a consequence of a specific lease covenant. Mason J concluded that on the facts of Progressive, ordinary contractual principles applied. His Honour outlined the test for determining when a repudiation in a lease occurred (at 33): What needs to be established in order to constitute a repudiation is that the party evinces an intention no longer to be bound by the contract or that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way.

Deane J came to a similar conclusion as Mason in Progressive but discussed the tension between the proprietary and contractual classification of the lease. His Honour stated at [3]: As they developed, the contractual doctrines of frustration and termination for fundamental breach (or for repudiation) were not seen as applicable to an executed demise under which an interest or estate in land had actually passed to the tenant (see, eg, Halloran v Firth (1926) 26 SR (NSW) 183, at p 187 and, on appeal, (1926) 38 CLR 261, at p 268, but cf at p 269; London & Northern Estates Co v Schlesinger (1916) 1 KB 20, at p 24; Total Oil Great Britain Ltd v Thompson Garages (Biggin Hill) Ltd (1972) 1 QB 318; Leightons Investment Trust Ltd v Cricklewood Property and Investment Trust Ltd (1943) KB 493 and, on appeal, (1945) AC 221, at pp 233–235 and 244–245). The rationale of that approach was the perceived inappropriateness of those contractual doctrines to a leasehold estate viewed as analogous to a form of feudal tenure. On the other hand, the general trend in this century, particularly in relation to leases of urban premises, has been away from the type of lease which can realistically be so viewed. It has been towards the lease, at a commercial rental and for a shorter term, framed in the language of executory promises of widening content and diminishing relevance to the actual demise. It is apparent that the special rules of property law regarding chattels real are inadequate as the exclusive determinant of rights and liabilities under such modern leases. That being so, it has become necessary for courts to look somewhat more critically at the rational basis and justification of the traditional assumption that leases generally were beyond the reach of fundamental doctrines of the law of contract. The actual application to leasehold interests of the common law doctrines of frustration and termination for fundamental breach involves some unresolved questions which are best left to be considered on a case by case basis whereby adequate attention can be focused on particular problems which might be overlooked in any effort at judicial codification. One cannot however ignore the fact that the clear trend of common law authority is to deny any general immunity of contractual leases from the operation of those doctrines of contract law (see, eg, National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675; Highway Properties Ltd v Kelly, Douglas & Co Ltd (1971) 17 DLR (3d) 710; Corbin, Contracts, vol 6 (1962), s 1356; and see the cases cited in Brooking and Chernov, Tenancy Law and Practice in Victoria, 2nd ed (1980), par 211; DM McRae, ‘Repudiation of Contracts in Canadian Law’, Canadian Bar Review, vol 56 (1978), 233 and JT Robertson, ‘Frustrated Leases: “No to Never — But Rarely if Ever”?’, Canadian Bar Review, vol 60 (1982), 619). At first impression, that trend may appear to represent a step back towards the medieval days when the lessee’s interest under a term of 398

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years was seen as a mere right in personam to sue the lessor for breach of covenant. Upon analysis however, it involves no more than recognition of the fact that the analogy between a leasehold and a freehold estate is an imperfect one and of the related fact that, except perhaps in the quite exceptional case of a completely unconditional demise for a long term with no rent reserved (cf Knight’s Case (1588) 5 Co Rep 54b), the leasehold estate cannot be divorced from its origins and basis in the law of contract (cf per Atkin LJ, Matthey v Curling (1922) 2 AC 180, at pp 199–200): the lease should be seen as ‘resting on covenant’ (or contractual promise) and it is ‘the contract  … and not the estate … which is the determining factor’ (see per Isaacs J, Firth v Halloran, 38 CLR, at p 269 quoting from Hallen v Spaeth (1923) AC 684, at p 690). That trend should be followed in this Court and it should be accepted that, as a general matter and subject to one qualification, the ordinary principles of contract law are applicable to contractual leases. The qualification is that the further one moves away from the case where the rights of the parties are, as a matter of substance, essentially defined by executory covenant or contractual promise to the case where the tenant’s rights are, as a matter of substance, more properly to be viewed by reference to their character as an estate (albeit a chattel one) in land with a root of title in the executed demise, the more difficult it will be to establish that the lease has been avoided or terminated pursuant to the operation of the ordinary principles of frustration or fundamental breach. Indeed, one may reach the case where it would be quite artificial to regard the tenant’s rights as anything other than an estate or interest in land (eg, a 99 year lease of unimproved land on payment of a premium and with no rent, or only a nominal rent, reserved). In such a case, it may be difficult to envisage circumstances in which conduct of the tenant short of actual abandonment would properly be held to constitute repudiation or fundamental breach or in which anything less than a cataclysmic event such as the ‘vast convulsion’ referred to by Viscount Simon LC in Cricklewood Property and Investment Trust Ltd v Leighton’s Investment Trust Ltd (1945) AC 221, at p 229 would warrant a finding of frustration.

The rationale of the High Court in Shevill v Builders Licensing Board for refusing to allow damages for loss of future benefit was that a lease which is terminated effectively constitutes a ‘surrender’, automatically terminating all future contractual responsibilities. In recent times, however, the lease has been increasingly ‘contractualised’. As discussed by Deane J in the above extract from Progressive Mailing House v Tabali Pty Ltd, this contractualisation stems from a greater preparedness to validate the contractual origins of the lease, particularly where the rights of the parties are a product of the lease covenant rather than the conferral of an estate or interest in land. His Honour suggests that the lease should not be completely ‘divorced’ from its contractual origins. Thus, where a lease is terminated pursuant to a specific contractual clause, a broader remedial scope may be available.16 The conclusions in Progressive were followed in Chan v Cresdon (1989) 168 CLR 242 and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623. In Apriaden Pty Ltd v Seacrest Pty Ltd [2005] 12 VR 319, Williams JA at [61]–[64] made the following comments: It is common ground that contractual principles relating to repudiation apply to leases after Progressive Mailing House and that, if the acceptance of repudiation also determines the lease under property law doctrines, contractual damages will be available to the innocent party. 16. See further M Redfern, ‘Repudiation and Leases’ (1998) 6 Australian Property Law Journal 153; J Effron, ‘The Contractualisation of the Law of Leaseholds: Pitfalls and Opportunities’ (1988) 14 Monash University Law Review 83; C Chew, ‘Leases Repudiated: The Application of the Contractual Doctrine of Repudiation to Real Property Lease’ (1990) 20(1) University of Western Australia Law Review 86. 399

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The first issue between the parties is as to whether the contractual doctrine of repudiation provides an additional means by which a lease may be terminated by the innocent party. In my opinion, the balance of authority suggests that it does … In my view, the ramifications of the recognition of a separate contractual basis for determination of a lease are likely to be limited. It has been repeatedly stated that the courts will be slow to infer repudiation, the existence of which must be objectively ascertained. The proprietary nature of the interests of each party to the lease contract has special ramifications in relation to the application of contractual principles. In other words, a consideration of factors such as the length of the lease and the amount of rent payable is relevant to the determination as to whether or not repudiation has occurred, particularly in the absence of abandonment of possession. In  contrast, the terms of a lease and, in particular, a commercial lease, will more often than not provide for its determination for breach of covenant, and, in particular, for non-payment of rent. After Shevill, leases are also even more likely to designate covenants as essential terms.

Ormiston JA, in Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319 at [3], identified, as an exception to the general rule that the principles of contract law relating to termination for repudiation or fundamental breach apply to leases, those: ‘cases where the lease by its very terms can be taken to have excluded conventional contractual remedies and leases of the kind where ordinary contractual remedies are effectively impossible to apply, for example, because the only consideration has been a premium and a nominal rent’. This approach has been broadly approved by courts in other jurisdictions and by academic commentators.17 The issue was recently reviewed by the High Court in Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd (2008) 234 CLR 237.

—  Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd  — (2008) 234 CLR 237 Facts: Transit Management Pty Ltd and its successors and assigns granted a lease to Duffy Bros Fruit Market (Campbelltown) Pty Ltd in 1993 for a term of 15 years. The lessor covenanted, under clause 3 of the lease agreement, to pay to the lessor and the lessors assigns the base rent together with any CPI increases, and any review increases monthly and in advance. Clause 7 of the lease agreement set out that clause 3 of the lease was to be treated as essential term of the lease. By 1999 the lessee was having trouble meeting the rental payments and fell into arrears. The lessor and lessee entered into a deed of variation which allowed the lessor to sublet part of the lease premises, requiring the sub-lessee to pay the rental directly to the lessor and clause 10 amended clause 3 of the original lease, making the lessee liable for rent due 17. See further Scarcella v Linknarf Management Services Pty Ltd (in liquidation) [2004] NSWSC 360; Swanville Investment Pty Ltd & Ors v Riana Pty Ltd [2003] WASCA 121; Nai Pty Ltd v Hassoun Nominees Pty Ltd (1985) ANZ ConvR 349; Leda Commercial Properties Pty Ltd v DHK Retailers Pty Ltd (1992) 111 FLR 81; Ripka Pty Ltd v Maggiore Bakeries Pty Ltd [1984] VR 629; Nangus Pty Ltd & Anor v Charles Donovan Pty Ltd (in liquidation) & Anor [1989] VR 184; Emhill Pty Ltd v Bonsoc Pty Ltd [2004] V ConvR 54–685; Natwest Markets Australia Pty Ltd v Tenth Vandy Pty Ltd [2008] 21 VR 68 per Neave JA especially at [55] where Neave JA concluded that ‘the ramifications of the recognition of a separate contractual basis for determination of a lease are likely to be limited’; Willmott Growers Group Inc v Willmott Forests Limited (Receivers and Managers Appointed) (In Liquidation) (2013) 251 CLR 592 at [157] per French CJ, Hayne and Kiefel JJ. See also P Butt, Land Law, 4th ed, Lawbook Company, Sydney, 2001, [15]–[131], 336–7; M Redfern, ‘Repudiation and Leases’ (1998) 6 Australian Property Law Journal 153. 400

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by the sub-lessor also. Subsequently, Transit Management Pty Ltd assigned the reversion to Gumland Property Holdings Pty Ltd and a sub-lease was granted to Austie Nominees Pty Ltd who eventually transferred that sub-lease over to Woolworths. When the sub-lease expired, Woolworths refused to exercise the option to renew but stayed on and, in breach of the sublease, refused to pay the full rental due. This also put Duffy Bros Fruit Market (Campbelltown) Pty Ltd in breach of clause 10 of the 1999 Deed as they did not make up the shortfall in rental money which Woolworths had not paid. Gumland issued a notice requiring Duffy Bros to pay the shortfall and when it was not paid, Gumland issued proceedings seeking arrears of rent up to the date of termination of the lease as well as loss of bargain damages for the rest of the 15 year term (which was to expire on 29 March 2008). It also sought damages for the costs of reletting the premises after termination of the lease. The Court of Appeal held that the appellant was not entitled to loss of bargain damages or damages for the costs of reletting the premises after termination because it found that the lessee’s failure to pay the shortfall in payment by Woolworths was not a breach of an essential term because it breached s 10 of the 1999 deed but this breach did not constitute a breach of s 3 of the original lease. The High Court was asked to examine, inter alia, whether the failure by Duffy Bros to pay the shortfall owed by Woolworths constituted a breach of s 3 and therefore a breach of an essential term and whether loss of bargain damages were available. The High Court overruled the Court of Appeal and reinstated the decision of the trial judge holding that there was a breach of clause 3 which amounted to a breach of an essential term and loss of bargain damages were available. Gleeson CJ, Kirby, Heydon, Crennan and Kiefel JJ: The starting point of the Lessee’s arguments was the following proposition, enunciated by Gibbs CJ in Shevill v Builders Licensing Board: It is clear that a covenant to pay rent in advance at specified times would not, without more, be a fundamental or essential term having the effect that any failure, however slight, to make payment at the specified times would entitle the lessor to terminate the lease. The Lessee also referred to the next sentence in Gibbs CJ’s reasons for judgment: However, the parties to a contract may stipulate that a term will be treated as having a fundamental character although in itself it may seem of little importance, and effect must be given to any such agreement. The Lessee described stipulations of that kind as ‘anti-Shevill clauses’, and submitted that cl 7 of the Lease was an extreme example of one. The Lessee then put two alternative propositions. The first was that the parties cannot give the landlord a right to terminate a contract for breach of a term merely by declaring it to be ‘essential’, unless the tenant’s breach was repudiatory, or the tenant’s breach was a fundamental breach, or the term was in truth essential in the sense of going to the root of the contract. The second, narrower, proposition was that it is open to the parties to declare a term to be essential, entitling the innocent party to terminate for breach, but that that declaration is incapable of giving a right to sue for loss of bargain damages, unless the non-innocent party’s conduct amounted to repudiation or fundamental breach. The Lessee submitted that if a clause went so far as to provide not only that the covenant to pay rent was an essential term but also that on termination for breach an action for loss of bargain damages lay, it would be ineffective. In this case, of course, cll 7.3–7.8, 12 and 16 did go that far. In relation to each proposition, the Lessee contended that there was here no repudiation and no fundamental breach. That may be accepted: the appellant was not given special leave to contend in this Court that there was. The Lessee endeavoured to support the two propositions by various arguments. In the end these arguments fell back on attempts to support the second proposition only, because early 401

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in oral argument counsel for the Lessee accepted that it was open to the parties to a lease to stipulate that a contract could be terminated for a particular breach, however minor, and that this effect was achieved by agreeing that the term was ‘essential’. Proper construction of Lease as a whole. The first argument of the Lessee was that on the proper construction of the Lease as a whole, in view of the fact that a tenant’s failure to pay rent is not necessarily repudiatory, the obligation to pay rent within the time limited by cll 3 and 7.1.1 was not truly a fundamental or essential term. It was not enough to ‘attribute a particular legal characterisation’ to a term, and it was not enough that the contract ‘labels’ the term ‘essential’. A fundamental difficulty with the Lessee’s submission is that it is not correct to describe the appellant’s claim to loss of bargain damages as one which depends on treating cl 7.1.1 only as attributing to the obligation to pay rent a characterisation as ‘essential’. Nor is it correct to say that cl 7.1.1 merely fixed a ‘label’ to that effect. The essentiality of the obligation in cl 3.3 does not rest only on cl 7.1.1. It is reinforced by several other provisions. One is the stipulation in cl 1.13 that it was a ‘fundamental obligation’ of the Lessee to ensure that the Lessor received the rental. Another is cl 12.1, giving the Lessor the right to re-enter the Demised Premises and determine the Lease where the Lessee is in arrears for seven days in the payment of rent, without formal demand. A third is the acknowledgment by the Lessee in cl 16 of the fundamental obligation imposed on it by cl 13. Further, essentiality is not waived by the Lessor accepting arrears or late payment: cl 7.2. The duty of the Lessee to pay damages — loss of bargain damages — for breach of an essential term is the subject of a specific covenant in cll 7.3, 7.5, and 7.7, as well as cl 16. The Lessor’s entitlement to recover damages is not to be affected or limited by any of the events described in cl 7.6. Whether or not the mere description of a covenant in a lease as essential, however trivial it may be thought to be, can make it essential is a question which need not be decided. The duty to pay rent punctually is not in itself necessarily a trivial one, and this congeries of provisions reveals it as having the characteristic of essentiality in this Lease. As the appellant submitted, the Lease reveals a ‘preoccupation’ with the issue, which is scarcely surprising in a commercial lease creating an economic relationship. Hence, if the issue is treated simply as one of construction, many clauses point overwhelmingly to the conclusion that on the true construction of the Lease the covenant to pay rent was an essential term. However, although this and other arguments of the Lessee treated the issue as one of pure construction, the Lessee’s case was not based on pure construction. It was based on positive rules of law said to be inherent in the nature of a lease, or on various forms of repugnancy, which were said to lead to the conclusion that whatever the express terms of the lease say, they must either be ignored or be read down so as to preclude recovery of loss of bargain damages for a breach of a term which is not in truth essential unless the breach is a repudiation or a fundamental breach. On the Lessee’s arguments, a contractual term that a particular provision was essential was thus to be read as an agreement that breach could justify termination, but not as an agreement that it would justify recovery of loss of bargain damages. Mischaracterisation of transactions. The Lessee supported its proposition that a covenant in a lease cannot be made essential merely by reason of the parties’ agreement that it is by alluding to authorities holding, for example, that to describe what would otherwise be a licence as a ‘lease’, or vice versa, does not prevent the courts from going behind the label and assessing the true nature of the transaction. Cases of that kind are often cases where the parties have attempted to gain the advantage of some statutory regime or other rule of law applying to one particular type of relationship by saying their relationship is of that type. There was no attempt of that kind here. There is no doubt what the legal relationship of the parties was; the only question is whether one term of that relationship was ‘essential’. Interdependency of grant of possession and right to rent. The Lessee submitted that a lease imposed on the landlord the obligation to grant the tenant exclusive possession over the whole term, and that that obligation was interdependent with the tenant’s obligation to pay 402

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rent over the whole term. If the landlord decided to terminate the lease for reasons other than repudiation or fundamental breach, the damage flowing from loss of bargain was not caused by the tenant’s breach, but by the landlord’s decision to terminate. So expressed, the argument was a causation argument. The Lessee supported the argument by reference to AMEV-UDC Finance Ltd v Austin and Esanda Finance Corporation Ltd v Plessnig. It is true that in these cases there are passages that say in reference to chattel leases, as Gibbs CJ said in the AMEV-UDC case: ‘[I]t is the actual damage which flowed from the breach which alone can be recovered.’ And in the same case Mason and Wilson JJ said: The point is that when the lessor terminates pursuant to the contractual right given to him for breach by the lessee, the loss which he can recover for non-fundamental breach is limited to the loss which flows from the lessee’s breach. The lessor cannot recover the loss which he sustains as a result of his termination because that loss is attributable to his act, not to the conduct of the lessee. But that case, like Shevill’s case, was a case where there was no fundamental breach, repudiation or breach of an essential term, and as Mason and Wilson JJ said in the passage immediately succeeding the last one quoted: It is otherwise in the case of fundamental breach, breach of an essential term or repudiation. They were distinguishing between termination pursuant to a contractual right to do so and termination on grounds of breach of condition (ie breach of an essential term). For the proposition last quoted, Mason and Wilson JJ cited what Mason J said in Progressive Mailing House Pty Ltd v Tabali Pty Ltd. His Honour there said that loss of bargain damages could be recovered for repudiation or ‘fundamental breach’. He defined ‘fundamental breach’ to mean ‘breach of a condition or breach of another term or terms which is so serious that it goes to the root of the contract’. The second sense of the term ‘fundamental breach’ as used by Mason J corresponds with what this Court recently described as ‘a sufficiently serious breach of a non-essential term’. Mason J said, contradicting the Lessee’s submission, that it cannot be said in the case of repudiation or fundamental breach (as he defined it, including breach of a condition) that: … loss of the bargain is attributable to the innocent party’s exercise of his contractual power to terminate. It is different in the case of termination for non-essential breach, as Shevill demonstrates, because, by terminating pursuant to the contract at that stage, the innocent party puts it beyond his power to insist on performance, thereby bringing to an end any possibility of repudiation or fundamental breach with consequential damages for loss of bargain. The two passages quoted in the last paragraph from the reasons for judgment of Mason and Wilson JJ in the AMEV-UDC case were also quoted with approval by Brennan J in a passage relied on by the Lessee in Esanda Finance Corporation Ltd v Plessnig. Mason and Wilson JJ also said in the AMEV-UDC case that: … in Shevill v Builders Licensing Board there were indications that, if the lease clearly provided that whenever a lessor exercised the right of re-entry conferred by the lease he was able to recover such loss as he may have suffered by reason of the premature termination of the lease, such a provision might be effective. The present case is one in which cll 7.2, 7.3, 12 and 16 do clearly provide for the outcome described in that passage. It is thus plain that the authorities relied on by the Lessee do not establish the point which the Lessee sought to make, and in fact contradict it. And in Shevill’s case Gibbs CJ said: [I]t would require very clear words to bring about the result, which in some circumstances would be quite unjust, that whenever a lessor could exercise the right given by the 403

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clause to re-enter, he could also recover damages for the loss resulting from the failure of the lessee to carry out all the covenants of the lease. In this case there are very clear words, and, although the failure of the Lessee’s commercial venture, caused partly by Woolworths’ stark breach of its obligations, naturally attracts sympathy, there is no basis upon which a court could properly do otherwise than to give effect to the obligations to which the parties had bound themselves. The Lessee’s argument thus fails when considered as a causation argument. But the argument was also put in another form. The landlord, it was said, could not have it both ways: the landlord could not both regain possession and recover damages for unpaid future rent which would only have been received if possession had not been regained. But why not? It is not the case that the appellant in this case by its conduct in terminating and suing for loss of bargain damages put itself in a position better than it could have been in if it had kept the Lease on foot and sued from time to time for arrears of rent as they piled up. The appellant could not unjustly advantage itself in that way. Clause 7.8 echoed the general law in obliging the Lessor to take reasonable steps to mitigate loss. The Lessor could not have got both damages (namely, the present value of the unpaid rent from the time of termination until the expiry of the Lease) and in addition any rent capable of being earned by a re-letting of the Demised Premises. The Lessor was only entitled to obtain, as damages, the present value of any difference between the rent not paid by the Lessee and the rent received or to be received on re-letting. That is all that the trial judge allowed. To some extent the Lessee’s argument rested on an idea of repugnancy — that there was a repugnancy between landlords having possession of property, but also being given a monetary equivalent for the rent they would have got had they not taken possession of the property and instead continued to allow it to be leased. But there is no true repugnancy. There can be no double recovery by landlords. If landlords obtain possession, they can only recover loss of bargain damages if they have tried unsuccessfully to obtain a new tenant at the rent stipulated in the terminated lease. The monetary equivalent of what they would have got if they had not taken possession of the property reflects the fact that they cannot obtain tenants, or cannot obtain tenants who promise to pay as much as the defaulting tenants promised. The group of submissions under consideration did not comprise submissions based on the words used in the Lease. In one version they involved a submission that some rule of law stopped the clear meaning of those words from being given effect. Thus the Lessee submitted: [The parties] can agree on things but the question of what are the legal consequences of what they agree upon and what are the legal consequences of action taken in accordance with their agreement is something that is governed by the law, not by their particular intention. What proposition of law is referred to? This question was never answered. Save for any applicable statutory requirements or rules of law, there is no reason in law why general contractual principles do not apply to leases in this respect. Under general contractual principles, an innocent promisee can terminate the contract, and recover loss of bargain damages, where there is repudiation, or a fundamental breach, or a breach of condition — ie a breach of an essential term. And under these principles it is possible by express provision in the contract to make a term a condition, even if it would not be so in the absence of such a provision — not only in order to support a power to terminate the contract, which the Lessee concedes, but also to support a power to recover loss of bargain damages. No convincing reason was given to explain why the former outcome was sound in law but the latter was not. … Difficulties of principle in the Lessee’s submission. There are other difficulties with the Lessee’s contentions. One is that they entail a sharp distinction between actions for damages on termination for breach of an express term and actions for damages on termination for repudiation. It can be 404

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adventitious whether a defaulting tenant simply fails to pay rent or accompanies the failure by a statement of inability and unwillingness to do so. The need for a landlord to recover loss of bargain damages from a tenant only arises when the market is falling, for if the market is static or rising, the landlord can re-enter against the defaulting tenant, recover arrears of rent, and promptly install a new tenant at the same or a higher rent. The consequence of the Lessee’s submission is that landlords are unable to protect themselves as satisfactorily in a falling market as distinct from one which is static or rising. It is difficult to see why landlords should bear the risks of a falling market rather than their defaulting tenants, particularly where, as the Lessor and the Lessee did in the Lease, the parties explicitly, in many places and in an integrated way, placed that risk on the tenant. It is also difficult to see why the law — whether the relevant rule which the Lessee was urging be a rule of construction or some rule of substantive law — should have the result of placing the risks of a falling market on landlords, and of depriving them of the opportunity by agreement to allocate the risk otherwise. The effect of the Lessee’s submission is to cut down on party autonomy, to increase the chance of disputes and to reduce certainty. If the Lessee is wrong, it is open to parties to agree that a particular term is essential, and to agree on the consequences of breach. That avoids arguments about whether the term in question is or is not essential independently of the parties’ agreement that it is, and what the consequences of breach of it are. If the Lessee is correct, these dangers increase. Conclusion. For these reasons the Lessee has not made good its submission that the Lease does not permit the appellant to sue for loss of bargain damages. … [The court went on to consider whether the covenant to pay rent was a benefit which passed on when the reversion was assigned to Gumland Property Holdings Pty Ltd in accordance with s 117 of the Conveyancing Act 1919 (NSW) and whether, as a consequence, the assignee was entitled to sue for loss of bargain damages.] … Difficulty of assessing loss of bargain damages. The first submission was put thus: Where no privity of contract governs an entitlement to relief it is more difficult than otherwise to assess damages by reference to what was, or was not, within the contemplation of the original contracting parties, one or both of whom no longer has an interest in the property the subject of the ‘contract’ and might not be party to proceedings before the court. In some circumstances it may be more difficult, but there is no such difficulty in the case of loss of bargain damages after termination for breach of an essential term in the form of a covenant to pay rent: the court simply compares the rent payable under the lease with that recovered or to be recovered from any new lease, discounting to obtain present value. In any event, the existence of difficulty in some circumstances could not compel a different construction of s 117 if the words were clear. Right to loss of bargain damages does not touch and concern the land. The second submission was that a right to loss of bargain damages did not ‘run with the land’ because it did not have ‘reference to the subject-matter’ of the lease — it did not touch and concern the land. The Lessee referred to the test stated in Rogers v Hosegood: [T]he covenant must either affect the land as regards mode of occupation, or it must be such as per se, and not merely from collateral circumstances, affects the value of the land. The Lessee submitted that an entitlement to loss of bargain damages is an entitlement which arises, if at all, upon termination of a contract between particular parties privy to the contract; that it is a personal right which does not satisfy either limb of the Rogers v Hosegood test; that it does not affect the landlord and tenant in their capacities as such; and that it is an entitlement to compensation based not upon a covenant but upon a secondary obligation imposed by law. It submitted that a legal obligation designed to secure performance of some other obligation 405

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which touches and concerns land does not necessarily take on from that relationship the same characteristics as regards transmissibility to or against successors in title. Those arguments must be rejected. As the Lessee correctly conceded, a covenant to pay rent touches and concerns demised land. It would be a strange result if the rights to enforce that covenant did not also touch and concern the land, whether they be rights to sue for arrears, to re-enter and terminate the lease, or to sue for loss of bargain damages. Application of the general tests as to whether or not a covenant touches and concerns the land indicates that that strange result does not follow in this case. In P&A Swift Investments v Combined English Stores Group, Lord Oliver of Aylmerton said that the relevant matters for consideration were these: (1) the covenant benefits only the reversioner for time being, and if separated from the reversion ceases to be of benefit to the covenantee; (2) the covenant affects the nature, quality, mode of user or value of the land of the reversioner; (3) the covenant is not expressed to be personal (that is to say neither being given only to a specific reversioner nor in respect of the obligations only of a specific tenant); (4) the fact that a covenant is to pay a sum of money will not prevent it from touching and concerning the land so long as the three foregoing conditions are satisfied and the covenant is connected with something to be done on, to or in relation to the land. The Lessee did not dispute the correctness of these tests, which have been much applied in Australia. Applying these tests to the Lease in turn, first, the covenants in cl 3 benefit the reversioner for the time being only, and if separated from the reversion they cease to be of benefit to the covenantee. This is because in cl 1.1 the term ‘Lessor’ is defined as meaning ‘the Lessor its successors and assigns’, and in cl 1.2 the term ‘Lessee’ is defined as meaning ‘the Lessee and the executors administrators successors and permitted assigns of the Lessee’. Further, the covenant in cl 3.1 to pay rent opens: ‘The Lessee covenants for himself, his heirs, executors administrators and assigns with the Lessor to pay unto the Lessor, his executors, his administrators or assigns …’ Secondly, while the covenant does not affect the nature, quality or mode of user of the reversioner’s land, it does affect its value. If Diplock LJ was correct to say that the measure of damages for breach of a covenant which runs with the land is ‘the diminution in the value of the reversion consequent upon the breach’, which with respect he was, breach of a covenant to pay rent which is an essential term can diminish the value of the reversion. However, a seller of Blackacre at a time when a tenant of Blackacre is not in breach of any covenant to pay rent should obtain the same price, as reflecting the value of the land, as the seller would if the tenant committed a breach of that covenant just before sale, but the seller had the right to sue for loss of bargain damages, and assigned that right. Leaving aside questions of opportunity cost and of the tenant’s solvency, the recovery of damages will overcome the diminution in the value of the reversion; if there were no right to recover damages, there would be diminution in the value of the reversion. But if there were no assignment, and if the right to sue for loss of bargain damages were held not to touch and concern the land, so that the transferee of the reversion could not sue under s 117, the diminution in the value of the land, whether it takes place just before completion or earlier, will be uncompensated. That there is a diminution in value of the land if the covenant is not enforceable by a transferee of the freehold supports the conclusion that a covenant to pay rent which is an essential term is in truth a covenant which affects the value of the land. Thus Lord Oliver’s second test is satisfied. Thirdly, because of the terms of cll 1.1, 1.2 and 3.1, the covenant is not expressed to be personal: it is not given only to a specific reversioner, nor in respect of the obligations of a specific tenant. Fourthly, although the covenant in relation to which the right to sue for loss of bargain damages arises is a covenant to pay sums of money, and although it is not connected with anything to be 406

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done with or to the land, those factors do not prevent it from touching and concerning the land, because the first three conditions are satisfied and the covenant is connected with something to be done in relation to the land.

Commentary 7.38  The decision of the High Court in this case accords with the conclusions of the High Court in Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17, where it was held that loss of bargain damages were available for a termination arising on the exercise of a lease covenant, and also the judgment of Gibbs CJ in Shevill v Builders Licensing Board (1982) 149 CLR 620, who made it clear that a term can become essential within a lease agreement where the parties stipulate that it will have this effect in the contract. In Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market, Gleeson CJ, Kirby, Heydon, Crennan and Kiefel JJ concluded at [58] that it was ‘possible by express provision in the contract to make a term a condition, even if it would not be so in the absence of such a provision’. Their Honours held that damages for a breach of a lease covenant should include loss of bargain damages, particularly within a falling market. In Willmott Growers Group Inc v Willmott Forests Ltd (receivers and managers appointed) (in liquidation) (2013) 251 CLR 592, the High Court reaffirmed the general applicability of contractual principles of repudiation and fundamental breach to leases. French CJ, Hayne and Kiefel JJ held at [150] that ‘where a lessee repudiates its executory obligations under a lease, and that repudiation is accepted by the lessor, the contractual underpinning of the lease is brought to an end and that is sufficient to terminate the lease for the future’. See also Mann v Paterson Constructions Pty Ltd (2019) 373 ALR 1 at [165] per Nettle, Gordon and Edelman JJ. In Gigi Entertainment Pty Ltd v Schmidt [2013] NSWCA 287, where a lease was forfeited by the exercise of a lease covenant, and a landlord decided to re-occupy the premises instead of re-letting it, Schmidt J concluded at [85] after considering the conclusions of the High Court in Gumland Property Holdings that, ‘in the absence of evidence as to any difficulties the landlord may have had in re-leasing the premises to an appropriate licensee, it is simply not known whether the landlord has suffered any loss at all as a result of the tenant’s breach of an essential term of the lease, as opposed to loss as a consequence of its own decision to retake possession and carry on the hotel business itself ’. In Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 82 ALJR 345, the High Court, referring to the conclusions of the English Court of Appeal in Hongkong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha [1962] 2 QB 26, indicated a preparedness to accept that in some circumstances, serious breaches of ‘non-essential terms’ could be repudiatory. Nevertheless on the facts, while the court was prepared to concede that the ‘stark’ breach of obligation committed by the sub-lessee ‘attracted sympathy’, this did not, in itself, constitute a basis for failing to give effect to the obligations to which the parties had bound themselves. Given this, sometimes the parties will stipulate that a term is essential in order to support a power to terminate the lease contract and recover loss of bargain damages. Where a contractual repudiation in a lease contract can be established, relief against forfeiture may, at the discretion of the court, be granted in the form of a decree of specific performance. In Impact Funds Management v Roy Morgan Research Ltd [2016] VSC 221, Croft J reinforced the fact that the jurisdiction to grant relief against forfeiture is grounded in equity, and therefore context and circumstances are extremely important in order to ascertain whether relief in the form of a decree of specific performance should be 407

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awarded where a repudiatory breach of a lease contract has occurred. Croft J noted that the equitable jurisdiction is based upon the fact that it would be unconscionable or inequitable for a party to insist upon forfeiture, and whether that is established depends upon the particular circumstances and is not in any way aligned to the contractual intention of the parties.

The doctrine of frustration 7.39  The contractual doctrine of frustration has been described as a ‘modern and

flexible’ tool that should not be subject to arbitrary restriction: Cricklewood Property and Investment Trust v Leighton’s Investment Trust [1945] AC 221. The need for an application that is contextual and flexible has been emphasised by Rix LJ in describing an approach that is ‘multi-factorial’.18 Consideration must be given to ‘the terms of the contract itself, its matrix or context, the parties’ knowledge, expectations, assumptions and contemplations, in particular as to risk, as at the time of contract, and the nature of the supervening event, and the parties’ reasonable and objectively ascertainable calculations as to the possibilities of future performance in the new circumstances’.19 The doctrine of frustration can be difficult and is not lightly invoked. Mere incidence of expense or delay or burden will be insufficient, as there needs to be a disjunction between the contract provided for and contemplated and its performance in the new circumstances. The effect of frustration is to destroy the contract and discharge the parties from further liability pursuant to its terms and the common object of the contract must be frustrated. If all that is frustrated is an individual advantage that one party or the other might have gained from the contract, the doctrine will not be satisfied. In this respect, the doctrine of frustration can only be invoked where there is a clear ‘break in identity between the contract as provided for and contemplated and its performance in the new circumstances’.20 If a part of the contractual purpose may be carried out, the contract cannot be said to have been frustrated. While the application of the doctrine of frustration to lease contracts is exceedingly rare, it has been suggested that such applications are nevertheless possible. In National Carriers v Panalpina (Northern) [1981] AC 675 the House of Lords considered whether the doctrine of frustration should be applied to a 10-year lease issued over a warehouse that was subsequently rendered inaccessible following the closure of an access route for a 20-month period by local authorities. During this period, the lessee was unable to utilise the warehouse and therefore refused to pay rent for this period. The  landlord brought an action to recover unpaid rent and was successful at first instance. The lessee appealed to the House of Lords who dismissed the appeal concluding that while there was nothing in principle to prevent a lease from ever being frustrated, the doctrine should not be applied on the facts. Lord Hailsham concluded that while the doctrine of frustration could be applied to both land and personal property it would ‘hardly ever’ be applied to lease agreements. Lord Simon stated that ‘Frustration of a contract takes place when there supervenes an event (without default of either party and for which the contract makes no sufficient provision) which so significantly changes the nature (not merely the expense or onerousness) of the outstanding contractual rights and/or obligations from what the 18. Edwinton Commercial Corp v Tsavliris Russ (Worldwide Salvage and Towage) Ltd (The Sea Angel) [2007] 2 Lloyd’s Rep 517 at [111]. See also: D Robertson, ‘Frustration of Leases: Who Bears the Risk? National Carriers Ltd v Panalpina (Northern) Ltd’ (1982) 9(3) Sydney Law Review 674. 19. Planet Kids Ltd v Auckland Council [2013] NZSC 147 at [8]. 20. Edwinton Commercial Corp v Tsavliris Russ (Worldwide Salvage and Towage) Ltd (The Sea Angel) [2007] 2 Lloyd’s Rep 517 at [111]. 408

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parties could reasonably have contemplated at the time of its execution that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances; in such case the law declares both parties to be discharged from further performance’ (p 700). On the facts, Lord Simon held that frustration had not been established. In dissent, Lord Russell went further to suggest at 696 that he would have ‘denied a case of frustration even if the closing of the access to the site had followed only a year after the commencement of the lease and were to last for the whole of its remaining duration’.21 In Dayah v The Partners of Bushloe Street Surgery [2020] EWHC 1375, Cavanagh J referred to the conclusions of the House of Lords in National Carriers v Panalpina and refused to uphold a frustration claim for a lease. His Honour held that an event which led to a practice being unable to continue to operate at the Medical Centre was not a completely unexpected and unanticipated event that rendered performance of the lease agreements radically different from what had been anticipated. Put another way, and to use the wording of Panalpina, ‘the contractual documentation made sufficient provision for this eventuality’ (at [70]). In Roman Catholic Bishop of the Diocese of Christchurch v RFD Investments Ltd (in liquidation) [2015] NZHC 2647, the New Zealand Court held at [41] that the doctrine of frustration could only operate in a lease context where the parties have been completely silent as to what they intended in the circumstances.

Merger and surrender 7.40  Under common law it is clear that a lease will be automatically extinguished in

circumstances where the leasehold interest and the reversionary interest are vested in the same person. In this situation, the merger of the interests operated irrespective of the intention of the parties: Rye v Rye [1962] AC 496. The equitable jurisdiction took a different approach to the common law and it focuses upon the intention of the parties. As outlined by Rimer LJ in Boh Ltd v Eastern Power Networks Pty Ltd [2011] EWCA Civ 19 at [40], ‘Equity further developed the principle that in any case in which A did not expressly evince such an intention, or in which there was no other evidence of such an intention on his part, there was a presumption against any intention for a merger if such would be against his interest’.22 A lease will be surrendered where a lessee gives over the tenancy to the landlord who agrees to accept it. As a surrender is, in effect, a disposition of land it must comply with the relevant statutory formalities for the disposition of land interests. A surrender may occur by operation of law in circumstances where the act of one of the parties to the lease is found to be inconsistent with the continuance of the lease. In effect, surrender by operation of law is a form of extinguishing estoppel. Hence, if there is an agreement between the landlord and the tenant to end the lease, and in pursuance of this agreement, the landlord resumes control of the leased premises, a surrender by operation of law may be established.23

21. See also Kiama Development Co Pty Ltd v Wilcox [1999] NSWSC 277 per Young J at [105]; and Tymbook Pty Ltd v State of Victoria [2007] VSC 140, where Harper J in the Victorian Supreme Court refused leave to appeal, concluding that on the facts, provisions applicable to the leased premises via heritage legislation did not amount to a frustration of the lease. 22. See also Capital and Counties Bank Ltd v Rhodes [1903] 1 Ch 631. 23. See Emhill Pty Ltd v Bonsoc Pty Ltd (No 2) [2004] V ConvR 54-685. 409

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7.41  Revision Questions 1. What is the difference between seeking ‘recovery of rent’ and seeking damages for a breach of a lease covenant? 2. What is the measure of damages applicable for a breach of a non-repudiatory lease covenant? 3. Why did the High Court in Progressive Mailing House Pty Ltd v Tabali Pty Ltd suggest that a lease terminated pursuant to a specific termination clause may entitle a landlord to damages based on loss of future benefit? How did the facts in Shevill v Builders Licensing Board differ from those in Progressive Mailing House Pty Ltd v Tabali Pty Ltd? 4. In Apriaden Pty Ltd v Seacrest Pty Ltd (2005) 12 VR 319, the court concluded that the ‘proprietary’ nature of the lease should be taken into account in a determination of contractual repudiation whereas when considering whether a lease can be terminated for a breach of covenant, increasingly the courts must focus upon the express terms of the lease. Can you explain the reason for this distinction? 5. What is the difference between a ‘merger’ and a ‘surrender’ of a leasehold interest?

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Chapter 8

Native Title Pre-Mabo Position 8.1 Commentary 8.2 The Mabo Decision 8.3 Revisiting sovereignty assumptions 8.4 Radical Title 8.5 Common Law Native Title 8.6 Extinguishment 8.7 Case: Common Law Doctrine of Extinguishment: More than a Pragmatic Compromise 8.8 Commentary 8.9 Revision Questions 8.10 Statutory Recognition of Native Title 8.11 Extract: Objects of Native Title: Native Title Act 1993 (Cth) — s 3 8.11 Extract: Definition of Native Title: Native Title Act 1993 (Cth) — s 223(1) 8.11 Commentary 8.12 Traditional Laws and Customs 8.13 Case: Members of the Yorta Yorta Aboriginal Community v Victoria 8.14 Commentary 8.15 Case: Bodney v Bennell 8.16 Commentary 8.17 Revision Questions 8.18 Case: Yanner v Eaton 8.19 Commentary 8.20 Extinguishment Tests 8.21 Wik and the Scope of Common Law Extinguishment 8.22 Case: Wik Peoples v Queensland 8.23 Commentary 8.24 Revision Questions 8.25 Case: Western Australia v Ward 8.26 Commentary 8.27 Case: Fejo v Commonwealth 8.28 Commentary 8.29 411

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Australian Property Law Native Title and Coastal Waters 8.30 Case: Akiba v The Commonwealth 8.31 Commentary 8.32 The Native Title Act: An Outline of Key Provisions 8.33 Recognition of native title 8.34 The determination of native title 8.35 Extract: Native Title Act 1993 (Cth) — s 225 8.35 Validation and confirmation of past Acts 8.36 Extract: Native Title Act 1993 (Cth) — s 15 8.36 Validation of intermediate period Acts 8.37 Extract: Native Title Act 1993 (Cth) — s 24GB 8.37 The Assessment of Compensation under the NTA 8.38 Economic value 8.39 Interest on economic value 8.40 Non-economic value: Cultural or spiritual value 8.41 Case: Northern Territory v Griffith 8.42 Future Act Regime 8.43 Extract: Native Title Act 1993 (Cth) — s 24AA 8.43 The registration test 8.44 Right to negotiate 8.45 Extract: Native Title Act 1993 (Cth) — s 31 8.45 ILUAs 8.46 Revision Questions 8.47 NTA Overview 8.48

Pre-Mabo Position 8.1  Native title describes the legally recognised customary rights and interests that Indigenous Australians have with their traditional lands. Prior to the Mabo decision, native title was not conceptualised as a legally enforceable interest and therefore existed as personal, usufructuary laws and customs that existed outside the institutionalised land framework. The difficulties that Indigenous inhabitants experienced in having these laws and customs validated as legally enforceable entitlements is reflected in the judgment of Blackburn J in Milirrpum v Nabalco Pty Ltd [1972–3] ALR 65; (1971) 17 FLR 141 (the ‘Gove Land Rights’ Case). The case involved the Yolgnu people of Western Arnhem Land and one of the issues Blackburn J was asked to consider was whether the relationship that the Yolgnu people had with the land could be described as proprietary. In rejecting the idea that the common law could recognise a doctrine of communal native title, his Honour made the following comments regarding the proprietary status of the laws and customs of the Yolgnu people at 268–73: 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. 412

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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 on 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.

Commentary 8.2  The difficulty with the assessment by Blackburn J in the Milirrpum decision is that his Honour assumed that ‘property’ or ‘ownership’ could only be articulated where it displayed sufficient signs of similarity to non-Indigenous concepts. This meant that the general absence of rights of exclusivity and rights of alienation in Indigenous laws and customs precluded those laws and customs from being articulated as ownership entitlements. The  effect of this approach is to externalise cultural difference from the ownership paradigm and this is inherently unfair and discriminatory. As outlined by J J Hookey in ‘The Gove Land Rights Case: A Judicial Dispensation for the Taking of Aboriginal Lands in Australia’ (1972) 5 FLR 85 at 113: The judgment in Milirrpum v Nabalco undoubtedly continues the trend of decisions in recent years of the land claims of ethnic minorities in former British colonies, where the majority population is of European stock. … It is submitted that the treatment of a number of Privy Council decisions in this case … was not entirely compelling on the fundamental issue of common law recognition of existing rights in land, on the establishment of a British colony. It may be thought that the plaintiffs might have fared better had they appealed.

In the subsequent High Court decision in Mabo v State of Queensland (No 2), Toohey J, in evaluating the conclusions of Blackburn J in Milirrpum v Nabalco, noted the importance of distinguishing title analysis from the social system where the rights and duties are derived. His Honour stated at [36]–[37]: In the end such a criterion is concerned with the kind of traditional right or duty, the distinguishing feature being its source. It presupposes the possibility that rights and duties will not constitute a title even though they are coherent, existent and underlie a functioning society. Therefore, apart from a prohibition against discriminatory treatment of some indigenous societies, an inquiry into the kind of society from which rights and duties emanate is irrelevant to the existence of title, because it is inconceivable that indigenous inhabitants in occupation of land did not have a system by which land was utilised in a way determined by that society. There must, of course, be a society sufficiently organised to create and sustain rights and duties, but there is no separate requirement to prove the kind of society, beyond proof that presence on land was part of a functioning system. It follows from this discussion 413

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that requirements that aboriginal interests be proprietary or part of a certain kind of system of rules are not relevant to proof of traditional title.

The decision in Milirrpum v Nabalco eventually led to the creation of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth), which was the first Act to actually acknowledge the right of Indigenous occupants to reclaim unalienated traditional lands.

The Mabo Decision 8.3  The decision in Mabo v The State of Queensland (No 2) (1992) 175 CLR 1 has been described as a watershed in the post-colonial movement supporting the recognition of Indigenous rights. The plaintiffs commenced proceedings in 1982. They sought common law recognition of their title over the islands of Mer, Dawar and Waier in the Torres Strait (the Murray Islands). The basis of the plaintiffs’ argument was that they had lived on the lands since time immemorial and held established customary rights and interests over those lands and surrounding seas. With the aim of impeding this action, the Queensland Government enacted legislation in 1985 known as the Queensland Coast Islands Declaratory Act, which set out that all of the islands in the Torres Strait were to vest in the state of Queensland and that Queensland held those islands free from any other interest, right or claim. The first litigation therefore dealt with the validity of this legislation. In Mabo v Queensland (No 1) (1988) 166 CLR 186 a majority of the High Court held that the legislation enacted by the Queensland Government was inconsistent with the Racial Discrimination Act 1975 (Cth) (RDA) because under the RDA Indigenous holders of land held the same right of protection against ‘arbitrary extinguishment’ as other holders of land title. Hence, unless Indigenous title was extinguished before the introduction of the RDA, the Queensland Government was legally obliged to treat Indigenous title in the same way as it would treat non-Indigenous title so that legislation that extinguished Indigenous land interests had to provide compensation to those interest holders. A majority (Brennan, Toohey and Gaudron  JJ at 204, and Deane J at 231) concluded that the terms of the Queensland Coast Islands Declaratory Act did not treat Indigenous titleholders equally because it extinguished their rights without compensation. Consequently, the Queensland Coast Islands Declaratory Act was found to breach the RDA and to therefore be contrary to s 109 of the Commonwealth Constitution as a state Act whose terms were directly inconsistent with the provisions of a prior Commonwealth Act. This decision paved the way for the subsequent decision in Mabo (No 2), which considered the substantial issue of whether the land interests of the Indigenous occupants of the Torres Strait Islands were recognisable by the common law. In Mabo (No 2) the High Court held by a majority of six to one (with Dawson J dissenting) that the common law did recognise customary native title. In order to reach this position the court had to consider and revise the nature of the Crown’s assertion of sovereignty following colonisation and the effect of the adoption of English feudal tenure. These issues were important because the court had to determine not only the nature and incidents of native title but, more fundamentally, how the common law framework would recognise as legally enforceable a land title that was not derived from the Crown.

Revisiting sovereignty assumptions 8.4  The High Court in Mabo (No 2) held that, upon colonisation, the Crown acquired

absolute sovereignty of power over the land but it did not automatically acquire absolute sovereignty of title. The court concluded that it was a fallacy to equate these two forms

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of sovereignty because the power that the Crown acquired to deal with the land was different to the ownership that it acquired over the land (see Chapter 5). One of the critical foundations for this conclusion was the rejection by the High Court of the doctrine of enlarged terra nullius upon which previous ownership presumptions were founded. The court held that the doctrine of enlarged terra nullius, which deemed the territory of Australia to be vacant because Indigenous people were ‘so low in the scale of social organization’ was discriminatory and had no place in contemporary Australian common law. In the leading judgment, Brennan J concluded that it was time to update Australian common law to accord with international law developments as it should not be ‘frozen’ in an age of discrimination. His Honour made the following comments at [41]–[42]: 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 organization’ that it is ‘idle to impute to such people some shadow of the rights known to our law’ (65) re Southern Rhodesia (1919) AC, at pp 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 re Southern Rhodesia in rejecting an argument (66) ibid, at p 232 that the native people ‘were the owners of the unalienated lands long 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 (67) ibid, at p 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 successfully 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 recognize 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 (68) (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 international 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 (69) Gerhardy v Brown (1985) 159 CLR 70 at p 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 (70) (1823) 8 wheat, at p 574 (21 US, at p 253), accepted that, subject to the assertion of ultimate dominion (including the power to convey title by grant) by the 415

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State, the “original inhabitants” should be recognized as having “a legal as well as just claim” to retain the occupancy of their traditional lands’.

This powerful rejection of enlarged terra nullius was founded upon a close examination of international law and the need to ensure that Australia supported universal human rights. The rejection of the enlarged version of terra nullius meant that Australian territory could no longer be treated as vacant upon colonisation. Consequently, any ownership rights asserted by the Crown had to make room for pre-existing customary ownership rights. This restatement of Australian sovereignty assumptions was a crucial part of the incorporation of native title interests into the common law. By rejecting the fictional basis for absolute Crown ownership, the High Court indicated a preparedness to accept the fact that absolute Crown ownership was a construction. As further noted by Brennan J at [45]: … it was only by fastening on the notion that a settled colony was terra nullius that it was possible to predicate of the Crown the acquisition of ownership of land in a colony already occupied by indigenous inhabitants. … If that hypothesis be rejected, the notion that sovereignty carried ownership in its wake must be rejected too.

(For further discussion on the rejection of the doctrine of terra nullius, see the discussion of terra nullius by Sir Harry Gibbs in the foreword to Mabo: A Judicial Revolution, M  Stephenson and S Ratnapala (eds), University of Queensland Press, Brisbane, 1993. See also the comments of G Simpson in ‘Mabo, International Law, Terra Nullius and the Stories of Settlement: An Unresolved Jurisprudence’ (1993) 19 Melbourne University Law Review 195 at 200 on the foundation of enlarged terra nullius: ‘The accepted and prevailing version of Australian history in 1889 could not deny the existence of the Aboriginal peoples entirely, but could easily accommodate a construction of them as unsettled, primitive and without law’. See also the comments of M Asch and P Macklem, ‘Aboriginal Rights and Canadian Sovereignty: An Essay on R v Sparrow’ (1991) 29 Alberta Law Review 498 at 511, where the authors suggest that territorial sovereignty under the settlement principle was justified, not because the land was vacant, but, rather, because the settlers assumed they held a better claim than the original inhabitants because of a presumed superiority ‘of Christianity over heathen religions, of agriculture over hunting and gathering, of western cultural institutions such as private property over non-western notions and, of course, of one skin colour over another’.)

Radical Title 8.5  Theoretically, the rejection of enlarged terra nullius precluded the assertion of any ownership claims by the Crown; according to fundamental international principles, where land was already inhabited, the settlement principle could not justify the acquisition of territory. Nevertheless, imperial expansion had often resulted in the conferral of Crown ownership over ‘inhabited’ territories. Thus, in revising Australian history, the High Court was not prepared to suggest that the Crown had actually acquired no title over Australian territory at all. Rather, taking into account the body of land grants that had already been issued and that were granted on the assumption that the assertion of Crown ownership was valid, the High Court concluded that, upon settlement, the Crown acquired what it described as a ‘radical’ title rather than absolute ownership. Unlike absolute ownership, which left no room for the recognition of any interest that was not derived from the Crown, the High Court found that radical title could be ‘encumbered’ by valid native title interests. Radical title was, in effect, a ‘legal postulate’ created by the High Court to validate the existence of native title on the one hand and the continuation of Crown ownership on 416

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the other. It was a necessary prerequisite for the endorsement of native title interests within an enduring feudal tenure system. Radical title is different to absolute ownership because of its amenability to native title encumbrances. This means that it is not as pervasive as absolute ownership. Despite this, the High Court concluded that radical title could still invest the Crown with the capacity to issue a grant. Brennan J in Mabo (No 2) at 50–1 described radical title as: … merely a logical postulate required to support the doctrine of tenure … 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.

Significantly, the High Court concluded that radical title is the starting point for Crown ownership. Where it is established that the Crown has issued a land grant, particularly where that land grant constitutes an established freehold or non-freehold estate, the radical title that the Crown held upon colonisation will be transformed into full beneficial ownership and the grant will, ordinarily, extinguish the native title encumbrance. In New South Wales Aboriginal Land Council v Minister Administering the Crown Lands Act [2016] HCA 50, the High Court considered whether land that had been used as a correctional centre in Berrima, which the New South Wales government owned, could be regarded as Crown land and therefore burdened with native title. If so, the New South Wales Aboriginal Land Council could claim land rights under the Aboriginal Land Rights Act 1983 (NSW). Crown land capable of being claimed was defined, consistently with the conclusions of the High Court in Mabo, as land capable of being sold, which is not lawfully occupied and which is not residential land or land designated for public purposes. French  CJ, Kiefel, Bell and Keane JJ in the majority held that the land in issue did not constitute claimable Crown land because the acquisition of the fee simple estate in the claimed land pursuant to s 13D(1) of the Real Property Act 1900 (NSW) meant that the State became the owner. As the owner of that estate, the State enjoyed the right to occupy the claimed land, so that the State’s occupation was lawful and while the dedications may not permit the claimed land to be actively used for purposes inconsistent with the dedications, occupation for the purpose of preserving the value of the land as an asset of the State of New South Wales is not occupation inconsistent with the dedications. As such, the radical title that the Crown acquired in the Mabo decision was to be distinguished from the beneficial ownership that the Crown retained pursuant to its acquisition of the fee simple estate. (For a further discussion on this issue, see N Rogers, ‘The Emerging Concept of “Radical Title” in Australia: Implications for Environmental Management’ (1995) 12 Environmental and Planning Law Journal 183, especially at 186 where the author concludes that radical title ‘is a bare right of property in land, a nuda proprietas. The investiture of radical title in the Crown creates no beneficial entitlement to the land to which it relates. It is merely the mechanism through which the Crown may invest persons with beneficial ownership of land.’)

Common Law Native Title 8.6  The majority of the High Court in Mabo (No 2) held that the radical title of the Crown could be burdened by the native title interests held by the Indigenous owners of the land. By re-articulating the title that the Crown acquired upon colonisation as ‘radical title’, the court created space within an otherwise unyielding feudal framework for the acceptance of native title. This left the court with the task of describing and defining the nature and scope of the native title interest. Importantly, because the decision in Mabo (No 2) dropped the 417

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claim to the territorial waters surrounding the Torres Strait islands, the common law only covers land-based claims. The Mabo High Court concluded that common law native title essentially amounted to the right of Indigenous inhabitants to continue to hold traditional lands in accordance with their traditional laws and customs. Native title was not to be characterised as a common law estate and it was not to be regulated by common law proprietary principles. Nevertheless, in circumstances where native title interests could be established, those interests were to be recognised by the common law as a valid form of non-Crown title. Brennan J made the following comments at [64]–[71]: Native title has its origin in and is given 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. … 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 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 connexion 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 connexion 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 418

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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 p 586 (21 US, at p 259); St Catherine’s Milling and Lumber Co v The Queen (1887) 13 SCR 577, at p 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 p 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 pp 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 2 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. Secondly, native title, being recognized 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 p 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 419

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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 pp 530–531, 537–539, 547–548; Onus v Alcoa of Australia Ltd (1981) 149 CLR 27, at pp 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 subgroups 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. By custom, such a point may have to be settled by community consensus or in some other manner prescribed by custom. A court may have to act on evidence which lacks specificity in determining a question of that kind.

The conclusions of the High Court in Mabo (No 2) indicate the unique nature of native title, as an interest, sourced in Indigenous laws and customs and valid only to the extent that its content is connected to the activities of pre-sovereignty communities. To create a valid and enforceable native title interest at common law, the High Court found that the laws and customs of the traditional communities must be proven to have continued over the claimed area to the present day. Where this can be proven, and no extinguishing grant has been issued, those laws and customs will be given legal effect. This means that the content of native title is sourced in Indigenous laws and customs rather than the ‘bundle of rights’ connected with institutional common law estates. As noted by Gummow J in Yanner v Eaton (1999) 201 CLR 351 at [73]–[75]: The term native title conveniently describes the interests and rights of indigenous inhabitants in land, whether communal, group or individual, possessed under the traditional laws acknowledged by and the traditional customs observed by the indigenous inhabitants. The native title of a community of indigenous Australians is comprised of the collective rights, powers and other interests of that community, which may be exercised by particular subgroups or individuals in accordance with that community’s traditional laws and customs.

Brennan J in Mabo (No 2) set out a number of different principles regarding the character and scope of the native title interest. His conclusions may be summarised as follows: • Native title is usually communal in nature; however, in some instances it may be individual. The rights of communal native title emanate from its communal character. Thus, community members and individuals who adhere to traditional laws may be entitled to exercise communal rights. In some instances, native title may uphold the right of individuals or groups to exercise hunting or ceremonial rights: see further Western Australia v Ward (2000) 170 ALR 159 at 219. • Native title is not a tenured estate but, rather, a unique customary interest that is attached to the tenure framework. Native title is comprised of non-English concepts. Brennan J (with whom Mason J and McHugh J concurred) concluded that native title could be ‘proprietary’ in some instances but that it probably bore a greater resemblance to a ‘personal, usufructuary’ right: see Mabo (No 2) at 51. Deane and Gaudron JJ 420

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•

•

• •

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concluded that native title was personal rather than proprietary in nature and that it was preferable to describe such title as sui generis in nature: see Mabo (No 2) at 88–89, 100. Toohey J concluded that it did not matter whether native title was described as personal or proprietary (Mabo (No 2) at 195 and Dawson J (in dissent) concluded that native title was not title at all but merely a permissive occupancy: Mabo (No 2) at 138. Native title, being sourced in the customs and traditions of Indigenous communities, is non-alienable although native title may be surrendered to the Crown. The right to alienate is not a customary practice generally recognised by Indigenous communities (although where traditional practices do include alienation, such practices may be upheld: see State of Western Australia v Sebastian [2008] FCAFC 65; Rubibi Community v State of Western Australia (No 7) [2006] FCA 459, where it was held that a right to succession could be characterised as a traditional native title interest where an ‘inextricable link’ between such a right and a pre-sovereignty native title community and its laws and customs could be established). An important aspect of native title lies in its dynamic character. It is not based upon static definitional characteristics, but rather the substantive continuation of traditional rights and interests pre-dating Crown sovereignty. In this sense, native title is capable of evolving, but not to the extent that it loses connection with its pre-sovereignty origins. Traditional customs and laws that are found to be inconsistent with fundamental common law principles may not be recognised under native title, even where they have continued in a substantive sense since pre-sovereignty. Native Title rights may be exclusive in nature where such rights are consistent with the traditional laws and customs of the claimants. As outlined by Jagot and Mortimer JJ in Fortescue Metals Group v Warrie on behalf of the Yindjibarndi People [2019] FCAFC 177 at [81], ‘… in country centrally and firmly connected to one group, and recognised by other groups to be so, rights equating to exclusive rights may be clearly apparent. All will depend on the evidence.’ On the facts, the Full Federal Court dismissed an appeal by Fortescue Metals Group in relation to the recognition of exclusive native title held by the Yindjibarndi People over FMG’s Solomon Hub mines. An application for special leave to appeal this decision to the High Court was refused. In their joint judgment, Jagot and Mortimer JJ dismissed the idea that exclusive possession could not arise with respect to a spiritual connection over the land and confirmed the previous conclusions of French, Branson and Sundberg JJ in Griffiths v Northern Territory [2007] 165 FCR 391at [127]:

It is not necessary to a finding of exclusivity in possession, use and occupation, that the native title claim group should assert a right to bar entry to their country on the basis that it is ‘their country’. If control of access to country flows from spiritual necessity because of the harm that ‘the country’ will inflict upon unauthorised entry, that control can nevertheless support a characterisation of the native title rights and interests as exclusive … It is also important to bear in mind that traditional law and custom, so far as it bore upon relationships with persons outside the relevant community at the time of sovereignty, would have been framed by reference to relations with indigenous people. The question of exclusivity depends upon the ability of the appellants effectively to exclude from their country people not of their community. If, according to their traditional law and custom, spiritual sanctions are visited upon unauthorised entry and if they are the gatekeepers for the purpose of preventing such harm and avoiding injury to the country, then they have, in our opinion, what the common law will recognise as an exclusive right of possession, use and occupation. 421

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Extinguishment 8.7 The Mabo High Court made it very clear that under common law native title may be extinguished where the Crown issues a grant evincing a clear and plain intention to extinguish and the grant confers legal rights upon the grantee that are inconsistent with native title. The Crown retains sovereignty of power and therefore the capacity to grant inconsistent dealings over unalienated land. While an intention to extinguish must be clear and unambiguous, the capacity of the Crown to issue such grants was accepted by the High Court as incontrovertible. Deane and Gaudron JJ made the following comments at 196–8: 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. (xiii) Legislative powers with respect to common law native title Like other legal rights, including rights of property, the rights conferred by common law native title and the title itself can be dealt with, expropriated or extinguished by valid Commonwealth, State or Territorial legislation operating within the State or Territory in which the land in question is situated. To put the matter differently, the rights are not entrenched in the sense that they are, by reason of their nature, beyond the reach of legislative power. The ordinary rules of statutory interpretation require, however, 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. See, eg, The Commonwealth v Hazeldell Ltd (1918) 25 CLR 552, at p 563; Central Control Board (Liquor Traffic) v Cannon Brewery Company Ltd (1919) AC 744, at p 752; Clissold v Perry (1904) 1 CLR 363, at pp 373– 374 (affirmed (1907) AC 73): a case dealing with possessory title. Thus, general waste lands (or Crown lands) legislation 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. If lands in relation to which such title exists are clearly included within the ambit of such legislation, the legislative provisions conferring executive powers will, in the absence of clear and unambiguous words, be construed so as not to increase the capacity of the Crown to extinguish or diminish the native title. That is to say, the power of the Crown wrongfully to extinguish the native title by inconsistent grant will remain but any liability of the Crown to pay compensatory damages for such wrongful extinguishment will be unaffected. The executive acts of the Crown under Crown or waste lands legislation will likewise be presumed not to have been intended to derogate from the native title. Thus, when Crown lands or waste lands are transferred to trustees to be held upon trust for Aboriginal interests, it will be presumed, in the absence of clear and unambiguous words, that the lands were intended to be held by the trustees for the holders of the common law native title to the extent necessary to enable enjoyment of their rights of occupation and use. There are, however, some important constraints on the legislative power of Commonwealth, State or Territory Parliaments to extinguish or diminish the common law native titles which survive in this country. In so far as the Commonwealth is concerned, there is the requirement of s 51(xxxi) of the Constitution that a law with respect to the acquisition of property provide 422

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‘just terms’. Our conclusion that rights under common law native title are true legal rights which are recognised and protected by the law would, we think, have the consequence that any legislative extinguishment of those rights would constitute an expropriation of property, to the benefit of the underlying estate, for the purposes of s 51(xxxi). An even more important restriction upon legislative powers to extinguish or diminish common law native title flows from the paramountcy of valid legislation of the Commonwealth Parliament over what would otherwise be valid State or Territory legislation. In particular, as Mabo v Queensland (1988) 166 CLR 186 has demonstrated, the provisions of the Racial Discrimination Act 1975 (Cth) represent an important restraint upon State or Territory legislative power to extinguish or diminish common law native title. It is unnecessary and would be impracticable to seek to identify the extent to which particular legislative provisions have clearly and unambiguously extinguished or adversely affected common law native title in different areas of this country. That being so, the general comments about enforcement and protection in the next section of this judgment must necessarily be read as subject to the provisions of any valid applicable legislation. (xiv) The enforcement and protection of common law native 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.

Native title is amenable to extinguishment by a Crown grant because of its articulation as an encumbrance on the pre-existing radical title of the Crown. The combined effect of the Crown’s radical title and sovereignty of power is that the Crown retains the capacity to issue grants directly inconsistent with pre-existing native title thereby extinguishing that title. Extinguishment is, therefore, a consequence of the sovereignty assumptions underlying the tenure system. Within this system native title is more susceptible to destruction because it is not derived from the Crown. Following the determination in Mabo (No 2), all grants and acts issued by the Crown had the capacity to extinguish native title. Consequently, it was necessary to set out a framework outlining the impact of all such grants upon native title interests. The common law doctrine of extinguishment sets out that native title can be affected by acts of sovereign power that are either legislative or executive in nature. This is the case for all property interests; however, the susceptibility of native title to destruction from such acts is founded on two primary sources: (i) the fact that native title was recognised in 1992 and superimposed upon a land framework already populated by a multitude of Crown grants; and (ii) the fact that native title did not acquire an equalised status with 423

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other Crown grants — it was an encumbrance over the radical title of the Crown rather than a grant derived from the Crown. This meant that whenever the Crown issued a grant, native title was affected. The only real qualification to the capacity of the Crown to issue inconsistent grants was that grants issued after the RDA could not be extinguished in a manner different to other forms of common law title. Hence, a Crown grant issued after 1975 that extinguished native title had to provide compensation in the same way and to the same extent as it would have been provided to the extinguishment of common law grants. 8.8  Consider the following extract from the article by K Howden, ‘Common Law Doctrine of Extinguishment: More than a Pragmatic Compromise’ (2001) 8 Australian Property Law Journal 206 at pp 236–41. The author considers fundamental issues concerning equality and justice in the application of the doctrine of extinguishment.

—  Common Law Doctrine of Extinguishment: More than a Pragmatic Compromise — K Howden (2001) 8 Australian Property Law Journal 206 The primary protection that native title has against extinguishment is what is known as the ‘clear and plain’ test. The ‘clear and plain’ intention test was originally developed in United States v Santa Fe Railways 314 US 339 (1941). It was then picked up in Canada in Calder v AttorneyGeneral (British Columbia) where Hall J held that: It would appear to be beyond question that the onus of proving that the Sovereign intended to extinguish Indian title lies on the respondent and the intention must be clear and plain. ((1973) 34 DLR 145 at 210. The test was later confirmed in R v Sparrow (1990) 70 DLR 385.) In Mabo (No 2) six judges adopted the test. Deane, Gaudron and Toohey JJ all related the ‘clear and plain’ intention test directly to the common law presumption against legislative taking of property rights without compensation. Brennan J said that the test ‘flows from the seriousness of the consequences to indigenous inhabitants of extinguishing their traditional rights and interests in land’ (see Mabo (No 2) at 64). However, the decision in Mabo (No 2) also set out that a ‘clear and plain’ intention could be indicated, not only by express words, but could be necessarily implied from the fact of ‘inconsistency’ between native title and an ‘extinguishing’ act. This approach arguably contradicts the idea that there is a common law presumption working in favour of protecting native title rights, as exists in favour of other property rights. Thus, the reasoning opened a path for the extinguishment of native title without clear and unambiguous legislative authority. (Aboriginal and Torres Strait Islander Social Justice Commissioner, Native Title Report 1994, Human Rights and Equal Opportunities Commission, p 14.) The force of the clear and plain intention test was eventually articulated in Wik Peoples v Queensland (1996) 187 CLR 1 where Kirby J stated: There is a strong presumption that a statute is not intended to extinguish native title. The intention to extinguish native title must be clear and plain, either by the express provisions of the statute or by necessary implication. General provisions of an Act are not construed as extinguishing native title if they are susceptible to some other construction … This is a species of a general proposition applied by the courts in the construction of legislation. It is applied out of deference to the presumption that parliament would not normally take away the rights of individuals or groups, without clearly stating such a purpose. (at 242) 424

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This ‘clear and plain’ intention test, including extinguishment by necessary implication, suggests that native title is protected by universal principles, such as the common law presumption against the removal of rights. Beyond this, however, the rationale of equality before the law becomes lost. In Mabo (No 2) Brennan J summarised the following general rules of extinguishment of native title: 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 … 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. (at 69) Deane and Gaudron JJ also found that inconsistent Crown grants or appropriation could unilaterally extinguish native title. However, they took a broader view of such a power, holding that native title rights are legal rights and the Crown’s sovereignty does not include a power simply to override traditional rights in relation to land. They found the exercise of such a power would be wrongful and give rise to a right to compensation. This view has not been incorporated into the developing doctrine of extinguishment. … This test of inconsistency, then, forms the basis of the doctrine of extinguishment. As such, the test tells us that the Crown can appropriate land or grant it to third parties without having to deal with the burden of native title that is acknowledged to encumber its radical title, and without having to pay compensation. The conclusion is that under the common law doctrine of extinguishment native title is not treated with the same respect and protection that are afforded other property rights in Australia. If the test of inconsistency were applied to other property rights it would be found to violate constitutional and common law principles. So why is it that despite the High Court’s adoption of a general rationale of equality, a subordinate status for native title has been declared in the context of extinguishment?

Unequal treatment? Several arguments have been constructed to justify the subordination of, and lack of protection for, native title rights. First, it has been suggested that native title can be distinguished from other property rights in Australia simply because it is not a Crown-derived title. Alternatively it has been argued that native title is not in fact a property right. Finally, it has been proposed that native title is a right to land but is not an ‘institution’ of the common law and as such cannot be protected by the common law. I will examine each of these arguments in an attempt to discover its basis and see whether it in fact provides a legitimate explanation for unequal treatment.

Not a Crown-derived property right It was Brennan J in Mabo (No 2) who suggested that the vulnerability of native title to executive extinguishment is due to the fact that it is not derived from a Crown grant. He states: … a statute, which confers a power on the Crown, will be presumed 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. (at p 64. Brennan CJ said in Wik Peoples v Queensland (1996) 187 CLR 1 at 84, ‘Its weakness [native title] 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’.) While this seems like an obvious distinction, authority does not support the proposition that native title is more vulnerable to expropriation simply because it was not granted by the Crown. Kent McNeil suggests that a long line of authority contradicts Brennan J’s position (Common 425

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Law Native Title at p 193). The protection of the common law clearly extends to all pre-existing rights and interests in land whatever their source (R v Eastern Archipelago Co (1853) 22 LJQB 196; K McNeil, above p 214). In England most land titles cannot even be traced back to Crown grants, as in many cases no grant was actually made. (In Mabo (No 2) at 47, Brennan  J acknowledged the fictional nature of the feudal notion that all land titles in England originate from Crown grant.) Land titles may also derive from possession, rather than grant, for example rights based on adverse possession (Perry v Clissold [1907] AC 73). These rights are no more vulnerable to abrogation by Crown grant than titles derived from Crown grants …

Not an interest in the land A number of judges have attempted to distinguish native title on the basis that it is not a property right. Deane and Gaudron JJ linked the Crown’s power to unilaterally extinguish native title to their description of that title as a personal right. Since native title is only a personal right, they said, ‘… it does not constitute a legal or beneficial estate or interest in the actual land’ (at p 88). The same position was adopted by the majority in Fejo v Northern Territory (1999) 195 CLR 96 at 100. As authority for this position they relied primarily on Attorney-General for Quebec v AttorneyGeneral for Canada ([1921] 1 AC 401). McNeil takes the view that Deane and Gaudron JJ misinterpreted this case. He argues that the Privy Council described native title as ‘personal’ by way of saying that it was inalienable other than by surrender to the Crown (reasoning derived from St Catherines Milling & Lumber Co v R (1888) 14 App Cas 46). This does not mean that it will not constitute an interest in the land. On the contrary, the St Catherine’s case, while referring to native title as personal, decided that it is an interest which burdens the Crown’s proprietary estate in the land. In interpreting the decision in St Catherine’s case, the Canadian Supreme Court in Canadian Pacific Ltd v Paul later made it clear that the description of Indian title as ‘personal’ in no way detracts from the protection it is entitled to under common law ([1988] 2 SCR 654) …

Not an institution of the common law More recently it has been argued that native title is not a creature of the common law and as such will not attract its protection. The majority in Fejo v Northern Territory stated: Native title has its origins 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 (at p 101). Brennan J also stated this in Mabo (No 2) at 59. Following this approach the majority in Western Australia v Ward found that: … the concept of native title recognised by the common law does not constitute a title which is an institution of the common law (at [57]). If ‘native title’ is not a creature or construct of the common law, it is hard to imagine where it was born. Although the courts have repeatedly said that native title has its ‘origins’ in traditional law and custom, the concept we call native title has no parallel in indigenous law and custom. In indigenous terms, connection, relationships, or to use our term, ‘title’ to land, is a very broad concept which encapsulates physical, social, religious and spiritual ties or ‘rights’ to land. (R  M  Berndt, ‘Traditional Concepts of Aboriginal Land’, in Aboriginal Sites, Rights and Resources Development, UWA Press, Perth, 1982.) Native title is a recognition of some only of those rights. For example, the rights attributed to native title by the common law may encompass a specific right to hunt, gather food, conduct ceremonies and maintain the land in a particular state, but do not encompass spiritual and religious rights. Native title is an ‘institution’ created by superimposing non-indigenous … conceptions of property rights over indigenous understandings of relationships with land and as such is a concept created by our legal system. Even if it was accepted that native title is only recognised, not created, by the common law, it is still difficult to see why recognition and protection do not go hand-in-hand. The conclusion is 426

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that native title rights are rights to land, are a creature of the common law, and should be treated with the same protection that the common law accords to Crown-derived property rights. There is no valid basis on which native title can be distinguished from other property rights in Australia so as to render fundamental common law principles impotent to protect them against unilateral expropriation. Yet it appears that native title rights are not being treated with ‘full respect’. The rationale of equality seems to have been forgotten.

Commentary 8.9 The Mabo decision represented a major shift in land perspectives in Australia. It

revised institutionalised historical assumptions concerning colonisation and sovereignty and, in so doing, made room for the recognition of Indigenous customary title. In this respect, the Mabo decision was a powerful step forward for the evolution of land law in Australia. Nevertheless, it is also arguable that the High Court did not take the opportunity to comprehensively overhaul the inherited English feudal framework that the Australian land system is founded on. Sovereignty assumptions were modified in order to accept native title; however, the feudal tenure system was effectively reinstitutionalised because the High Court concluded that it was ‘too late in the day’ to adopt a different system. The effect of this was that common law native title became an entitlement enframed by a feudal system, despite having no origin in any Crown grant. This meant that native title became inherently susceptible to Crown extinguishment. From this perspective it is arguable that, despite the recognition of native title, the perpetuation by the High Court of an inherited, monoistic land system was an opportunity lost. (See Chapter 5 for further discussion on this.) The susceptibility of native title to extinguishment can also arise where legislation is introduced that incorporates a prohibitive, regulatory framework and the exercise of native title rights and interests would be inconsistent with that framework. However, extinguishment does not arise purely on the basis of legislative constraint. As outlined in Akiba v The Commonwealth (2013) 300 ALR 1 at [24], ‘Extinguishment in relation to native title refers to extinguishment or cessation of rights. Such extinguishment of rights, in whole or in part, is not a logical consequence of a legislative constraint upon their exercise for a particular purpose, unless the legislation, properly construed, has that effect.’ Further, native title rights that are not extinguished by a licencing framework may be protected from having to comply with licencing or permitting requirements where the exercise of those rights is for non-commercial or personal purposes, as outlined in s 211(2) of the NTA.

8.10  Revision Questions 1. If, as Brennan J stated in Mabo (No 2) at [42] ‘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’, how is it possible to justify the assumption of any Crown ownership over lands that were in occupation by Indigenous inhabitants? 2. Why is native title a ‘burden’ on the Crown’s radical title whereas other common law estates and interests are treated as grants? Is it possible to reconcile Indigenous and non-Indigenous land interests within a feudal infrastructure? 3. How do native title interests differ in scope and enforceability from common law estates and interests? What happens if the laws or customs of an Indigenous 427

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group are not consistent with the definitive rights that comprise common law ownership? 4. What are the basic features of native title interests and what does it mean to say that native title is an ‘inalienable’ interest?

Statutory Recognition of Native Title 8.11  Following the introduction of native title in Mabo (No 2), the nature, scope and validity of native title was reinforced under statute. The Native Title Act 1993 (Cth) (NTA) was introduced soon after the decision in Mabo (No 2). The aim of the NTA was to validate the recognition of native title and set up a framework for the determination of native title interests. One of the primary objectives of the legislation was to deal with the possibility that grants already made by the Commonwealth, states and territories might be inconsistent with the terms of the RDA, and are therefore invalid because they did not provide just compensation. The following table includes extracts from the NTA. EXTRACT

Objects of Native Title: Native Title Act 1993 (Cth) — s 3 3 The following objectives are outlined: (a) to provide for the recognition and protection of native title and; (b) to establish ways in which future dealings affecting native title may proceed and to set standards for those dealings; and (c) to establish a mechanism for determining claims to native title; and (d) to provide for, or permit, the validation of past acts, and intermediate period acts, invalidated because of the existence of native title.

EXTRACT

Definition of Native Title: Native Title Act 1993 (Cth) — s 223(1) 223(1)  The statutory definition of native title is set out as follows: (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 (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. 428

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Commentary 8.12  The statutory definition of native title draws upon the conclusions of the High Court

in Mabo (No 2). It has, however, been held by a majority of the High Court in Members of the Yorta Yorta Aboriginal Community v Victoria (2002) 214 CLR 422 (Yorta Yorta) that the statutory definition of native title in s 223(1) of the NTA is the primary focus for native title and that native title is best regarded as a creature of statute rather than common law. Gleeson CJ, Gummow and Hayne JJ at [31]–[32] made the following comments: An application for determination of native title requires the location of that intersection, and it requires that to be located by reference to the Native Title Act. In particular, it must be located by reference to the definition of native title in s 223(1) … what the claimants sought was a determination that is a creature of that Act, not the common law.

This means that post-NTA the capacity of Indigenous claimants to establish native title is dependent upon their ability to prove that their rights and interests come within the requirements of s 223 of the NTA. The courts have taken a strict interpretational approach to the specific wording used within s 223 and have carefully defined specific key references.

Traditional Laws and Customs 8.13  The combined effect of the statutory requirement under s 223(1)(a)–(c) is the need

to establish that the continuing laws and customs which are claimed within the rubric of native title are ‘traditional’ in nature. According to the High Court in Yorta Yorta, the reference to ‘traditional’ in s 223(1) of the NTA means that the laws and customs must link back to pre-sovereignty community practices. Thus, what must be established is that the claimed laws and customs retain a substantial connection to the practices of pre-sovereignty, normative communities. Accordingly, laws and customs that post-date sovereignty and that have evolved as a consequence of the effects of colonisation cannot be validated under the umbrella of native title. The rationalisation for this interpretation is that native title can only encumber the radical title of the Crown where that law or custom actually pre-dates its application. The overall effect of s 223(1) and the strict interpretation of ‘traditional’ is that, in order to establish native title under the NTA claimants must prove that the claimed laws and customs have originated in laws and customs that were exercised by pre-sovereignty, normative communities and that these laws and customs continue to be exercised over the claimed area of land, subject to reasonable adaptations, by the descendants of those communities. This ‘frozen in time’ approach has created enormous difficulties for Indigenous claimants because of the evidential burden it imposes, and because of the fact that many laws and customs that were exercised by pre-sovereignty communities were completely destroyed by the European settlement. 8.14  The decision of the High Court in Members of the Yorta Yorta Aboriginal Community v Victoria (2002) 214 CLR 422 is extracted below.

—  Members of the Yorta Yorta Aboriginal Community v Victoria  — (2002) 214 CLR 422 Facts: 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 429

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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 application was made in the name of eight persons on behalf of the members of the Yorta Yorta Aboriginal community. Gleeson CJ, Gummow and Hayne JJ: 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: 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. In order to understand the issues that fall for decision in this Court, it is necessary to begin with the statutory provisions from which those issues arise and to do so by reference first to what it was that the claimants sought.

An application for determination of native title By their application, the claimants sought a determination of native title under the Native Title Act. The application which the claimants made, and the relief which they sought by that application, were both creatures of that Act. At the time the trial judge made his determination, s 225 of the Act provided that: A determination of native title is a determination whether or not native title exists in relation to a particular area (the determination area) of land or waters and, if it does exist, a determination of: (a) who the persons, or each group of persons, holding the common or group rights comprising the native title are; and (b) the nature and extent of the native title rights and interests in relation to the determination area; and (c) the nature and extent of any other interests in relation to the determination area; and (d) the relationship between the rights and interests in paragraphs (b) and (c) (taking into account the effect of this Act); and 430

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(e) to the extent that the land or waters in the determination area are not covered by a non-exclusive agricultural lease or a non-exclusive pastoral lease — whether the native title rights and interests confer possession, occupation, use and enjoyment of that land or waters on the native title holders to the exclusion of all others. As originally enacted, the Native Title Act had contained a different definition of ‘determination of native title’ but that had been repealed, and a new definition substituted by the 1998 Amendment Act. The transitional provisions of the 1998 Amendment Act provided that the new form of the definition applied to all determinations made after the commencement of the 1998 Amendment Act regardless of when the native title determination application was made. Accordingly, what the claimants sought was a determination having the characteristics identified in the definition set out above. Those characteristics included, if native title were determined to exist, who the persons, or each group of persons, holding the common or group rights comprising the native title are and, in addition, the nature and extent of the native title rights and interests in relation to the determination area. Several of the terms used in the definition of ‘determination of native title’ are defined elsewhere in the Native Title Act. For present purposes, the most important is the definition of ‘native title’ contained in s 223 of the Act. Although that section was also amended by the 1998 Amendment Act, it is not necessary to notice the changes that were made then; for the purposes of the present matter, they may be left aside. ‘Native title’, and the longer expression sometimes used in the Act, ‘native title rights and interests’, are expressions defined in s 223(1) as: 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 (c) the rights and interests are recognised by the common law of Australia. Much of the argument of the present appeal was directed to the proper construction of this definition. In particular, considerable attention was directed to what is meant by par (c) of the definition when it says that ‘the rights and interests are recognised by the common law of Australia’. Does this paragraph, as the majority of the Full Court held, [incorporate] into the statutory definition of native title the requirement that, in the case of a claimed communal title, the holders of the native title are members of an identifiable community ‘the members of whom are identified by one another as members of that community living under its laws and customs’ and that that community has continuously since the acquisition of sovereignty by the Crown been an identifiable community the members of which, under its traditional laws observed and traditional customs practised, possessed interests in the relevant land? Does it, again as the majority of the Full Court held, also incorporate into the statutory definition of native title, the notion of extinguishment — whether by a positive exercise of sovereign power appropriate to achieve that result or by reason of the native title having expired so as to allow the Crown’s radical title to expand to a full beneficial title? (Native title was said by the majority to have ‘expired’ if, at any time since the Crown acquired the radical title to the land, the traditional laws and customs, the acknowledgment and observance of which provided the foundation of native title, ceased to be acknowledged and 431

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observed or the relevant people, whether as a community, a group, or as individuals, ceased to have a connection with the land or waters in question.) As these reasons will seek to explain, the questions which arise in this matter turn more on a proper understanding of par (a) of the definition of native title, and in particular what is meant by ‘are possessed under the traditional laws acknowledged, and the traditional customs observed’ by the relevant peoples, than it does on par (c) of the definition. But, of course, it will be necessary to consider all elements of the definition. Before turning to that consideration it is necessary to say something about the decisions in the courts below and about the way in which the claimants sought to demonstrate their entitlement to a determination that native title exists in relation to the land and waters the subject of their claim. That is necessary because the way in which the claimants shaped and presented their claim informs the proper understanding of the findings of fact that were made by the primary judge and the way in which he dealt with some questions of law.

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 claim at trial The primary judge required the claimants and some of the many other parties to the proceeding who opposed, or at least did not support, the claims made by the claimants to file and serve a statement, in summary form, of the facts and contentions upon which they relied. That statement of facts and contentions was amended at various stages of the proceeding, the last of the amendments being made after the last day of the oral hearing before the primary judge. It may be taken, therefore, to represent a summary of the case which the claimants had sought to make at the trial of their application. Two particular aspects of that case are to be noted — the way in which it was said that the claimants were the persons who held native title, and the bases upon which it was said that native title was claimed. The claimants contended that, in accordance with Aboriginal custom and tradition, they had inherited native title rights and interests to the claimed areas from those Aboriginal persons who were in occupation of the land before European settlement. Those Aboriginal persons, referred to as the ‘ancestors’, were said to have enjoyed that title uninterrupted by any non-Aboriginal person until European settlement. The claimants further asserted that, from the time of assertion of sovereignty over 432

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the claim areas (in the case of these areas, 1788) ‘to the times of the present generation’, the ancestors and their descendants (including the claimants) had enjoyed that title, through the generations, firstly maintaining continuing uninterrupted occupation, use and enjoyment of the claimed areas and, secondly, maintaining traditional connection with, and possession of, the claimed areas. The claimants contended that they maintained their traditional connection to all of the claimed areas and that they had ‘maintained to the present day, and continuing, a system of tradition customs and practices inherited, in adapted form’ from the ancestors (emphasis added). The reference to an adapted form of tradition, customs and practices was amplified in the contentions made about the bases upon which native title was claimed. Two alternative bases were advanced for the claim. First, it was said that the claimants had native title because they, or their ancestors, had been continuously physically present on, or had occupied, used and enjoyed, either all of the claimed areas, or at least large parts of the claimed areas, ‘[s]ince 1788 until the present day’. Alternatively, it was said that, if there had not been continuous physical occupation, the claimants had native title to the claimed areas because there was a continuing traditional connection of the claimants and their ancestors with the claimed areas, demonstrated by a continuing system of custom and tradition incorporating a traditional relationship to land. In this regard, reference was made to what was said to be the physical presence of individuals or groups from the claimants and their ancestors upon the claimed areas and to activities described as being ‘other than those involving physical presence’ on the land. All of the activities of the claimants and their ancestors were said to demonstrate a system of custom and tradition, including a traditional connection with the claimed areas, which was a system ‘sourced in, and in its essential features, … continuous with’ the system of custom and tradition operating among the various generations of ancestors ‘from 1788 to [the] present time’ (emphasis added). The significance of the references to adaptation of tradition and custom will be the subject of later consideration in these reasons. But in addition to that aspect of the claimants’ contentions at trial, it is important to notice one other feature of them, namely, that the case which they sought to make good was that there was a connection between the native title rights and interests which they claimed to possess with the traditions and customs of Aboriginal society as those traditions and customs existed before European settlement. This connection was said to be established by demonstrating either continuous physical presence from the time the British Crown asserted sovereignty to the date of the proceeding or the existence of a continuing system of custom and tradition. Of this latter connection it was said that it could be demonstrated even though it had changed and adapted since European settlement.

The primary judge’s findings In his reasons for judgment the primary judge dealt with the case which the claimants had sought to make, namely, that they were descendants of Aboriginal persons who had inhabited the claim area when Europeans arrived and that either there had since been continuous occupation of the land by the claimants and their ancestors, or there was a continuing system of custom and tradition from before the time of European settlement to the time of the proceedings. The primary judge found that some but not all of the claimants were descended from persons who, in 1788, were indigenous inhabitants of part of the claim area. He found further that the evidence did not demonstrate that the descendants of the original inhabitants of the claimed land had occupied the land (in what he described as ‘the relevant sense’) since 1788, and did not demonstrate that they had continued to acknowledge and observe, throughout that period, the traditional laws and customs in relation to land of their forebears. Rather, he concluded that the evidence demonstrated 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’. 433

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In this Court, and in the Full Court, the claimants attacked those findings and it will be necessary to say more about the way in which the primary judge arrived at them, but it is convenient to deal now with the nature of the attack that was made rather than the detail of the primary judge’s reasoning.

The Full Court On appeal to the Full Court of the Federal Court the claimants contended that in a number of respects the primary judge had applied a wrong test or tests in deciding whether they had established their asserted native title. It was contended, in effect, that the primary judge had required the claimants to establish that they, and their ancestors, had at all times since sovereignty continuously acknowledged and observed the same traditional laws and customs as had been acknowledged and observed before sovereignty, that they and their ancestors had occupied the claimed land and waters throughout that time in the same way as their ancestors had done so, and that the traditional connection which the claimants alleged they had with the land had been substantially maintained throughout the period since 1788. That is, the claimants contended on appeal to the Full Court that the primary judge had applied tests, characterised as a ‘frozen in time approach’, which permitted no alteration of or development in the Aboriginal traditional law or custom in which the claimed native title was said to be based, and which allowed no interruption to the exercise of those rights and interests at any time after sovereignty was first asserted by the British Crown. At once it can be seen that what was said in the Full Court to constitute error by the primary judge was, subject to one very important exception, for the primary judge to conclude that it was necessary for the claimants to make good the case which they had set out to establish at trial, namely, a case that either there had been continuous occupation of the claimed land since before sovereignty was claimed, or that there was a continuing system of custom and tradition from before sovereignty to the time of the proceedings. (The exception which must, of course, be noted is the claimants’ contention at trial that, between the time sovereignty was asserted and the time of the proceedings, there had been adaptations to traditions, customs and practices.) But what is clear is that there was, between trial and appeal to the Full Court, a marked shift in the case which the claimants sought to make. No longer did they contend that it was necessary for them to prove the case that they had set out to establish at trial. Be that as it may, and it was not suggested that the claimants were precluded from shifting their ground in this way, all members of the Full Court concluded that the primary judge had probably not applied a ‘frozen in time approach’. All accepted that the traditional laws and customs which found native title may have adapted and changed in the period since the arrival of European settlers without native title rights and interests necessarily being lost as a result. The majority of the Court (Branson and Katz JJ) concluded, however, that the finding of the primary judge that there was a period of time between 1788 and the date of the claim made by the claimants during which the relevant community lost its character as a traditional Aboriginal community should not be disturbed and that, in consequence of that change, native title had ‘expired’. By contrast, Black CJ concluded that the primary judge had applied too restrictive an approach to what is ‘traditional’ in reaching his conclusion that native title had expired before the end of the nineteenth century and that the matters should, therefore, go back for further hearing. Again, the way in which the claimants shaped and presented their arguments on appeal to the Full Court informs the proper understanding of the way in which that Court dealt with the matter.

The appeal to the High Court In this Court, the claimants contended that both the trial judge and the majority of the Full Court misconstrued and misapplied the definition of native title in s 223(1) of the Native Title Act and that, as a result, the findings of fact which the trial judge had made, and which the majority of 434

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the Full Court had upheld, were misdirected. The error which it was said that the primary judge had made was to require positive proof of continuous acknowledgment and observance of traditional laws and customs in relation to land and that the majority of the Full Court, albeit by a different path, had likewise concluded that positive proof of continuous acknowledgment and observance of traditional laws and customs was required. Rather, so the claimants contended, attention should be directed to the rights and interests presently possessed under traditional laws presently acknowledged and customs presently observed, and to a present connection by those laws and customs. It followed, so it was submitted, that occupation, as a traditional Aboriginal society of the land and waters claimed, was not a matter that need be established to prove the existence of native title rights and interests. The emphasis given in the claimants’ arguments in this Court, to traditional laws presently acknowledged and traditional customs presently observed, appears to constitute another important shift in emphasis away from that given at trial to continuity between sovereignty and the present. Again, however, it was not submitted that the conduct of the proceedings below precluded the claimants advancing the arguments which they did in this Court. Nonetheless, it is important to approach the criticisms which they advanced of the reasoning adopted in the courts below bearing in mind the way in which the case has been put at the various stages of its progress through the courts. Further, it is as well to say that, in tracing the development of the claimants’ arguments, we are not to be understood as criticising what was done. Shifts in emphasis in argument at different stages of a matter are far from unusual and when, as was the case here, the issues are novel, development of the arguments advanced by a party, not only by elaboration but also by modification, is to be expected. It is for different purposes that we have pointed out the way in which the claimants’ arguments developed. First, as we have said, the reasons in the courts below must be read in the light of the arguments presented to those courts. Secondly, the developments in the claimants’ arguments serve to identify a very important aspect of the issue that is to be decided in this matter. As six members of the Court said in Fejo v Northern Territory: 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 (emphasis added). An application for determination of native title requires the location of that intersection, and it requires that it be located by reference to the Native Title Act. In particular, it must be located by reference to the definition of native title in s 223(1). Further, in this case, as the development of the claimants’ argument, from trial through their appeal to the Full Court to their appeal in this Court, may be seen to reveal, it is critically important to identify what exactly it is that intersects with the common law. Is it a body of traditional law and custom as it existed at the time of sovereignty? Is it a body of law and custom as it exists today but which, in some way, is connected with a body of law and custom that existed at sovereignty? How, if at all, is account to be taken of the inescapable fact that since, and as a result of, European settlement, indigenous societies have seen very great change? It is necessary, as has now been said repeatedly, to begin consideration of a claim for determination of native title by examination and consideration of the provisions of the Native Title Act. As has been pointed out above, what the claimants sought was a determination that is a creature of that Act, not the common law. In undertaking that task, all elements of the definition of native title must be given effect. ‘Native title’ means certain rights and interests of indigenous peoples. Those rights and interests may be communal, group or individual rights and interests, but they must be ‘in relation to’ land 435

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or waters. The rights and interests must have three characteristics. The first is that they are possessed under the traditional laws acknowledged and the traditional customs observed by the peoples concerned. That is, they must find their source in traditional law and custom, not in the common law. It will be necessary to return to this characteristic. Secondly, the rights and interests must have the characteristic that, by the traditional laws acknowledged and the traditional customs observed by the relevant peoples, those peoples have ‘a connection with’ the land or waters. Again, the connection to be identified is one whose source is traditional law and custom, not the common law. Thirdly, the rights and interests in relation to land must be ‘recognised’ by the common law of Australia and it was, as we have said, upon the operation of this requirement that much of the debate on the hearing of this appeal centred. Three separate strands of argument about this element of the definition of native title will require consideration. First, does this element of the definition permit, even require, consideration of any aspect of the general law as it stood after the decision in Mabo v Queensland (No 2) but before the enactment of the Native Title Act? Secondly, does this element of the definition carry within itself any rule or principle relating to extinguishment, abandonment, or loss of native title rights, by which it can be decided whether native title rights which existed at sovereignty may no longer be the subject of a determination of native title under the Native Title Act? Thirdly, what, if anything, does this element of the definition of native title say about the significance that is to be attached to the identification of what traditional law or custom may have said, at the time sovereignty was first asserted, about the rights and interests of peoples in the land or waters in which native title is now claimed? None of these questions can be answered without an understanding of the operation of all of the elements of the definition of native title. Most especially is that the case in connection with the third of the strands we have identified. In order to understand the work that is to be done by par (c) of the definition of native title, with its reference to recognition by the common law of Australia, it is necessary to understand the operation of par (a), and what is meant by ‘possessed under the traditional laws acknowledged, and the traditional customs observed’. Moreover, none of the questions posed in connection with ‘recognition’ of native title rights and interests by the common law of Australia can be examined properly without taking into account some fundamental principles: principles to which we now turn.

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 intersection, the relevant intersection, concerning as it does rights and interests in land, is an intersection 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. 436

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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 H L A 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 What is important for present purposes, however, is not the jurisprudential questions that we have identified. It is important to recognise that the rights and interests concerned originate in a normative system, and to recognise some consequences that follow from the Crown’s assertion of sovereignty. Upon the Crown acquiring sovereignty, the normative or law-making system which then existed could not thereafter validly create new rights, duties or interests. Rights or interests in land created after sovereignty and which owed their origin and continued existence only to a normative system other than that of the new sovereign power, would not and will not be given effect by the legal order of the new sovereign. 437

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That is not to deny that the new legal order recognised then existing rights and interests in land. Nor is it to deny the efficacy of rules of transmission of rights and interests under traditional laws and traditional customs which existed at sovereignty, where those native title rights continue to be recognised by the legal order of the new sovereign. The rights and interests in land which the new sovereign order recognised included the rules of traditional law and custom which dealt with the transmission of those interests. Nor is it to say that account could never be taken of any alteration to, or development of, that traditional law and custom that occurred after sovereignty. Account may have to be taken of developments at least of a kind contemplated by that traditional law and custom. Indeed, in this matter, both the claimants and respondents accepted that there could be ‘significant adaptations’. But what the assertion of sovereignty by the British Crown necessarily entailed was that there could thereafter be no parallel law-making system in the territory over which it asserted sovereignty. To hold otherwise would be to deny the acquisition of sovereignty and as has been pointed out earlier, that is not permissible. Because there could be no parallel law-making system after the assertion of sovereignty it also follows that the only rights or interests in relation to land or waters, originating otherwise than in the new sovereign order, which will be recognised after the assertion of that new sovereignty are those that find their origin in pre-sovereignty law and custom.

Consequences for construction of ‘native title’ Construction of the definition of native title must take account of these considerations. The first level of inquiry is whether, on the proper construction of the Native Title Act and the definition of native title, the Act is to be understood as creating new rights and interests in land which it calls ‘native title’. Putting the same question another way, does an application for determination of native title seek the determination of rights and interests which find their origin in the new sovereign order, or is it seeking a determination of the existence of rights and interests which, recognised after the assertion of that new sovereignty, nonetheless find their origin in presovereignty law and custom? Hitherto it has been accepted, and the contrary was not contended in this appeal, that the native title rights and interests to which the Native Title Act refers are rights and interests finding their origin in pre-sovereignty law and custom, not rights or interests which are a creature of that Act. That being so, the references, in pars (a) and (b) of the definition of native title, to ‘traditional’ law or custom must be understood in the light of the considerations that have been mentioned. As the claimants submitted, ‘traditional’ is a word apt to refer to a means of transmission of law or custom. A traditional law or custom is one which has been passed from generation to generation of a society, usually by word of mouth and common practice. But in the context of the Native Title Act, ‘traditional’ carries with it two other elements in its meaning. First, it conveys an understanding of the age of the traditions: the origins of the content of the law or custom concerned are to be found in the normative rules of the Aboriginal and Torres Strait Islander societies that existed before the assertion of sovereignty by the British Crown. It is only those normative rules that are ‘traditional’ laws and customs. Secondly, and no less importantly, the reference to rights or interests in land or waters being possessed under traditional laws acknowledged and traditional customs observed by the peoples concerned, requires that the normative system under which the rights and interests are possessed (the traditional laws and customs) is a system that has had a continuous existence and vitality since sovereignty. If that normative system has not existed throughout that period, the rights and interests which owe their existence to that system will have ceased to exist. And any later attempt to revive adherence to the tenets of that former system cannot and will not reconstitute the traditional laws and customs out of which rights and interests must spring if they are to fall within the definition of native title. To explain why this is so requires consideration of fundamental aspects of what is meant by a body of norms (laws and customs) that give rise to rights or interests in relation to land 438

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or waters, and what is meant by saying that the body of norms has a continuous existence and vitality.

The inextricable link between a society and its laws and customs Laws and customs do not exist in a vacuum. They are, in Professor Julius Stone’s words, ‘socially derivative and non-autonomous’. As Professor Honoré has pointed out, it is axiomatic that ‘all laws are laws of a society or group’. Or as was said earlier, in Paton’s Jurisprudence, ‘law is but a result of all the forces that go to make society’. Law and custom arise out of and, in important respects, go to define a particular society. In this context, ‘society’ is to be understood as a body of persons united in and by its acknowledgment and observance of a body of law and customs. Some of these issues were considered in Milirrpum v Nabalco Pty Ltd where there appears to have been detailed evidence about the social organisation of the Aboriginal peoples concerned. Some were touched on by Toohey J in Mabo (No 2) where his Honour referred to North American decisions about similar questions. They appear not to be issues that were addressed directly in argument in this matter in the courts below, whether for want of evidence about them or for some other reason does not matter. To speak of rights and interests possessed under an identified body of laws and customs is, therefore, to speak of rights and interests that are the creatures of the laws and customs of a particular society that exists as a group which acknowledges and observes those laws and customs. And if the society out of which the body of laws and customs arises ceases to exist as a group which acknowledges and observes those laws and customs, those laws and customs cease to have continued existence and vitality. Their content may be known but if there is no society which acknowledges and observes them, it ceases to be useful, even meaningful, to speak of them as a body of laws and customs acknowledged and observed, or productive of existing rights or interests, whether in relation to land or waters or otherwise. What is the position if, as is said to be the case here, the content of the laws and customs is passed on from individual to individual, despite the dispersal of the society which once acknowledged and observed them, and the descendants of those who used to acknowledge and observe these laws and customs take them up again? Are the laws and customs which those descendants acknowledge and observe ‘traditional laws’ and ‘traditional customs’ as those expressions are used in the Native Title Act, and are the rights and interests in land to which those laws and customs give rise possessed under traditional laws acknowledged and traditional customs observed? Again, it is necessary to consider the several elements of the issues that thus arise. Has the society ceased to exist? Does not the survival of knowledge of the traditional ways suggest that it has not? Or is it shown that, although there is knowledge, there has been or is no observance or acknowledgment? These may be very difficult questions to resolve. Identifying a society that can be said to continue to acknowledge and observe customs will, in many cases, be very difficult. In the end, however, because laws and customs do not exist in a vacuum, because they are socially derivative and non-autonomous, if the society (the body of persons united in and by its observance and acknowledgment of a body of law and customs) ceases to acknowledge and observe them, the questions posed earlier must be answered, no. When the society whose laws or customs existed at sovereignty ceases to exist, the rights and interests in land to which these laws and customs gave rise, cease to exist. If the content of the former laws and customs is later adopted by some new society, those laws and customs will then owe their new life to that other, later, society and they are the laws acknowledged by, and customs observed by, that later society, they are not laws and customs which can now properly be described as being the existing laws and customs of the earlier society. The rights and interests in land to which the re-adopted laws and customs give rise are rights and interests which are not rooted in pre-sovereignty traditional law and custom but in the laws and customs of the new society. 439

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In so far as it is useful to analyse the problem in the jurisprudential terms of the legal positivist, the relevant rule of recognition of a traditional law or custom is a rule of recognition found in the social structures of the relevant indigenous society as those structures existed at sovereignty. It is not some later created rule of recognition rooted in the social structures of a society, even an indigenous society, if those structures were structures newly created after, or even because of, the change in sovereignty. So much necessarily follows as a consequence of the assertion of sovereignty and it finds reflection in the definition of native title and its reference to possession of rights and interests under traditional law and custom. The caveat we have entered about the utility of jurisprudential analysis is not unimportant. Leaving aside the questions of choice between different schools of analytical thought, any analysis of the traditional laws and customs of societies having no well-developed written language by using analytical tools developed in connection with very differently organised societies is fraught with evident difficulty. The difficulty of that analytical task should not be understood, however, as denying the importance of recognising two cardinal facts. First, laws and customs and the society which acknowledges and observes them are inextricably interlinked. Secondly, one of the uncontestable consequences of the change in sovereignty was that the only native title rights or interests in relation to land or waters which the new sovereign order recognised were those that existed at the time of change in sovereignty. Although those rights survived the change in sovereignty, if new rights or interests were to arise, those new rights and interests must find their roots in the legal order of the new sovereign power. For these reasons, it would be wrong to confine an inquiry about native title to an examination of the laws and customs now observed in an indigenous society, or to divorce that inquiry from an inquiry into the society in which the laws and customs in question operate. Further, for the same reasons, it would be wrong to confine the inquiry for connection between claimants and the land or waters concerned to an inquiry about the connection said to be demonstrated by the laws and customs which are shown now to be acknowledged and observed by the peoples concerned. Rather, it will be necessary to inquire about the relationship between the laws and customs now acknowledged and observed, and those that were acknowledged and observed before sovereignty, and to do so by considering whether the laws and customs can be said to be the laws and customs of the society whose laws and customs are properly described as traditional laws and customs. Against this lengthy introduction it is convenient now to turn to the specific criticisms that the claimants made of the reasoning in the courts below and, for that purpose, to say more about the reasons both of the primary judge and of the majority in the Full Court. …

The appeal to this court The claimants contended that both the primary judge, and the majority of the Full Court, wrongly held that the claimants’ claim to native title failed without positive proof of continuous acknowledgment and observance of the traditional laws and customs in relation to land of the original inhabitants of the claimed land. The claimants submitted that the primary judge proceeded from the erroneous premise that ss 223(1) and 225 of the Native Title Act required proof of native title according to all common law requirements of which positive proof of the kind described was one. They contended that the majority of the Full Court wrongly found this requirement in an erroneous construction of s 223(1)(c). To speak of the ‘common law requirements’ of native title is to invite fundamental error. Native title is not a creature of the common law, whether the Imperial common law as that existed at the time of sovereignty and first settlement, or the Australian common law as it exists today. Native title, for present purposes, is what is defined and described in s 223(1) of the Native Title Act. Mabo (No 2) decided that certain rights and interests relating to land, and rooted in traditional law and custom, survived the Crown’s acquisition of sovereignty and radical title in 440

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Australia. It was this native title that was then ‘recognised, and protected’ in accordance with the Native Title Act and which, thereafter, was not able to be extinguished contrary to that Act. The Native Title Act, when read as a whole, does not seek to create some new species of right or interest in relation to land or waters which it then calls native title. Rather, the Act has as one of its main objects ‘to provide for the recognition and protection of native title’ (emphasis added), which is to say those rights and interests in relation to land or waters with which the Act deals, but which are rights and interests finding their origin in traditional law and custom, not the Act. It follows that the reference in par (c) of s 223(1) to the rights or interests being recognised by the common law of Australia cannot be understood as a form of drafting by incorporation, by which some pre-existing body of the common law of Australia defining the rights or interests known as native title is brought into the Act. To understand par (c) as a drafting device of that kind would be to treat native title as owing its origins to the common law when it does not. And to speak of there being common law elements for the establishment of native title is to commit the same error. It is, therefore, wrong to read par (c) of the definition of native title as requiring reference to any such body of common law, for there is none to which reference could be made. The reference to recognition by the common law serves a different purpose of which there are at least two relevant features. First, the requirement for recognition by the common law may require refusal of recognition to rights or interests which, in some way, are antithetical to fundamental tenets of the common law. No such case was said to arise in this matter and it may be put aside. Secondly, however, recognition by the common law is a requirement that emphasises the fact that there is an intersection between legal systems and that the intersection occurred at the time of sovereignty. The native title rights and interests which are the subject of the Act are those which existed at sovereignty, survived that fundamental change in legal regime, and now, by resort to the processes of the new legal order, can be enforced and protected. It is those rights and interests which are ‘recognised’ in the common law. How then, if at all, does the definition of native title take account of whether there has been some modification of or adaptation to traditional law and custom, or some interruption in the exercise of native title rights and interests? As foreshadowed at the outset of these reasons, much turns on a proper understanding of the reference in par (a) of the definition to ‘traditional’ laws acknowledged and ‘traditional’ customs observed. For the reasons given earlier, ‘traditional’ does not mean only that which is transferred by word of mouth from generation to generation, it reflects the fundamental nature of the native title rights and interests with which the Act deals as rights and interests rooted in pre-sovereignty traditional laws and customs. It may be accepted that demonstrating the content of that traditional law and custom may very well present difficult problems of proof. But the difficulty of the forensic task which may confront claimants does not alter the requirements of the statutory provision. In many cases, perhaps most, claimants will invite the Court to infer, from evidence led at trial, the content of traditional law and custom at times earlier than those described in the evidence. Much will, therefore, turn on what evidence is led to found the drawing of such an inference and that is affected by the provisions of the Native Title Act. When the primary judge was hearing evidence in this matter the Native Title Act provided that, in conducting proceedings under the Act, the Federal Court, first, was ‘not bound by technicalities, legal forms or rules of evidence’ and, secondly, ‘must pursue the objective of providing a mechanism of determination that is fair, just, economical, informal and prompt’. It may be that, under those provisions, a rather broader base could be built for drawing inferences about past practices than can be built since the 1998 Amendment Act came into operation. By that Act a new s 82 was enacted. Section 82(1) now provides that the Court is bound by the rules of evidence ‘except to the extent that the Court otherwise orders’. (In the present case the parties were invited by the primary judge to make submissions about the effect of this amendment on the evidence that had already been received in the matter but nothing was said then, or in this Court, to turn on that point.) The kinds of evidentiary questions which may 441

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arise in this regard are well illustrated by Milirrpum but it is neither necessary nor appropriate to consider whether the answers given to the questions that arose in that case were right. Were they to arise again, in proceedings in the Federal Court, it would be necessary to consider them by reference to the Evidence Act 1995 (Cth). It is, however, important to notice that demonstrating the content of pre-sovereignty traditional laws and customs may be especially difficult in cases, like this, where it is recognised that the laws or customs now said to be acknowledged and observed are laws and customs that have been adapted in response to the impact of European settlement. In such cases, difficult questions of fact and degree may emerge, not only in assessing what, if any, significance should be attached to the fact of change or adaptation but also in deciding what it was that was changed or adapted. It is not possible to offer any single bright line test for deciding what inferences may be drawn or when they may be drawn, any more than it is possible to offer such a test for deciding what changes or adaptations are significant. Indeed, so far as the second of those issues is concerned, it would be wrong to attempt to reformulate the statutory language when it is the words of the definition to which effect must be given. 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 pars (a) and (b) of the definition of native title are cast in the present tense. 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. 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 442

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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 influence 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.

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 443

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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 par (a) of that definition than they do on the requirements of par (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.

Commentary 8.15  The majority of the High Court in Yorta Yorta concluded that following the

introduction of the NTA, native title must now be founded upon statute because it was the intention of the Parliament to codify the common law elements of native title into the statutory definition in s 223(1). In articulating the statutory definition, the majority interpreted the words ‘traditional laws acknowledged, and the traditional customs observed’, as ‘a reference to a body of norms or normative system’: at [39]. The court concluded that three requirements were needed in order to establish statutory native title: 1. First, that the interests found their source in traditional laws and customs rather than the common law: [2002] 194 ALR 538 at [33] and [38]; see also Western

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Australia v Ward (2002) 76 ALJR 1098 at [20]. It has been subsequently held by Finn J in Akiba v Queensland (No 3) (2010) 204 FCR 1 at [173] that ‘“customs” are accepted and expected norms of behaviour, the departure from which attracts social sanction (often disapproval especially by elders)’. 2. Second, that the ‘traditional’ rights and interests had a connection with the claimed land or waters. 3. Third, that the rights and interests in relation to the claimed land were recognised by the common law. In interpreting these requirements, the majority adhered to what they described as two ‘cardinal facts’. First, laws and customs and the society that acknowledges and observes those laws and customs are inextricably linked. It is this social connection that, according to the majority, gives laws their normative content. In reaching this conclusion, the majority referred to A M Honoré, ‘Groups, Laws and Obedience’ in A W B Simpson (ed) Oxford Essays in Jurisprudence (Second Series), Clarendon Press, Oxford, 1973. Second, only native title rights or interests existing pre-sovereignty could bind the ‘new sovereign order’: at [55]. Thus, laws and customs can only be traditional where they are sourced in a pre-sovereignty, normative, Indigenous social system. Where that system has continued to the present day, without interruption, the laws and customs of that society will retain a traditional connection and satisfy the statutory requirements. It is not, however, necessary to prove that the claimants form a part of a social, communal or political organisation on or near the claim: see also De Rose v State of South Australia (No 2) [2005] FCAFC 110. In interpreting the meaning of ‘society’, the Federal Court has held that there is no need for a strict, legalistic interpretation. In Northern Territory v Alyawarr (2005) 145 FCR 442, the Full Court at [78] considered that the term ‘society’ deployed by the plurality did not require ‘arcane construction’, was not a word that appeared in the NTA, but rather was to be treated as ‘a conceptual tool for use in its application’. The Full Court added at [78] that it did not introduce into judgments required under the NTA, ‘technical, jurisprudential or social scientific criteria for the classification of groups or aggregations of people as “societies”’. Where the society has been dispersed, dislocated, or interrupted as a consequence of European settlement, the laws and customs will ‘cease to have continued existence and vitality’ because the society is no longer sourced in a pre-sovereignty normative system: Yorta Yorta at [50]. On the facts of the Yorta Yorta decision, the High Court held that there was no error of law in the conclusions of the primary judge, Olney J, who had held that the claimants had not demonstrated that their ancestors had continued to acknowledge and observe the traditional laws and customs of their forebears throughout the period from the assertion of sovereignty in 1788 to the date of their claim. The judgment of Olney J was based upon evidence from 201 witnesses, including 54 Yorta Yorta community members, two anthropologists, an archaeologist and a linguist. His Honour also took significant account of some written historical accounts by Edward Curr, an early European pioneer living in the region in the 1840s and 1850s. His writings were in the nature of a memoir containing his personal observations of the Aboriginal peoples living on his pastoral run. The emphasis given by Olney J to the writings of Curr has been criticised because they were not contextualised and this was important as they were written approximately 30 years later and the writing was primarily for a British imperial audience. This approach has not been followed in subsequent courts. In Sampi v Western Australia (2010) 266 ALR 537 at [48] the court concluded that the evidence of Aboriginal witnesses ‘about their traditional laws 445

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and customs and their rights and responsibilities with respect to land and waters, deriving from them, is of the highest importance. All else is second order evidence.’ Nevertheless, the conclusions of Olney J highlight the evidential difficulties associated with proving that claimed laws and customs connect to the practices of pre-sovereignty communities. The inherent problems underpinning the conclusions of the majority in Yorta Yorta were considered by K Anker in ‘Law in the Present Time: Tradition and Cultural Continuity in Members of Yorta Yorta Aboriginal Community v Victoria’ (2004) 28 Melbourne University Law Review 1. The author makes the following comments at 21: The majority has native title claimants in a bind — a community must continue to acknowledge laws and observe customs in a way that is normative and therefore capable of sustaining rights and interests, rather than mere habits and behaviours. However, another aspect of normativity is completely denied: the fact that legal norms come from a jurisgenic or lawcreating community. This is in fact a reiteration of the point that law and society are mutually constitutive and engaged in a dynamic relationship, where laws are constantly negotiated and interpreted within a social arena. People do not just follow laws, which arguably do not have an autonomous existence or identity apart from the activity of interpreting law. Rather, they give laws meaning through their interpretation in, and application to, daily life, and in that sense they generate the substance of the law. Despite the common belief across Aboriginal Australia that Dreaming law was left by ancestor beings and is not a human artefact, in an interpretive sense people are particularly jurisgenic in oral Aboriginal culture. All individuals in society have responsibility for stories, sites and living things that make up Aboriginal law; life and Law continue to be ‘brought into being’ by performing ceremony and telling stories. In the majority’s schema, claimants must belong to a real live Aboriginal society living under traditional laws, but the laws that they must observe are not recognised by Western law to be really alive. They are perceived, instead, to have been preserved in some kind of colonial formaldehyde since 1788 (albeit with the possibility that the mode of practice might have changed), because the ability to breathe ongoing life into them is excluded by the idea of state sovereignty. Despite their reassurances to the contrary, the majority seems to adopt a frozen in time approach.

The conclusions of the High Court in Yorta Yorta were subsequently reinforced by the Full Federal Court in Bodney v Bennell (2008) 167 FCR 84. The case was an appeal from the conclusions of Wilcox J in Bennell v State of Western Australia [2006] FCA 1243 who, following voluminous evidence from 30 Aboriginal witnesses and five expert witnesses, including two historians, two anthropologists and a linguistic expert, held that the laws and customs practised by the Noongar Aboriginal community in Western Australia had sustained a ‘recognisable adaptation’ of those customs over the claimed land and therefore did satisfy the requirements of s 223(1) of the NTA. The claimed land included the whole of the Perth metropolitan area including centres such as Bunbury, Busselton, Margaret River, Albany, York, Toodyay, Katanning, Merredin and many other towns. Wilcox J validated significant parts of the native title claim of the Noongar despite the fact that substantial changes to their laws and customs had occurred following the impact of European colonisation. Wilcox J made it clear that he was prepared to tolerate ‘recognisable adaptations’ to the cultural traditions, laws and customs that had occurred as a direct result of European colonisation. While Wilcox J accepted the need for laws and customs to have a traditional character and retain their connection to a pre-sovereignty normative order, he also recognised the inherent unfairness in suggesting that ‘forced’ changes to laws and customs have removed this connection. 446

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8.16  On appeal, the Full Federal Court reversed this decision, holding that Wilcox J had

not applied two important criteria from s 223(1) correctly. Those criteria were the need to prove continuity of traditional laws and customs and connection of the traditional laws and customs with the claimed land. An extract of the judgment of Finn, Sundberg and Mansfield JJ in Bodney v Bennell (2008) 167 FCR 84 follows.

—  Bodney v Bennell — (2008) 167 FCR 84 Facts: In 2003 eighty Aboriginal persons made an application to the court for a determination of native title. The application came to be called ‘the Single Noongar application’. The applicants alleged that in 1829 (the date of European settlement in Western Australia) there was a single Aboriginal community throughout the whole of the south-west of Western Australia. The applicants called this the ‘Noongar community’ and claimed the 1829 rules governing the occupation and use of land, throughout the south-west, were the laws and customs of that community. The applicants said the Noongar community continues to exist, and they are part of it; and that its members continue to observe some of the community’s traditional laws and customs (including in relation to land), although with changes flowing from the existence and actions of the white community. The applicants seek a Determination of native title, in favour of all members of the present Noongar community, over a substantial portion of Western Australia. The boundary of the claimed area commences, on the west coast, at a point north of Jurien Bay, proceeds roughly easterly to a point approximately north of Moora and then roughly south-easterly to a point on the southern coast between Bremer Bay and Esperance. The Single Noongar applicants also claim rights and interests over Rottnest and Carnac Islands and coastal waters to a distance of three nautical miles from land. The whole of the land and waters claimed in the single Noongar application are described as the ‘claim area’. The claim area includes the whole of the Perth metropolitan area as well as centres such as Bunbury, Busselton, Margaret River, Albany, York, Toodyay, Katanning, Merredin and many other towns. However, the applicants excluded from their claim all land and waters over which native title had been extinguished by a past act of the Commonwealth or state governments. The effect of that exclusion is to omit from the application all freehold land in the claim area, and probably most leasehold land. Having regard to the extent of urban development, and intensive farming, in the claim area, the result is that a large proportion of the land within the claim area is unaffected by the claim. The court decided to break up the trial of the Single Noongar application by first dealing with an area, in and around Perth, that had been the subject of several earlier, smaller claims later aggregated together as the ‘Combined Metro claim’. The court took this course because of the expressed desire of the state (supported by the Commonwealth) for early finality as to whether native title still survived in the Perth area. With the agreement of all parties, the court created a separate proceeding in relation to the Perth area. With the assistance of the parties, the court framed a separate question in that proceeding, asking whether native title existed in the Perth area and, if so, who were the persons who held the native title and what rights and interests it included. The application was heard by Justice Wilcox commencing in October 2005. On 19 September 2006 the judge answered the separate question as follows: ‘But for any question of extinguishment of native title by inconsistent legislative or executive acts carried out pursuant to the authority of the legislature under Divisions 2, 2A, 2B or Part 2 of the Native Title Act 1993 (Cth) or under the Titles (Validation) and Native Title (Effect of Past Acts) Act 1995 (WA), native title exists in relation to the whole of the land and waters in the area of the separate proceeding, other than off-shore islands and land and waters below low-water mark.’ 447

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In the course of his reasons for judgment Justice Wilcox reached the following conclusions: (1) that the applicants were correct in claiming that, in 1829, the laws and customs governing land throughout the claim area (other than off-shore islands and land and waters below low-water mark) were those of a single community; (2) that the contemporary Noongar community acknowledges and observes laws and customs relating to land which are a recognisable adaptation to their situation of the laws and customs existing at the date of settlement; (3) that the native title holders are the whole Noongar community on whose behalf the Single Noongar application was made. The state, the Commonwealth and Western Australian Fishing Industry Council (WAFIC) obtained leave to appeal to the Full Court against Justice Wilcox’s decision. The appeal was heard by Justices Finn, Sundberg and Mansfield in April 2007. Today the Full Court allowed the appeals. The Full Court assumed, without deciding, that in 1829 the laws and customs governing land throughout the claim area were those of a single community. However, it held that Justice Wilcox had failed to consider two matters the claimants were required by s 223 of the Native Title Act to establish in order for their application to be successful. The first was that there has been continuous acknowledgment and observance of the traditional laws and customs by the Single Noongar Society from sovereignty until recent times. The second matter was that the claimants have a connection with the Perth Metropolitan Area. Justice Wilcox had taken the view, wrongly in the Full Court’s opinion, that it was enough that the claimants had established a connection with the claim area of the Single Noongar claim, and that since the Perth Metropolitan Area was part of that larger area, the connection requirement was satisfied in relation to the Perth Metropolitan Area. Finn, Sundberg and Mansfield JJ:

Continuity Meaning of ‘traditional’ We now turn to the question whether the laws and customs said to be acknowledged and observed by the claimants today are traditional in the sense that they are the continuation of laws and customs acknowledged and observed at sovereignty. The primary judge held that they are. Under the definition of ‘native title’ in s 223(1)(a) the rights and interests in relation to land and waters must be ‘possessed under the traditional laws acknowledged, and the traditional customs observed, by the Aboriginal peoples’. Members of the Yorta Yorta Aboriginal Community v Victoria [2002] HCA 58; (2002) 214 CLR 422 (Yorta Yorta HC) draws attention to three separate but related concepts: society; laws and customs; and rights and interests. The first is not found in the Act, but is referred to at length in Yorta Yorta HC. The second and third are related in the manner first explained by Brennan J in Mabo v Queensland (No 2) [1992] HCA 23; (1992) 175 CLR 1 at 58 (Mabo (No 2)). In Yorta Yorta HC the majority said at [49] that ‘law and custom arise out of and, in important respects, go to define a particular society’, and that ‘society’ is to be understood as a body of persons united in and by its acknowledgment and observance of a body of law and customs’. At [50] the majority said that ‘to speak of rights and interests possessed under an identified body of laws and customs is, therefore, to speak of rights and interests that are the creatures of the laws and customs of a particular society that exists as a group which acknowledges and observes those laws and customs’. Their Honours spoke of the traditional laws and customs as constituting a normative system which possesses normative rules which give rise to rights and interests in relation to land and water. 448

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Because it is the normative system that is the source of the rights and interests, it is necessary in order to prove native title that the normative system has had a continuous existence and vitality since sovereignty. If that normative system has not existed throughout that period, the rights and interests which owe their existence to that system will have ceased to exist: Yorta Yorta HC at [47]. It is therefore necessary for native title claimants to show that the normative system that existed at sovereignty is substantially the same as the one that exists today. If it is not, then any rights and interests are not ‘possessed under the traditional laws acknowledged and traditional customs observed’. The requirement in s 223(1)(b) that the Aboriginal peoples, by their laws and customs, have a ‘connection’ with the land or waters, is an additional element of proof which is considered at [61] to [66]. However, ‘connection’ is linked with the requirement of continuity. As a Full Court said in Northern Territory v Alyawarr [2005] FCAFC 135; (2005) 145 FCR 442 (Alyawarr FC) at [92]: It may be that not enough emphasis has been placed on the idea of continuity of observance as a manifestation of connection. … The use of ‘connection’ as emphasising a requirement to show continuity of association with the land by observance and acknowledgment of traditional law and custom relating to it gives proper recognition to its origins in the Mabo (No 2) judgment. It involves the continuing assertion by the group of its traditional relationship to the country defined by its laws and customs. This relationship may be evidenced by its physical presence there but also in other ways involving the maintenance of the stories and allocation of responsibilities and rights in relation to it. Thus ‘connection’ can be maintained by the continued acknowledgment of traditional law and observance of traditional customs. See also Western Australia v Ward [2000] FCA 191; (2000) 99 FCR 316 at [243] (Ward FC).

Primary judge on continuity At the beginning of his discussion of continuity, the primary judge posed two questions, which he said were logically distinct: 3.1 whether the community that existed in 1829 (the Single Noongar community) continued to exist over subsequent years, up until recent times, with its members continuing to acknowledge and observe at least some of the traditional laws and customs relating to land that were acknowledged and observed in 1829; 3.2 whether that community continues to exist today, with members, including at least some of the Applicants, who continue to acknowledge and observe at least some of those laws and customs. His Honour then set about informing himself of the relevant law concerning continuity, and noted at [456]–[459]: • the possibility that a native title claim may fail where traditional laws and customs have been discontinued and subsequently revived; •

that native title claimants must satisfy the Court, on the balance of probabilities, that there has been continuity of acknowledgment and observance of laws and customs from the date of sovereignty until the present time;

•

that inferences may be drawn from evidence led at trial as to the situation that existed at times before the living memory of witnesses: Yorta Yorta HC at [80].

His Honour summarised the evidence given by thirty Aboriginal witnesses. He noted the following features of their evidence: • while there were some differences in witnesses’ perceptions, there was unanimity about the existence of a Noongar society;

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•

there was substantial agreement about the location of Noongar land, and the witnesses’ description of Noongar boundaries was generally consistent with those given by the early writers and with the anthropological evidence;

•

most witnesses gave clear evidence of differences between Noongars and their neighbouring groups the Wongais and Yamatjis, and thought the differences were unlike those existing between Noongar tribes;

•

many of the witnesses first learnt about being Noongar as children, as long ago as the 1940s or even earlier;

•

European settlement had a profound effect on the Aboriginal people of south-west Western Australia, but there was no cataclysmic event that totally removed them from their traditional country;

•

members of Noongar families continued to remain in contact with each other, and with members of other Aboriginal families, especially those from their traditional areas, so there is clearly a present-day ‘Noongar network’ linking families throughout the claim area.

His Honour turned to the observance and acknowledgment of traditional laws and customs and noted at [601] that the … question whether the members of the ‘Noongar network’ may properly be called a ‘community’, for the purposes of s 223(1) of the Act, depends upon the extent to which its members have continued to observe and acknowledge their traditional laws and customs. He considered the evidence relating to each of the traditional laws and customs with a view to determining whether the Noongar society of today acknowledges and observes traditional laws and customs. …

Primary judge’s conclusion on continuity The primary judge prefaced his conclusion by quoting this passage from Yorta Yorta HC at [89]: it is necessary to demonstrate that [despite the changes] the normative system out of which the claimed rights and interests arise is the normative system of the society [at sovereignty] … not a normative system rooted in some other, different, society … it must be shown that the society … has continued to exist throughout that period as a body united by its acknowledgment and observance of the laws and customs. He continued at [776]: In other words, one should look for evidence of the continuity of the society, rather than require unchanged laws and customs. No doubt changes in laws and customs can be an indication of lack of continuity in the society; they may show that the current normative system ‘is rooted in some other, different, society’. Whether or not that conclusion should be drawn must depend upon all the circumstances of the case, including the importance of the relevant laws and customs and whether the changes seem to be the outcome of the factors forced upon the community from outside its ranks. His Honour then dealt with a number of submissions made by the present appellants and reached the following conclusions: (a) Descent rules are of great importance and changes to them were inevitable if the Noongar were to survive European colonisation. The move away from a patrilineal system to a mixed patrilineal/matrilineal system ‘should be regarded as not inconsistent with the maintenance of the pre-settlement community and the continued acknowledgment and observance of its laws and customs’. (b) There was inconsistency as to whether a person had to have been born on country in order to have rights to it. However, problems with the content of this rule have 450

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arisen because of European settlement and the phenomenon of babies being born elsewhere than on their parents’ land. It was therefore ‘natural’ for a rule to have developed to the effect that a person could have rights to land merely from living on it for substantial periods of time and learning about it. (c) The fact that witnesses could not always articulate with precision the content of their rules does not mean that there was no normative system. Aboriginal witnesses cannot be expected to recount their laws and customs with the precision of a lawyer expounding the common law. Moreover, there is no error in an expert anthropologist reasoning from individual evidence to discern the rules that are in operation. (d) The absence of an enforcement mechanism for resolving disputes over access to land is not fatal. The most effective method of enforcement — spearing — is illegal under European law and so has disappeared. A secondary method — social ostracism — is still practised today, especially if a person hunts on or speaks for land without permission. (e) The submission that no action had been taken to resist or protest against ingress to Perth of Aborigines from other areas was ‘unreal’. There was evidence that from as early as 1836, Perth Aborigines were unwilling to drive away stranger tribes since the loss of control of their traditional lands meant that the Perth Aborigines were reliant on strangers for essential goods. (f) ‘Today’s boodjas are similar in concept to — although probably larger in area than — the “runs” of pre-settlement times’. While this change is significant, it is an understandable result of European settlement. White settlers put up fences and forced the Aborigines off their home areas. It is possible for Aborigines to substantially maintain a connection with the land even though it is impracticable to maintain a traditional presence on substantial parts of the determination area. (g) The argument that permission rules have changed is incorrect. Although the manner of seeking permission has changed, the rule that permission must be obtained still exists. The fact that it is disregarded by some does not abrogate the rule. At [791] the primary judge stated his ultimate conclusion on continuity in relation to the Single Noongar claim area as follows: The changes mentioned by counsel for the state, and counsel for the Commonwealth, raise important issues. There is no doubt that enormous forces have assailed Noongar society since 1829, making it impossible for many of the traditional laws and customs to be maintained. However, when I come back to the test stated in Yorta Yorta, and ask myself whether the normative system revealed by the evidence is ‘the normative system of the society which came under a new sovereign order’ in 1829, or ‘a normative system rooted in some other, different society’, there can be only one answer. The current normative system is that of the Noongar society that existed in 1829, and which continues to be a body united, amongst other ways, by its acknowledgment and observance of some of its traditional laws and customs. It is a normative system much affected by European settlement; but it is not a normative system of a new, different society.

Consideration of the appeals on continuity Wrong question asked The appellants contended that the questions the primary judge posed (quoted at [49]) are the wrong questions. The Commonwealth submitted that the correct question is whether acknowledgment and observance of traditional laws and customs has continued substantially uninterrupted since sovereignty. It is to be answered by ascertaining whether, for each generation 451

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of the relevant society since sovereignty, those laws and customs constituted a normative system giving rise to rights and interests in land, and in fact regulated and defined the rights and interests which those people had and could exercise in relation to the land and waters. Since Yorta Yorta HC the approach propounded by the Commonwealth has been adopted in relation to the continuity issue. There at [87] the majority said: 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. In Risk v Northern Territory [2006] FCA 404 at [97(c)] (Risk TJ) Mansfield J said that applicants for native title must establish, amongst other things, that the acknowledgment and observance of the laws and customs has continued substantially uninterrupted by each generation since sovereignty, and the society has continued to exist throughout that period as a body united in and by its acknowledgment and observance of those laws and customs. On appeal to the Full Court, the appellants did not attack that formulation, though they did unsuccessfully attack other parts of his Honour’s summary of the requirements for establishing native title: Risk v Northern Territory [2007] FCAFC 46; (2007) 240 ALR 75 at [78]–[79]. The Full Court regarded the whole of his Honour’s summary, including that quoted above, as an accurate statement of the effect of the cases, including Yorta Yorta HC. See at [78] to [98]. As appears from [49], the primary judge did not pose the continuity question in the form propounded by Yorta Yorta HC. Instead of enquiring whether the laws and customs have continued to be acknowledged and observed substantially uninterrupted by each generation since sovereignty, he asked whether the community that existed at sovereignty continued to exist over subsequent years with its members continuing to acknowledge and observe at least some of the traditional 1829 laws and customs relating to land. The Yorta Yorta HC formulation concentrates on continued acknowledgment and observance of laws and customs because the rights and interests the subject of a determination of native title (s 225) are the product of the laws and customs of the society. It is not the society per se that produces rights and interests. Proof of the continuity of a society does not necessarily establish that the rights and interests which are the product of the society’s normative system are those that existed at sovereignty, because those laws and customs may change and adapt. Change and adaptation will not necessarily be fatal. So long as the changed or adapted laws and customs continue to sustain the same rights and interests that existed at sovereignty, they will remain traditional. An enquiry into continuity of society, divorced from an enquiry into continuity of the pre-sovereignty normative system, may mask unacceptable change with the consequence that the current rights and interests are no longer those that existed at sovereignty, and thus not traditional. Consistently with the primary judge’s formulation at [49], his Honour’s conclusion quoted at [67] is cast in terms of continuation of a society. The primary judge’s focus on the continuity of a society rather than continued acknowledgment and observance of laws and customs is seen in his treatment of the change from an essentially patrilineal system of descent to a mixed patrilineal/matrilineal system. His Honour did not engage in the Yorta Yorta HC and Risk TJ enquiry as to whether the laws and customs relating to descent had continued to be observed by each generation from 452

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sovereignty to the present. He made no findings about that. Rather he seems to have proceeded on the basis that provided the pre-sovereignty society continued to exist, its members would have continued to acknowledge and observe those laws and customs. …

Disregard of continuity evidence The primary judge’s failure to address continued acknowledgment and observance of traditional law and custom between sovereignty and the present is underlined, and perhaps explained, by his ‘disregard’ of opinions expressed by the anthropologists who gave evidence based on the writings of nineteenth and twentieth century anthropologists and observers. We use the word ‘disregard’ because, while his Honour said he obtained no benefit or little assistance from this material, he did not positively disallow it, so that it was not part of the evidence before him. It is nevertheless clear that his Honour said he would not take it into account and that he did not do so. … In view of the discussion at [90] to [94] the primary judge’s failure to have regard or attach weight to the anthropologists’ evidence on the observance of the laws and customs in the period between sovereignty and the present on the ground that it was not relevant to the position at sovereignty or at the present time was a serious error. The other ground on which his Honour rejected the evidence, namely that the basis rule was not satisfied, is also wrong. The primary judge thereby deprived himself of the evidence in reliance on which he could have undertaken the Yorta Yorta HC exercise of determining whether, for each generation since sovereignty, acknowledgment and observance of the Noongar laws and customs have continued substantially uninterrupted.

Effects of white settlement The applicants submit that the primary judge erred by making too much allowance for the changes inflicted upon Noongar society by European settlement. In Yorta Yorta HC at [89]–[90] the majority said: 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 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 … 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 influence the fact-finder’s decision about whether there was such an interruption. We understand the last sentence of that passage to be a reference back to the expression ‘substantially uninterrupted’. In the passage quoted at [78] the primary judge said that the disappearance of home areas, and apparently pre-settlement runs, was a ‘significant change’. He then seems to have put the change aside on the ground that it was ‘readily understandable’. There could not be a more 453

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important law or custom for the identification of rights and interests in land than that by which Aboriginal people are related to tracts of land. At settlement the tracts were the home areas and the runs. They ceased to exist after settlement and Aboriginal people instead claimed boodjas or country. Understandably, the primary judge treated the change as significant. However his Honour thought the effects of change could be mitigated by reference to white settlement. That is not a process contemplated by Yorta Yorta HC. European settlement is what justifies the expression ‘substantially uninterrupted’ rather than ‘uninterrupted’. It explains why it is that the common law will recognise traditional laws and customs that are not exactly the same as they were at settlement. But if, as would appear to be the case here, there has been a substantial interruption, it is not to be mitigated by reference to white settlement. The continuity enquiry does not involve consideration of why acknowledgment and observance stopped. If this were not the case, a great many Aboriginal societies would be entitled to claim native title rights even though their current laws and customs are in no meaningful way traditional. Yorta Yorta HC would have been decided differently, since the primary judge in that case found that it was European settlement that had caused the forebears of the claimants to leave their traditional lands and cease acknowledgment and observance of their traditional laws and customs. What we have said about the primary judge’s treatment of European settlement is applicable also to his observation at [777] that changes to the descent rules ‘must have been inevitable’ if the Noongar community was to survive white settlement. It follows that in reaching his conclusion that Noongar laws and customs of today are traditional, his Honour’s reasoning was infected by an erroneous belief that the effects of European settlement were to be taken in account — in the claimants’ favour — by way of mitigating the effect of change. …

Commentary 8.17  According to Wilcox J, a society that practises adapted laws and customs out of

necessity is not a different society but, rather, the same, continuing society. Where change is understandable because of the effects of white settlement, and effectively constitutes a ‘recognisable adaptation’, the change should not, in fairness, invalidate a native title claim on the basis of a lack of traditional connection. A good example of a ‘recognisable adaptation’ according to Wilcox J was the boodjas (home areas) of the Noongar people. Pre-sovereignty these ‘home’ areas were much smaller and more cohesive than they are today. His Honour noted that while this geographical change was ‘significant’, it was nevertheless ‘readily understandable’ because it was ‘forced upon the Aboriginal people by white settlement. As white settlers took over, and fenced, the land, Aborigines were forced off their home areas and … the ability to maintain the element of the pre-settlement normative system was lost’: at [787]. The Full Federal Court rejected this approach to the questions of connection and continuity. Finn, Sundberg, and Mansfield JJ indicated the importance of proof of continuity. Their Honours felt that the continuity inquiry must be focused upon proving that the laws and customs have continued substantially since pre-sovereignty. It does not focus upon why acknowledgment or observance of such laws and customs may have stopped. Hence, if it is not established that the laws and customs are traditional, the reasoning behind why this has occurred is beyond the scope of the legislative provisions in s 223(1) of the NTA. The Full Federal Court felt that Wilcox J had erred in his application of s 223(1) and had not followed the proper test enunciated in the Yorta Yorta decision. Their Honours argued at [74] that Wilcox J focused upon continuity of society in the absence of continuity of traditional laws and customs, concluding that:

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Proof of the continuity of a society does not necessarily establish that the rights and interests which are the product of the society’s normative system are those that existed at sovereignty, because those laws and customs may change and adapt. Change and adaptation will not necessarily be fatal. So long as the changed or adapted laws and customs continue to sustain the same rights and interests that existed at sovereignty, they will remain traditional.

Their Honours found that the laws and customs had not been substantially observed, especially in the Perth metropolitan region, and this absence of practice resulted in an inability to establish a connection with the claimed area. As their Honours further stated at [186]: … if those persons whom the laws and customs connect to a particular part of the claim area have not continued to observe without substantial interruption the laws and customs in relation to their country, they cannot succeed in a claim for native title rights and interests even if it be shown — which it has not been — that other Noongar peoples have continued to acknowledge and observe the traditional laws and customs of the Noongar.

This was reiterated by Gilmour J in Augustine v State of Western Australia [2013] FCA 338 at [214]–[215] who concluded that: … a native title claim group is defined by the traditional laws and customs which confer rights and interests in a group. Any definition of a native title claim group should properly be based on an analysis of those traditional laws and customs and not on the contemporary state of relations between members of the group.

This does not mean that interferences to the exercise of traditional laws and customs will necessarily preclude establishing a connection. In Banjima v State of Western Australia (No  2) [2013] FCA 868, Barker J in the Federal Court concluded that maintaining a connection with a claimed area could be established despite interruptions to the practice of traditional laws and customs. His Honour noted at [399] that the simple proposition that: … because from the 1950s and 1960s many Banjima people were obliged to leave their ‘employment’ on pastoral stations in or near the Banjima claim area and commenced living with their families in towns like Onslow, Roebourne and Port Hedland where their children were able to go to school, does not necessarily mean that the connection of the Banjima with their traditional country by their traditional laws and customs was substantially interrupted. They knew who they were, they spoke their own language and they inculcated their children and grandchildren in the traditional ways of the Banjima. Practice of the ritual and ceremonial laws of the Banjima did not cease. Boys were still put through the Law. The Wardirba did not cease to be practised. Knowledge of country was imparted and religious connection with country celebrated. People did all they could, whenever they could, to get back on their own country and maintain their practical connection with that country, for example, through camping, hunting, using traditional resources and visiting and protecting sites, as their ancestors always had.

The courts have clearly held that the nature and extent of native title interests should be assessed by reference to all of the evidence and while the nature and extent of an activity may inform the existence of a right, it is possession of the right that is the critical issue.1 In Murray on behalf of the Yilka Native Title Claimants v State of Western Australia (No 5) [2016] FCA 752, McKerrcher J considered a native title claim by the Yilka and Sullivan claimants with respect to native title rights and interests over Cosmo Newberry Reserve, 100 km north-east of Laverton, Western Australia. The State argued that native title did not arise due to historical changes in circumstance that included migration. This, according to 1. See Rrumburriya Borroloola Claim Group v Northern Territory of Australia [2016] FCA 776 at [128] per Mansfield J. 455

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the State, interfered with the capacity of the claimants to claim continuity. His Honour held that there were multiply ‘pathways to connection’ that could be proven through birth, long association and the holding of ritual status rather than common ancestry. His Honour felt that this broader approach was appropriate in order to account for sparse population and the harsh, unpopulated desert environment. His Honour also rejected the argument that the NTA required claimed rights to be ‘common or group rights’ as opposed to individual rights. His Honour held that the NTA does not preclude the bringing of a representative claim by individuals for rights in individual areas. It is also important to remember that the determination of the native title construct does not necessarily, as outlined by Jagot J in Wyman (on behalf of the Bijara People) v The State of Queensland (No 2) [2013] FCA 1229 at [472], say anything about the existence of contemporary Aboriginal society (in the sense of a body of persons united in and by its acknowledgment and observance of a body of laws and customs), the content or strength of any norms and values of that society, or the merits or otherwise of those norms and values.

8.18  Revision Questions 1. Why did the Full Federal Court in Bodney v Bennell reject the conclusions of the trial judge, Wilcox J, and how did they find that Wilcox J had misapplied the criteria in s 223(1) of the NTA? What is the difference in approach, if any, between the judgment of Gleeson CJ, Gummow and Hayne JJ in Members of the Yorta Yorta Aboriginal Community v Victoria and that of Wilcox J in Bennell v State of Western Australia? 2. Do you think that a ‘change’ to traditional laws and customs should only be acceptable for the purposes of the NTA in circumstances where it maintains a connection with the practices of pre-sovereignty communities? 3. Noel Pearson has suggested that the body of common law dealing with native title has been rendered increasingly irrelevant because the legislation is treated as having virtually replaced the common law (‘Land is Susceptible to Ownership’, High Court of Australia Centenary 1903–2003 Conference, Australian National University, Canberra, 10 October 2003 at 3–5). The emphasis given by the High Court in Yorta Yorta to the statutory definition of native title supports this. What do you think are some of the problems associated with removing native title from its common law foundations? 8.19  An interesting issue connected to the statutory definition of native title under the NTA

lies in the extent to which the rights conferred may be enforced against other regulatory Acts. The ‘intersection’ between the cultural rights and interests recognised under native title can often conflict with the regulatory requirements of other Acts. The impact of the Fauna Conservation Act 1974 (Qld) on rights granted to native titleholders under the NTA was considered by the High Court in Yanner v Eaton (1999) 201 CLR 351. An extract from the judgment is set out below. See also Chapter 1 at 1.6 for a further extract from Yanner v Eaton.

—  Yanner v Eaton — (1999) 201 CLR 351 Facts: The issue for the court was whether the traditional right of the appellant to hunt freshwater crocodiles, as endorsed by the native title rights of the appellant, could be prohibited under the 456

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terms of the Fauna Conservation Act 1974 (Qld). The High Court concluded that regulating the way in which native title rights and interests may be exercised is not inconsistent with their continued existence. According to Gleeson CJ, Gaudron, Kirby and Hayne JJ, the regulation of native title rights clearly presupposes the existence of the right. Further, in determining whether an inconsistency exists, the court concluded that the Native Title Act 1993 (Cth) recognises that native title rights and interests have their origin in Aboriginal law and custom and reflect a connection with the land which should not automatically be destroyed or impeded by permit regulation. Gleeson CJ, Gaudron, Kirby and Hayne JJ: The respondent contended that any native title right or interest to hunt crocodiles in Queensland which the appellant 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 Act which provided that: All fauna, save fauna taken or kept otherwise than in contravention of this Act during an open season with respect to that fauna, is the property of the Crown and under the control of the Fauna Authority. It followed, so the respondent submitted, that the Native Title Act provisions preserving native title rights and interests to hunt and fish had no relevant operation in this case, because the native title rights and interests upon which the appellant relied had been extinguished before the Native Title Act was enacted. Earlier forms of Queensland fauna legislation had provided expressly that those Acts (with some presently irrelevant exceptions) did not apply to ‘[a]ny aboriginal killing any native animal for his own food’. Unlike these earlier Acts, however, the Fauna Act did not deal expressly with Aboriginals taking native animals or birds for food. That being so, much of the argument in this Court concerned what effect the Fauna Act’s vesting of ‘property’ in some fauna in the Crown had on the native title rights and interests asserted by the appellant.

The Fauna Act The meaning of s 7(1) can be identified only by construing it in the light of the whole Fauna Act. It is necessary, therefore, to refer to a number of other provisions, but before doing so it is as well to emphasise that s 7(1) did not make all fauna ‘the property of the Crown and under the control of the Fauna Authority’. What the sub-section described as ‘fauna taken or kept otherwise than in contravention of this Act during an open season with respect to that fauna’ was excepted. ‘Fauna’ was defined by the Fauna Act (in effect) as any bird or mammal indigenous to Australia or declared by Order in Council to be fauna, and any animal or member of a species of animal declared by Order in Council to be fauna. ‘Fauna’ included the young, the egg, the carcass, skin or nest of the animal or member of species but did not include any processed products except those declared by Order in Council. ‘Bird’ and ‘mammal’ were defined respectively to mean a bird or mammal, ‘wild by nature whether native to a State or Territory of the Commonwealth, migratory or introduced, in captivity, bred in captivity or tamed’. Estuarine crocodiles were declared by Order in Council made on 29 August 1974 to be fauna for the purposes of the Act. The Fauna Act divided fauna into four classes: ‘permanently protected fauna’, ‘protected fauna’, ‘non-protected fauna’ and ‘prohibited fauna’. Fauna other than permanently protected fauna, non-protected fauna and prohibited fauna was defined as protected fauna for the purposes of the Act. Subject to declaration of an open season, protected fauna could lawfully be taken or kept only in certain limited circumstances: if it was orphaned, injured, sick or emaciated; or if it was causing or likely to cause damage or injury. In addition, a snake or estuarine crocodile might be killed if it had caused, was causing or was likely to cause injury to a person. Nonprotected fauna might be taken at any time. An open season might be declared in respect of protected fauna and in that case permits could be issued permitting the taking of that fauna. Additionally, the Director of National Parks and Wildlife was empowered to issue permits to fauna dealers to buy, keep, sell or otherwise dispose of protected fauna during a close season. 457

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The terms of s 54(1)(a) prohibiting the taking or keeping of fauna without a licence are set out above. The apparent generality of that prohibition must be understood in the light of not only its reference to the holder of a licence, permit, certificate or other authority granted and issued under the Fauna Act, but also the further exemptions created by s 54(1)(b). That paragraph exempted (among other things) the keeping of protected fauna that was taken otherwise than in contravention of the Act during an open season and the taking of fauna at a time and place when and where it is non-protected fauna. The penalty for contravening s 54(1)(a) was a fine or imprisonment (or both) and the offender was liable ‘in any case to an additional penalty not exceeding twice the royalty on each fauna in respect of which the offence is committed’. The reference to royalty is significant. Section 67 of the Fauna Act provided: (1) Subject to subsection (4), royalty at the rates prescribed shall be payable to the Crown on prescribed fauna. (2) Notwithstanding this Act or any other Act or law, payment of royalty on fauna pursuant to this Act does not transfer property in that fauna from the Crown. (3) Rates of royalty may vary in respect of different species of fauna. (4) The regulations may exempt from the payment of royalty species of fauna specified therein in cases where that fauna is taken otherwise than in contravention of this Act. Fauna protection legislation in Queensland had contained generally similar royalty provisions for many years. They were introduced in 1924 to take the benefit of what was seen at the time to be a valuable and developing fur trade. The obligation to pay royalty under the Fauna Act was supported by several other provisions of that Act including s 69 which made it an offence to fail to pay royalty, s 70 which provided for recovery by summary proceeding under the Justices Act (Q) or by action ‘as for a debt due to the Crown’, and s 71 which permitted a fauna officer to detain fauna in respect of which royalty payable was not paid. Section 71(2) provided that: Fauna so seized and detained shall, without further or other authority, be forfeited to Her Majesty, unless all royalty payable thereon is paid within one month of its seizure and detention. Similar provision was made by s 83 in respect of fauna, appliances or other things seized under the Act. Section 83(3) provided that: Notwithstanding this Act, the Minister may order that any fauna, appliance or other thing seized under this Act be forfeited to Her Majesty though proceedings have not been taken for, nor any person convicted of, an offence against this Act in respect thereof. No doubt ss 71(2) and 83(3) must be read in the light of s 84 which provided that: The provisions of this Act with respect to the seizure, detention or forfeiture of fauna shall not prejudice or affect in any way the rights of the Crown with respect to fauna that by virtue of section 7 is the property of the Crown, and those rights may be exercised at any time. What, then, is the meaning to be given to s 7(1) and its provision that some fauna is the property of the Crown and under the control of the Fauna Authority? Did it, as the respondent submitted, give rights to the Crown in respect of fauna that were inconsistent with the rights and interests upon which the appellant relied?

‘Property’ 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 458

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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 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, 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 459

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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: ‘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) 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: … 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 460

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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 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 (eg, wild game) into res publicae and to justify a more stringent regulation of individual use of res communes (eg, 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 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 respondent expressly disclaimed a contention that the enactment of legislation forbidding the taking or keeping of fauna except pursuant to licence would be sufficient to extinguish the rights and interests relied on by the appellant. This concession was rightly made and it follows, therefore, from what we have said about the meaning and effect of the Fauna Act (and, in particular, the vesting of property in some fauna in the Crown) that the Act did not extinguish those rights and interests. It is as well, however, to examine why the respondent’s concession was right. That examination must begin from a consideration of what is meant by native title rights and interests.

Native title rights and interests Section 223 of the Native Title Act provides (in part): (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 (c) the rights and interests are recognised by the common law of Australia. 461

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(2) Without limiting subsection (1), rights and interests in that subsection includes hunting, gathering, or fishing, 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 ‘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 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, ‘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, 462

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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. 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 information. For completeness it is as well to note two further matters. First, although the respondent referred to the earlier decision of this Court in Walden v Hensler it must be recalled that the issues discussed in that case were radically different from those that arise in the present, not least because they arose before the passing of the Native Title Act. Secondly, a number of submissions were made in the course of argument that touched upon questions much broader than those that must be decided in this proceeding. It is neither necessary nor desirable to express any view about them when this case can be decided on the narrow question whether the Fauna Act should be given the construction for which the respondent and the Commonwealth contended. It should not be given that construction. The appeal should be allowed, the orders of the Court of Appeal of Queensland set aside and in lieu it should be ordered that the order nisi be discharged.

Commentary 8.20  The conclusions of the High Court in Yanner v Eaton illustrate the problems associated with the intersection between traditional customs and rights coming under the ambit of native title and inconsistent state legislation. The approach taken by the High Court in Yanner was to read down the provisions of the Fauna Act so that the reference to ‘property’ was not taken to indicate a full beneficial ownership over all fauna. This effectively meant, as outlined by the plurality at [37], that it was ‘unnecessary to decide whether the creation of property rights under the Fauna Act would be inconsistent with the continued existence of native title rights’. While the flexible approach of the High Court to the interpretation of the Fauna Act resolved the potential ‘intersection’ difficulties, it is unclear how future ‘collisions’ may be dealt with. The High Court in Yanner v Eaton made it clear at [37] that ‘regulating the way in which native title rights and interests may be exercised’ is not necessarily inconsistent with their continued existence. Of course, this will ultimately be a question of degree. While regulation may provide recognition of the existence of the right, it does not necessarily allow for its full cultural expression. In Commonwealth of Australia v Akiba on behalf of the Torres Strait Islanders of the Regional Seas Claim Group (2012) 289 ALR 400, Keane CJ and Dowsett J noted however that the conclusions in Yanner did not mean that legislation that is ‘necessarily inconsistent’ with the continued enjoyment of native title would not extinguish native title. Their Honours stated at [81]–[82]: 463

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It may also be noted that the High Court in Yanner did not decide, or suggest by way of obiter dicta, that only legislation which expressly purported to extinguish native title rights in those terms would be effective to foreclose the continued recognition by the common law of those rights. Nothing in Yanner denies that legislation which was necessarily inconsistent with the continued enjoyment of native title rights extinguished those rights. The contrary view is difficult to reconcile with the approach taken in  Ward.  The Seas Claim Group’s argument is flawed by the failure to appreciate that Yanner does not support the general proposition that a legislated prohibition upon an activity, save subject to a licence, is to be understood as having effect merely to regulate the exercise of an underlying right to carry out that activity. In Yanner, the provisions of the Queensland legislation which ex facie purported to prohibit the activity of taking native fauna without a licence were denied that effect by s 211(2) of the [Native Title Act 1993 (Cth)].

The importance of protecting ‘proprietary’ and ‘cultural rights’ has statutory protection within a Charter of Rights in Victoria and indirect endorsement within the human rights legislation in the Australian Capital Territory. In Victoria, the Charter of Human Rights and Responsibilities Act 2006 (Vic) s 19 confers express statutory protection to the right of Indigenous people to enjoy their identity and culture; maintain and use their language and kinship ties; and maintain their distinctive spiritual, material and economic relationship with their land and waters, and other resources with which they have a connection under traditional laws and customs. Section 20 of the Victorian Act sets out that a person should not be deprived of their proprietary right other than in accordance with the law. While ‘cultural rights’ are not defined within the Victorian charter it is clear that all reasonable attempts should be made to take into account these interests in the interpretation of existing legislative provisions and the enactment of new ones: see ss 30–36. Similarly, in the Australian Capital Territory, the Human Rights Act 2004 (ACT) s 27 expressly precludes a member of an ethnic, religious or linguistic minority from being denied the right, with other members of the minority, to enjoy his or her culture, to declare and practise his or her religion, or to use his or her language. The NTA sets out that native title will be subject to a range of rights, freedoms, privileges and expectations that exist with respect to public areas, natural resources and waterways. Section 212(1) authorises a state or territory to confirm any existing ownership of natural resources by the Crown, the state or the territory, any existing right to use, control and regulate the flow of water; or  that any existing fishing access rights prevail over any other public or private fishing rights. Section 212(2) sets out that a law of the Commonwealth, a state or a territory may confirm any existing public access to and enjoyment of:  (a)  waterways; or  (b)  beds and banks or foreshores of waterways; or  (c) coastal  waters; or (d) beaches; or  (da) stock-routes; or  (e) areas that were public places at the end of 31 December 1993. Any confirmation under this section will not, as set out in s 212(3) extinguish any native title rights and interests. Section 212(2) is not expressly confined to rights and includes freedoms, privileges and liberties. Rather than protecting rights, the High Court confirmed in Western Australia v Manado (2020) 94 ALJR 352 that s 212(2) is broad enough to protect expectations regarding access to the foreshore arising from the tacit tolerance of the state. Edelman J held at [75] that a ‘general expectation of public access will usually exist in relation to all of the categories of public places, even where exclusive native title exists over the relevant area and even where access to the area is a matter of tacit tolerance by the State. On the other hand, no general expectation will arise if public access to and enjoyment of the relevant public places is prohibited by a statute or regulation.’ On the facts of Western Australia v Manado it was argued that because there was no ‘existing common law or statutory right of prescribed access to prescribed places 464

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on the determination areas’, nor ‘any evidence of fact said to constitute prescribed access’, the ability of the public to access and enjoy the foreshore could not be confirmed under  s 212(2) of the NTA. Nettle J (with whom the Keifel CJ, Bell, Gageler, Keane and Gordon JJ agreed) rejected this. His Honour held that contrary to the reasoning of the Full Court, there was no basis to suppose a statutory intent to confine the operation of s 212(2) to existing public access to, and enjoyment of, the foreshore that was in fact in active use by members of the public in the period prior to 1 January 1994. His Honour held that the NTA  does not refer to such use, nor does it provide any means of determining the amount, period, frequency or continuity of the use that would be required if such use were required. Indeed, his Honour held that such a construction would be problematic as there would be way of determining whether it would be sufficient to prove that one member of the public had accessed and enjoyed the foreshore or whether it was necessary to show that more had done so. Further, there was no means of determining how much access would be required and for how long. The idea that this could be grounded in the doctrine of lost modern grant, an analogous doctrine, was rejected because of the fact that it does not have a uniform operation in every state and, ‘the idea that Parliament contemplated proof of something like it in order to bring existing public access and enjoyment within  s 212(2) presents as most improbable’ (at [45]).

Extinguishment Tests 8.21  The High Court in Mabo v Queensland (No 2) (1992) 175 CLR 1 clearly anticipated

the extinguishment of native title interests. In his leading judgment, Brennan J made the following comments 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).

Similarly, Deane and Gaudron JJ stated at 110: 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.

Common law assumed that native title would be extinguished where the Crown made a grant evincing a clear and plain intention to confer a title whose legal incidents were directly inconsistent with native title rights. While the Mabo decision presumed extinguishment, it did not clarify its scope and effect, thereby making it necessary to properly articulate the effect of validating native title on different types of interests under the NTA. In its original form, the NTA provided for the validation of legislative and Crown grants issued after the enactment of the RDA because of the probability that many such grants would contravene the requirements of the NTA. Following Mabo (No 2), it was presumed that all freehold and non-freehold estates would be inconsistent with native title and therefore result in its extinguishment. However, the decision of the High Court in Wik Peoples v Queensland (1996) 187 CLR 1 altered this assumption. In the Wik decision the High Court concluded that a pastoral statutory lease issued by the Crown did not confer exclusive possession and therefore did not create a lease which extinguished native title over the area of land to which it applied. Thus, following the Wik decision, further amendments to the NTA were introduced, in order to distinguish between what came to be known as an ‘exclusive 465

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possession’ act (a lease) and a ‘non-exclusive possession’ (a ‘Wik’ grant) act and to clearly evaluate the impact of such grants upon native title, particularly where such a grant was issued in the ‘intermediate’ period between the determination of Mabo (No 2) and the handing down of the Wik decision.

Wik and the Scope of Common Law Extinguishment 8.22 The Wik decision has its origin in proceedings brought by the Wik peoples in the

Federal Court of Australia. Those proceedings were initiated prior to the operation of the NTA. The action in the Federal Court was brought by the Wik and the Thayorre peoples for a declaration that they retained native title rights over a large area of land in North Queensland. The land claimed by the Wik and Thayorre peoples included land over which pastoral leases had been granted by the Crown. One of these pastoral leases was known as the Holroyd River Holding Lease (the ‘Holroyd Lease’) and the others were known as the Mitchellton pastoral leases (‘the Mitchellton leases’). The central issue before the High Court was whether or not the native title rights claimed had survived the granting of these pastoral leases. The Wik and Thayorre peoples argued that their native title interests could co-exist with the interests of the lessees and that the issuing of the leases had not extinguished native title. Drummond J in the Federal Court held that, as each of the pastoral leases conferred on the lessee rights of exclusive possession, the granting of such estates extinguished all incidents of Aboriginal title with respect to the land demised under the pastoral leases. As a consequence his Honour did not decide on the issue of whether the Wik and Thayorre peoples actually held native title rights over the land or not. The decision of Drummond J was interlocutory, however, and did not fully and finally dispose of the proceedings. Leave was granted to appeal to the Full Court of the Federal Court, although subsequently, an amended notice of appeal was filed in the High Court. The appellants challenged the conclusion of Drummond  J that the pastoral leases resulted in the extinguishment of native title rights. The issues at stake in the Wik decision were well summarised by Kirby J at 162: The issues at stake in these proceedings are therefore important. If the primary argument of the contesting respondents is accepted, this court’s holding in Mabo (No 2), that native title survived the annexation of Australia to the Crown and the acquisition of the Crown’s radical title, is revealed as having little practical significance for Australia’s indigenous people over much of the land surface of the nation. … This is all the more significant to indigenous peoples as the parts of Australia where their laws and traditions (important to sustain native title) are most likely to have survived include those where pastoral leases are likely to exist. On the other hand, the issues are equally important for lessees under pastoral leases, those taking under them, potentially those holding other title to land, governments, mining interests and the population generally.

The arguments raised by the appellants may be broadly summarised as follows: (1) That exclusive possession was not actually conferred by the terms of the pastoral leases. It was contended that the statutory procedure for removing persons in unlawful occupation of the Mitchellton pastoral leases pursuant to s 204 of the Land Act 1910 (Qld) and subsequent statutory provisions proved that the person entitled to possession of the land was not the lessee but, rather, the Crown. Consequently, it was argued that the lease was no more than a licence. 466

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(A) That the express reservation in the pastoral lease, of a right in the Crown to nominate any person to enter upon the land for any purpose and at any time, proved that the lessees did not acquire a right of exclusive possession. It was argued that this reservation, combined with other statutory restrictions, negated any statutory intention to confer exclusive possession upon pastoral lessees and thereby precluded the extinguishment of native title. (B) That parliament could not have intended exclusive possession to be conferred because the land areas covered were of such magnitude that the conferral of exclusive possession would effectively result in the Aboriginal inhabitants becoming trespassers on their traditional land and such a consequence would have been ‘truly barbaric’. (2) Even if the pastoral leases did confer exclusive possession, native title could only be extinguished where a practical inconsistency arose between the exercise of native title rights and the exercise of rights under the pastoral leases and, on the facts, no such practical inconsistency existed. (3) Alternatively, if exclusive possession was conferred, the pastoral leases only suspended native title rights during the term of the lease. Once the leases were determined, the Crown regained radical title to the land, burdened by native title rights.

The High Court held by a majority (Toohey, Gaudron, Gummow and Kirby JJ; Brennan CJ, McHugh and Dawson JJ dissenting) that the pastoral leases in question did not confer on the lessees rights to exclusive possession or possession that was exclusive of all rights and interests held by the Indigenous inhabitants. Further, that the granting of the pastoral leases did not automatically result in the extinguishment of native title because such title can coexist with rights flowing from pastoral leases. This conclusion prevented the need to further consider the alternative argument of whether or not native title rights could be suspended during the term of a pastoral lease, although Kirby J and Toohey J considered the implications of such an argument. In dissent, Brennan CJ, McHugh and Dawson JJ held that the Wik and Thayorre peoples’ claim should fail because native title was extinguished by the pastoral leases. The leases conferred the right to exclusive possession and this right was directly inconsistent with native title. 8.23  The judgments of Toohey J in the majority and Brennan CJ in dissent are extracted below.

—  Wik Peoples v Queensland — (1996) 187 CLR 1 Toohey J: The Land Act 1910 The grants in question were of course of Crown land. The first Holroyd lease and both Mitchellton leases were granted pursuant to and subject to the conditions and provisos of Pt III, Div I of the Land Act 1910 (Q). The 1910 Act is described in its long title as An Act to Consolidate and Amend the Law relating to the Occupation, Leasing, and Alienation of Crown Land. Section 6(1) empowers the Governor in Council, in the name of His Majesty, to ‘grant in fee-simple, or demise for a term of years, any Crown land within Queensland’. ‘Crown Land’ is defined as 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 467

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(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. Part III of the Act deals with Pastoral Tenures. The term pastoral tenures is wider than pastoral leases since it includes occupation licenses granted under Pt III. Division I of Pt III prescribes the machinery whereby Crown land may be declared open for pastoral lease for a term not exceeding thirty years and competing applications dealt with. When the term of any lease exceeds ten years, the term is to be divided into periods, the last period to be of such duration as to permit the other period or periods to be of ten years duration (s 42). Division I contains other provisions relating to the computation of rent. Subject to what is said in the general provisions of the Act, little more appears as to the rights and obligations attaching to pastoral leases. Division II of Pt III deals with occupation licenses. Section 45 empowers the Minister to declare Crown land to be open for occupation under occupation license. A yearly rent is payable. Each license expires on 31 December of the year in which it is granted but is renewable from year to year (s 47). While Pt III makes specific provision for pastoral leases and occupation licenses in respect of term and rent, other parts of the Act apply equally to both. There are two other sections of the 1910 Act which should be noted because of the attention paid to them (or their counterparts in later legislation) in argument. The first is s 135 which reads: If the licence 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. This section has relevance to the concepts of radical title and reversion to the Crown which are discussed later in these reasons. The other provision is s 203 which reads: Any person, not lawfully claiming under a subsisting lease or license or otherwise under any Act relating to the occupation of Crown land, who is found occupying any Crown land or any reserve, or is found residing or erecting any hut or building or depasturing stock thereon, or clearing, digging up, enclosing, or cultivating any part thereof, shall be liable to a penalty not exceeding twenty pounds. This provision was relied upon by the respondents as evidencing the exclusive possession of a pastoral lessee. I shall return to s 203 when dealing with that question. As already noted, the leases granted under the 1910 Act (431) were expressed to be for ‘pastoral purposes only’. ‘Pastoral purposes’ is not defined in the Act nor are the grants of lease specific as to what the expression entails. Clearly it includes the raising of livestock. It also includes things incidental thereto such as establishing fences, yards, bores, mills and accommodation for those engaged in relevant activities. But the use to which the land may be put is circumscribed by the expression ‘pastoral purposes only’; the rights of the lessee are to be determined accordingly.

The Land Act 1962 The second Holroyd lease, the one on which Drummond J focused, was granted in pursuance of Pt VI, Div I of the Land Act 1962–1974 (Q). The 1962 Act is described in its long title as An Act to Consolidate and Amend the Law relating to the Alienation, Leasing and Occupation of Crown Land. With some transposition of words, the long titles of the 1910 and 1962 Acts are the same. The definition of ‘Crown land’ in the 1962 Act is the same as that in the 1910 Act. The power to 468

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make grants and leases is virtually the same. In the 1962 Act s 6(1) empowers the Governor in Council, in the name of Her Majesty, to ‘grant in fee-simple, or demise for a term of years or in perpetuity, or deal otherwise with any Crown land within Queensland’. Part III of the 1962 Act deals with Pastoral Tenures which it identifies as pastoral leases, stud holdings (not found in the 1910 Act) and occupation licenses. Occupation licenses are dealt with similarly in both Acts. Part III, Div I of the 1962 Act prescribes the machinery whereby Crown land may be declared open for pastoral lease. Section 49(1) identifies the following classes of tenure, namely: (a) pastoral holding; or (b) pastoral development holding; or (c) preferential pastoral holding. These classes of pastoral lease are not defined. But s 49(1) provides that land may be declared open for pastoral lease under pastoral development holding ‘only where the cost of developing the land will be abnormally high, and where developmental conditions are imposed calculated to improve the carrying capacity and productivity of the land and to develop the public estate’. A preferential pastoral holding carries an obligation of personal residence if the notification so provided (s 62(1)). Mention is made earlier in these reasons of the improvements and development specified in the second Holroyd lease which is a pastoral holding. While the lease is not expressed to be for pastoral purposes only, no other activity is authorised. The term of such a pastoral lease is to be determined by the Minister and may not exceed thirty years (s 53(1)). By force of s 4(2), all leases granted under repealed Acts and subsisting at the commencement of the 1962 Act ‘shall be deemed to have been granted or issued under the provisions of this Act relating to the tenure or class or mode of a class of tenure hereunder which is analogous thereto’. Before leaving this survey of the 1962 Act, two provisions should be mentioned. In dealing with the 1910 Act mention was made of s 135 which provided that on the determination of a lease before the expiration of the term, the land reverted to His Majesty and became Crown land. That provision has its counterpart in s 299(1) of the 1962 Act with, however, an additional requirement that the person in occupation give peaceful possession to the Land Commissioner, ‘otherwise such person shall be a trespasser upon Crown land’ (s 299(2)). The other provision was s 203 of the 1910 Act relating to persons on Crown land, ‘not lawfully claiming under a subsisting lease or license or otherwise under any Act relating to the occupation of Crown land’. It has its counterpart in s 372 of the 1962 Act.

Leases: exclusive possession The 1910 Act and the 1962 Act say little as to the rights conferred by a pastoral lease. What of the lease itself? In each of the leases with which this appeal is concerned, the Crown ‘DO HEREBY … DEMISE AND LEASE’ the land in question. At the forefront of the respondents’ case was the argument that an essential feature of a lease is that it confers exclusive possession on the lessee. In their submission, it followed that the instruments, being pastoral leases, conferred on the lessees exclusive possession of the land. To pose the issue in that way is to focus unduly on leasehold interests as known to the common law and to give insufficient recognition to the fact that the pastoral lease is a creature of statute. Accordingly, the rights it confers and the obligations it imposes must be determined by reference to the applicable statutory provisions. That is not to say that reference to leasehold interests at common law does not aid an understanding of these rights and obligations. But it must not be allowed to obscure the particular nature of a pastoral lease under the relevant legislation. And it must not divert attention from the basic question whether the grant of a pastoral lease was so inconsistent with the existence of native title rights that those rights 469

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must be regarded as having been extinguished. With those observations in mind, I turn to a consideration of leasehold interests. The headnote to Radaich v Smith reads: In determining whether an instrument creates a lease as opposed to a licence, the decisive factor in favour of a lease is whether the right which the instrument confers is one to the exclusive possession of the premises for a term. Put that way, the point is not so much that a ‘lease’ confers exclusive possession; it is that the conferring of exclusive possession is an indication that the arrangement in question is a lease rather than, say, a licence. Radaich v Smith and many other cases in which the character of a lease has been considered were decided in the context of commercial transactions, often entered into against the background of legislation that controlled rents and evictions. The factual background had generally been a written contract, described as a licence in order to avoid the operation of legislation. It is in this context that the following passage from the judgment of Windeyer J must be considered: 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. The particular context in which emphasis has been placed on exclusive possession is further illustrated by Street v Mountford, where the question was whether an agreement gave rise to a tenancy protected under the Rent Acts (UK). Lord Templeman, with whom the other Law Lords agreed, ‘gratefully adopt[ed] the logic and the language of Windeyer J’ for the purposes of determining whether as a result of an agreement relating to residential accommodation the occupier was a lodger or a tenant. Neither Windeyer J nor Lord Templeman was speaking in a context which throws light on the position of a ‘lessee’ whose rights depend on statute. It is a mistake to apply what is said in these passages to the present appeals unless it accords with the relevant statute and has regard to the presence on the land of the indigenous people. The inconclusiveness for the present context of descriptive terms such as lease and licence is illustrated by O’Keefe v Malone which concerned licences granted under the Crown Lands Act 1889 (NSW). Lord Davey, delivering the advice of the Privy Council, spoke of the need to examine the rights actually conferred on the grantee and said: An exclusive and transferable licence to occupy land for a defined period is not distinguishable from a demise, and in the legislative language of the Land Acts the words ‘leased,’ ‘lease,’ and ‘lessee,’ are frequently used as words of a generic import, including lands held under occupation licence, or the licence or the holder thereof. The point is that the rights and obligations of a person holding an interest under the legislation involved in the present appeals are not disposed of by nomenclature. A closer examination is required. The looseness of terminology in this area is further illustrated by the term ‘mining lease’ which, as used in the Mining Act 1906 (NSW), was described by Windeyer J in Wade v New South Wales Rutile Mining Co Pty Ltd as ‘really a sale by the Crown of minerals reserved to the Crown to be taken by the lessee at a price payable over a period of years as royalties’. Likewise, the question has arisen whether an arrangement described as a lease may fall short of the grant of a right of exclusive possession. It arose in Goldsworthy Mining Ltd v Federal Commissioner of Taxation with respect to a dredging lease of an area of sea-bed issued under the Land Act 1933 (WA). The respondent in that case argued that reservations in favour of the Crown and others by way of access for navigation, and the reservation of all minerals and 470

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petroleum showed that there was no right of exclusive possession in the appellant. Mason J rejected the argument, holding in effect that the reservations were explicable by reason of the relationship of the sea-bed to the navigable channel which it underlay. Indeed, his Honour thought that the very existence of access reservations assumed a right of exclusive possession. It is clear that Mason J found such a right in the terms of the overall arrangement, not simply in the use of the expression ‘demises and leases’. A similar approach may be found in Glenwood Lumber Co Ltd v Phillips where the Privy Council said: If the effect of the instrument is to give the holder an exclusive right of occupation of the land, though subject to certain reservations or to a restriction of the purposes for which it may be used, it is in law a demise of the land itself. The instrument in question was a licence of land for the purpose of cutting timber, granted pursuant to a Newfoundland statute. Certainly, the authorities point to exclusive possession as a normal incident of a lease. They do not exclude, however, an inquiry whether exclusive possession is in truth an incident of every arrangement which bears the title of lease. Furthermore, those authorities, which are directed to commercial transactions between individual persons or corporations, are not concerned whether something that is underpinned by common law recognition, namely, native title rights, are excluded by the grant by the Crown of what is described as a pastoral lease over land to which those rights attach. There is a passage in the judgment of Brennan J in American Dairy Queen (Qld) Pty Ltd v Blue Rio Pty Ltd which may seem to tell against some of the considerations just mentioned. His Honour said of a lease by a trustee of land reserved under the Land Act 1962–1981 (Q): By adopting the terminology of leasehold interests, the Parliament must be taken to have intended that the interests of a lessee, transferee, mortgagee or sublessee are those of a lessee, transferee, mortgagee or sublessee at common law, modified by the relevant provisions of the Act. These remarks were made in a particular context, namely, whether a sublessee of the land could assign its interest at common law. The further sublease proposed was an entirely commercial transaction. It did not involve the title of the Crown. There is no comparison with the situation in the present appeals. Furthermore, examination of how pastoral leases came about in Queensland and the more basic question of tenures under Queensland law shows that his Honour’s observation cannot be transposed so as to throw light on the position of native title rights. The same may be said of the observation of Mason J in the same case that the rule that courts will construe a statute in accordance with common law principles ‘applies to the principles of the common law governing the creation and disposition of rights of property’.

Pastoral leases: exclusive possession? It is not surprising that the terminology of pastoral leases was employed by the legislature. And it is important to bear in mind that although the second Holroyd lease was granted in 1975 (the Mitchellton leases in 1915 and 1919), the regime under which all the leases were granted was established before the turn of the century and was itself part of the historical development of the colony. The regime is best understood by seeing what had preceded it, as outlined earlier in these reasons. It is apparent from a despatch from Sir George Gipps, transmitting the Crown Lands Unauthorised Occupation Act to the Secretary of State that one of its aims was ‘for the purpose of putting a stop to the atrocities which have been committed both on them [the natives] and by them’. Furthermore, under the Regulations made pursuant to that Act a licence could be cancelled if the licensee was convicted ‘of any malicious injury committed upon or against any aboriginal native or other persons’. The whole tenor of these provisions indicates a contemplation that Aborigines would be upon licensed lands. 471

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The thrust of contemporary documents, in particular communications by the Secretary of State, Earl Grey, to the Governor of New South Wales make it clear that Aborigines were not to be excluded from land under pastoral occupation. In the first of these two despatches, Earl Grey wrote of pastoral occupation: I think it essential that it should be generally understood that leases granted for this purpose give the grantees only an exclusive right of pasturage for their cattle, and of cultivating such Land as they may require within the large limits thus assigned to them, but that these Leases are not intended to deprive the Natives of their former right to hunt over these Districts, or to wander over them in search of subsistence, in the manner to which they have been heretofore accustomed, from the spontaneous produce of the soil except over land actually cultivated [or] fenced in for that purpose. In the second, Earl Grey repeated his earlier view that the intention was ‘to give only the exclusive right of pasturage in the runs, not the exclusive occupation of the Land, as against Natives using it for the ordinary purposes’. The Queensland legislation aimed at giving pastoralists some security of tenure in regard to their pastoral activities. The authorities in England expressed almost constant concern that the grant of pastoral leases should not be used to prevent Aborigines from using the land for subsistence purposes. And a similar concern was expressed within Australia. … But, despite the generality of the statement, it is clear that the Court was directing its attention to the position of third parties in the conventional sense, not to Aborigines whose traditional land might fall within the lease. The same may be said of the observation of the Full Court in Wildash v Brosnan that a pastoral lessee had an ‘exclusive right to the land’. Reference was made earlier in these reasons to s 203 of the 1910 Act and its counterpart, s  372 of the 1962 Act. The respondents contended that the effect of the provision was to render a trespasser any person occupying Crown land who was ‘not lawfully claiming under a subsisting lease or license’. This was said to include Aborigines. The answer to this contention was given by Brennan J in Mabo (No 2) when dealing with s 91 of the Crown Lands Alienation Act 1876 (Q), the predecessor of this provision. His Honour said: To construe s 91 or similar provisions as applying to the Meriam people in occupation of the Murray Islands would be truly barbarian. Such provisions should be construed as being directed to those who were or are in occupation under colour of a Crown grant or without any colour of right; they are not directed to indigenous inhabitants who were or are in occupation of land by right of their unextinguished native title. In the course of argument reference was made to the decision of this Court in Yandama Pastoral Co v Mundi Mundi Pastoral Co Ltd as pointing to exclusivity of possession on the part of a holder of a pastoral lease. But this was a case in which one pastoral company, relying on certain statutory provisions, claimed the right to take travelling stock across the land comprised in a pastoral lease held by another pastoral company. The judgments turned on the language of the statutory provisions. There was however a strong dissent from Isaacs J who thought it astonishing to hear it argued: … that — while in the very act of liberalising the conditions of pastoral settlement in the more distant parts of the State on virgin land … the Legislature of South Australia had deliberately adopted the suicidal and inconsistent policy of making the passage of healthy travelling stock, not only always more difficult than it already was, but in a vast number of cases impossible. His Honour’s judgment is lengthy, involving a detailed consideration of the history of pastoral leases in South Australia. It is apparent that his view of the statutory provisions was influenced by that history which he regarded as establishing that ‘the right of owners of travelling stock 472

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to pass — a right more or less regulated, but basically a right — over Crown lands, including lands let by the Crown for pasturage, is part of the constant and traditional policy and law of South Australia’. While the appellants may find some support for their argument in the dissenting judgment of Isaacs J, the decision itself turns on statutory language. Certainly, the decision offers no support for the proposition that exclusivity of possession is a necessary ingredient of a pastoral lease. A pastoral lease under the relevant legislation granted to the lessee possession of the land for pastoral purposes. And the grant necessarily gave to the lessee such possession as was required for the occupation of the land for those purposes. As has been seen, each lease contained a number of reservations of rights of entry, both specific and general. The lessee’s right to possession must yield to those reservations. There is nothing in the statute which authorised the lease, or in the lease itself, which conferred on the grantee rights to exclusive possession, in particular possession exclusive of all rights and interests of the indigenous inhabitants whose occupation derived from their traditional title. In so far as those rights and interests involved going on to or remaining on the land, it cannot be said that the lease conferred on the grantee rights to exclusive possession. That is not to say the legislature gave conscious recognition to native title in the sense reflected in Mabo (No 2). It is simply that there is nothing in the statute or grant that should be taken as a total exclusion of the indigenous people from the land, thereby necessarily treating their presence as that of trespassers or at best licensees whose licence could be revoked at any time. It follows that Question 1B(b) and Question 1C(b), which ask whether the pastoral leases ‘confer rights to exclusive possession on the lessee’, must be answered ‘No’. As the questions are framed, the question of extinguishment strictly does not then arise. But for these reasons to be meaningful, one must go on and consider to what extent the grant of a pastoral lease under the 1910 Act or 1962 Act necessarily extinguished native title rights. That a concept of feudal tenure brought to Australia but subjected to change through a complex system of rights and obligations adapted to the physical, social and economic conditions of the new colony, in particular the disposition of large areas of land (often unsurveyed) for a limited term for a limited purpose, should determine the fate of the indigenous people is a conclusion not lightly to be reached. The continuance of native title rights of some sort is consistent with the disposition of land through the pastoral leases. I say ‘of some sort’ because there has been no finding by the Federal Court whether such rights existed in respect of the leased land and, if they did, the nature of those rights. That is a matter to which I shall return.

Extinguishment The idea of extinguishing title to land raises a number of questions, particularly when the title said to have been extinguished does not derive from the common law but has been recognised by the common law. When land is acquired by the Crown for the purposes of public works, the title of the registered proprietor is in truth extinguished by force of the notice of acquisition or resumption. The title vests in the Crown by force of statute though registration may be required under the Torrens system. But that is hardly the situation here when what is contended is that the grant of a pastoral lease of itself effected an extinguishment of native title rights. In Mabo (No 2) (454) Brennan J said: Sovereignty carries the power to create and to extinguish private rights and interests in land within the Sovereign’s territory. 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. … It is with the concept of inconsistency that these appeals are much concerned. 473

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During the hearing of these appeals attention focused on a passage in the judgment of Brennan J in Mabo (No 2) where his Honour said: 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. In this regard Deane and Gaudron JJ said: The personal rights conferred by common law native title … 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. In the circumstances of the case, I held that whether the leases in question were effective to extinguish traditional title was something it was unnecessary to answer. The recital in the preamble to the Native Title Act that: The High Court has: … (c) 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. reads too much into the judgments in Mabo (No 2) so far as the reference to leasehold estates is concerned unless particular attention is given to what is meant by that term. At their highest, the references are obiter. It has been generally accepted that a grant of an estate in fee simple extinguishes native title rights since this is the largest estate known to the common law. It is fair to comment that while there are passages in the judgments of the Court dealing with the circumstances in which native title may be extinguished, no great attention has been focused on the idea itself. Hitherto it has not been necessary to do so. What is meant by extinguishment is alluded to by Macfarlane JA in Delgamuukw v British Columbia when he said: Before concluding that it was intended that an aboriginal right be extinguished one must be satisfied that the intended consequences of the colonial legislation were such that the Indian interest in the land in question, and the interest authorised by the legislation, could not possibly co-exist. There is a further passage in the judgment of Macfarlane JA which strikes a chord in the present appeals: It is clear that the mischief at which many of the Colonial Instruments was directed was the agitation in the colony attendant upon the influx and presence of miners seeking gold. Governor Douglas needed authority to stabilise the situation. A plan to attract permanent settlers, and establish them on the land was urgently required. The aboriginal peoples were not the problem. The acquisition of Indian lands was not the design, although attendant upon settlement was the need to reconcile the conflicting interests of the aboriginals and of the settlers. But the urgent question was settlement and the establishment of British authority in the colony. One should assume that the object was to achieve the desired result with as little disruption as possible, and without affecting accrued rights and existing status any more than was necessary. It is true that what is said in the judgments in Delgamuukw is against a background of treaty making. Nevertheless the passage in the judgment of Macfarlane JA is particularly apposite here. In the course of his judgment Lambert JA (who was in dissent as to the outcome of the appeal) distinguished express (or explicit) extinguishment and implicit extinguishment. As to the latter he said: Implicit extinguishment is extinguishment brought about by the sovereign power acting legislatively in an enactment which does not provide in its terms for extinguishment but which brings into operation a legislative scheme which is not only inconsistent with 474

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aboriginal title or aboriginal rights but which makes it clear and plain by necessary implication that, to the extent governed by the existence of the inconsistency, the legislative scheme was to prevail and the aboriginal title and aboriginal rights were to be extinguished. What emerges from the judgments in Delgamuukw is the emphasis on inconsistency between native title rights and rights created by legislation or by some administrative scheme authorised by legislation, that is, the inability of the two to co-exist. It is that inconsistency that renders the native title rights unenforceable at law and, in that sense, extinguished. If the two can co-exist, no question of implicit extinguishment arises and it is implicit extinguishment with which these appeals are concerned. While the appellants accepted, as they were bound to do in light of Mabo (No 2) and the Native Title Act Case, that native title may be extinguished, there is something curious in the notion that native title can somehow suddenly cease to exist, not by reason of a legislative declaration to that effect but because of some limited dealing by the Crown with Crown land. To say this is in no way to impugn the power of the Crown to deal with its land. It is simply to ask what exactly is meant when it is said that native title to an area of land has been extinguished. Inconsistency can only be determined, in the present context, by identifying what native title rights in the system of rights and interests upon which the appellants rely are asserted in relation to the land contained in the pastoral leases. This cannot be done by some general statement; it must ‘focus specifically on the traditions, customs and practices of the particular aboriginal group claiming the right’. Those rights are then measured against the rights conferred on the grantees of the pastoral leases; to the extent of any inconsistency the latter prevail. It is apparent that at one end of the spectrum native title rights may ‘approach the rights flowing from full ownership at common law’. On the other hand they may be an entitlement ‘to come on to land for ceremonial purposes, all other rights in the land belonging to another group’. Clearly there are activities authorised, indeed in some cases required, by the grant of a pastoral lease which are inconsistent with native title rights that answer the description in the penultimate sentence. They may or may not be inconsistent with some more limited right. Brennan J: If, as a matter of construction, it is right to hold that the right to exclusive possession was conferred on a pastoral lessee, the statutory provisions that authorised entry onto leased land for a variety of purposes were qualifications of that right but they did not destroy it. They merely limited the enjoyment of that right to the extent that the particular statute prescribed. For example, s 205 which authorised the depasturing of stock other than sheep along stock routes traversing pastoral leases was simply what it purported to be: a statutory exception to the right which, as an incident of the right to exclusive possession, the lessee would otherwise have had to exclude the stock and the persons driving the stock. However, there are certain statutory provisions which authorised the suspension or termination of a lessee’s right to exclusive possession. The clearest example was the statutory power to resume for particular purposes a portion of land subject to a pastoral lease. That power, contained in Pt VI, Div VI of the 1910 Act, did not deny that the land resumed was in the exclusive possession of the lessee prior to the resumption. Another example is found in the Petroleum Act 1923 (Q). Assuming the power to grant a petroleum lease under that Act extended to the grant of a petroleum lease over ‘private land’ (which included pastoral leaseholds), it may be that the petroleum lease conferred a right to exclusive possession on the petroleum lessee that suspended the right to exclusive possession otherwise exercisable by a pastoral lessee. But that is not to say that the pastoral lessee’s interest in land the subject of a pastoral lease was altered by the mere existence of a power to grant a petroleum (or other mining) lease over the same land. The problems of mining leases over land already leased by the Crown arise precisely because the Crown has already disposed of the leasehold estate in the land. 475

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It remains a question of construction whether a pastoral lease issued pursuant to Pt III, Div I of the 1910 Act confers on the lessee a right to exclusive possession. That question is to be determined by reference to the terms of the lease and of the Act under which it was issued. It is not a necessary consequence of the description of the instruments issued pursuant to Pt III, Div I of the 1910 Act as leases that they conferred a right of exclusive possession on the lessee. The question whether the lessees acquired a right to exclusive possession does not depend on what the parties called the instrument except in so far as their description of the instrument indicates the rights which it confers. As the Privy Council observed in Glenwood Lumber Co Ltd v Phillips, it is not a question of words but of substance. Thus, their Lordships held in O’Keefe v Malone Ltd that an exclusive and transferable licence to occupy land for a defined period is in truth a lease. Conversely, a true lease confers on the lessee a right to exclusive possession, albeit that right might be subject to particular reservations or exceptions. In Radaich v Smith, Windeyer J said: 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 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. Although it is the substance of the rights conferred and not the description of the instrument conferring them which is the ultimate touchstone for determining whether a lease has been granted, the ordinary rules of interpretation require that, in the absence of any contrary indication, the use in a statute of a term that has acquired a technical legal meaning is taken prima facie to bear that meaning. Under the 1910 Act, the power to grant a pastoral lease was a power to ‘demise for a term of years’ (s 6(1)); a ‘lease’ was declared to be effectual to vest ‘the estate or interest therein stated’ (s 6(2)); a pastoral lease was granted for a term (s 40(2)) commencing on a quarter day (s 41(4)) in respect of a specified area of land (s 40(2)); there was an obligation to pay the rent (s 43); provision was made for a ‘surrender’ of a lease and for forfeiture and, on forfeiture, the land reverted to His Majesty and could have been dealt with again under the Act. This is the language of lease. … The Wik and Thayorre submissions then raise their second basic point, namely, whether extinguishment of native title is effected by mere inconsistency between the continued right of indigenous inhabitants at common law to the enjoyment of native title and the pastoral lessee’s right to exclusive possession created or conferred pursuant to the 1910 Act or whether it is a practical inconsistency between the exercise of those respective bundles of rights that can alone extinguish native title. These submissions contended for the latter view for the reason, it was submitted, that extinguishment required proof of a clear and plain intention to extinguish native title. 476

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As I held in Mabo (No 2), 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’. Those rights, although ascertained by reference to traditional laws and customs are enforceable as common law rights. That is what is meant when it is said that native title is recognised by the common law. Unless traditional law or custom so requires, native title does not require any conduct on the part of any person to complete it, nor does it depend for its existence on any legislative, executive or judicial declaration. 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. Such laws or acts may be of three kinds: (i) laws or acts which simply extinguish native title; (ii) laws or acts which create rights in third parties in respect of a parcel of land subject to native title which are inconsistent with the continued right to enjoy native title; and (iii) laws or acts by which the Crown acquires full beneficial ownership of land previously subject to native title. A law or executive act which, though it creates no rights inconsistent with native title, is said to have the purpose of extinguishing native title, does not have that effect ‘unless there be a clear and plain intention to do so’. Such an intention is not to be collected by inquiry into the state of mind of the legislators or of the executive officer but from the words of the relevant law or from the nature of the executive act and of the power supporting it. The test of intention to extinguish is an objective test. A law or executive act which creates rights in third parties inconsistent with a continued right to enjoy native title extinguishes native title to the extent of the inconsistency, irrespective of the intention of the legislature or the executive and whether or not the legislature or the executive officer adverted to the existence of native title. In reference to grants of interests in land by the Governor in Council, I said in Mabo (No 2): 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 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. Third party rights inconsistent with native title can be created by or with the authority of the legislature in exercise of legislative power but, as the power of State and Territory legislatures is now confined by the Racial Discrimination Act 1975 (Cth), a State or Territory law made or executive act done since that Act came into force cannot effect an extinguishment of native title if the law or executive act would not effect the extinguishment of a title acquired otherwise than as native title. The third category are laws and acts by which the Crown acquires a full beneficial ownership that extinguishes native title. That may occur by acquisition of native title by or under a statute, in which case the question is simply whether the power of acquisition has been validly exercised. Or the Crown, without statutory authority, may have acquired beneficial ownership simply by appropriating land in which no interest has been alienated by the Crown. (Such an acquisition by the Crown in right of a State or Territory would have occurred, if at all, before the Racial Discrimination Act came into force.) In the latter case, the appropriation of the land gives rise to the Crown’s beneficial ownership only when the land is actually used for some purpose inconsistent with the continued enjoyment of native title — for example, by building a school or laying a pipeline. Until such a use takes place, nothing has occurred that might affect the legal status quo. A mere reservation of the land for the intended purpose, which does not create third party rights over the land, does not alter the legal interests in the land, but the Crown’s exercise 477

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of its sovereign power to use unalienated land for its own purposes extinguishes, partially or wholly, native title interests in or over the land used. In considering whether native title has been extinguished in or over a particular parcel of land, it is necessary to identify the particular law or act which is said to effect the extinguishment and to apply the appropriate test to ascertain the effect of that law or act and whether that effect is inconsistent with the continued right to enjoy native title. In the present case, it would be erroneous, after identifying the relevant act as the grant of a pastoral lease under the 1910 Act to inquire whether the grant of the lease exhibited a clear and plain intention to extinguish native title. The question is not whether the Governor in Council intended or exhibited an intention to extinguish native title but whether the right to exclusive possession conferred by the leases on the pastoral lessees was inconsistent with the continued right of the holders of native title to enjoy that title. On the issue of a pastoral lease under the 1910 Act, the lessee acquired an estate. There is no legal principle which would defer the vesting of, or qualify, that estate in order to allow the continuance of a right to enjoy native title. Given that the pastoral lessee acquired a right to exclusive possession at latest when the lease was issued, there was an inconsistency between that right and the right of any other person to enter or to remain on the land demised without the lessee’s consent. Assuming that access to the land is an essential aspect of the native title asserted, inconsistency arises precisely because the rights of the lessee and the rights of the holders of native title cannot be fully exercised at the same time. As Mahoney J observed in Hamlet of Baker Lake v Minister of Indian Affairs with reference to Indian land rights in Canada: The co-existence of an aboriginal title with the estate of the ordinary private land holder is readily recognised as an absurdity. The communal right of aborigines to occupy it cannot be reconciled with the right of a private owner to peaceful enjoyment of his land. However, its co-existence with the radical title of the Crown to land is characteristic of aboriginal title. If a holder of native title had only a non-accessory right, there may be no inconsistency between that right and the rights of a pastoral lessee. The law can attribute priority to one right over another, but it cannot recognise the coexistence in different hands of two rights that cannot both be exercised at the same time. To postulate a test of inconsistency not between the rights but between the manner of their exercise would be to deny the law’s capacity to determine the priority of rights over or in respect of the same parcel of land. The law would be incapable of settling a dispute between the holders of the inconsistent rights prior to their exercise, to the prejudice of that peaceful resolution of disputes which reduces any tendency to self-help. To postulate extinguishment of native title as dependent on the exercise of the private right of the lessee (rather than on the creation or existence of the private right) would produce situations of uncertainty, perhaps of conflict. The question of extinguishment of native title by a grant of inconsistent rights is — and must be — resolved as a matter of law, not of fact. If the rights conferred on the lessee of a pastoral lease are, at the moment when those rights are conferred, inconsistent with a continued right to enjoy native title, native title is extinguished. The submission that inconsistency in the practical enjoyment of the respective rights of the native title holders and of the pastoral lessees, not inconsistency between the rights themselves, determines whether native title has been extinguished is founded on the notion that the 1910 Act and pastoral leases should be given a restrictive operation so as to permit, as far as possible, the continued existence of native title. If that notion is not applied, there is ‘a significant moral shortcoming in the principles by which native title is recognised,’ to adopt a dictum of French J. So much can be admitted. The position of the traditional Aboriginal inhabitants of the land demised by the Mitchellton leases is a good illustration. If it be right to hold that the mere grant of those leases extinguished the native title of the traditional Aboriginal inhabitants, the 478

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law will be held to destroy the legal entitlement of the inhabitants to possess and enjoy the land on which they are living and on which their forebears have lived since time immemorial. That would be a significant moral shortcoming. But the shortcoming cannot be remedied by denying the true legal effect of the 1910 Act and pastoral leases issued thereunder, ascertained by application of the general law. The questions for decision by this Court are whether, on the issue of the Mitchellton and Holroyd River leases under s 6 of the 1910 Act, there was an inconsistency between the rights of the lessees and the continued right of the Wik and Thayorre Peoples to enjoy their native title and, if there were an inconsistency, which set of rights prevailed. For the reasons stated, the lessees had the right of exclusive possession and that right was inconsistent with native title (except for non-accessory rights, if any) and, as the right of exclusive possession was conferred on the lessees by the Crown as the sovereign power, that right prevailed and the rights of the holders of native title were extinguished.

Commentary 8.24  Toohey J concluded that pastoral leases were creatures of statute rather than

common  law and consequently the rights and obligations of those leases had to be determined by reference to the applicable statutory provisions. In considering the intention of parliament, his Honour noted the historical context and the desire of the state to achieve a peaceful coexistence between the pastoralists who wanted to obtain pasturage for their cattle and stock and Indigenous peoples who subsisted on the land. In particular, his Honour concluded that the relevant legislation granted the lessees possession of the land for pastoral purposes only; there was nothing in the legislation which conferred a right to exclusive possession. Consequently, the question of extinguishment did not arise. Nevertheless, in dicta, Toohey  J argued that in order to extinguish native title it was necessary to prove an inconsistency between native title rights and interests and the legislative rights conferred to such an extent that the two could not coexist. This type of inconsistency could only be proven where the particular form of native title resulted in a direct interference with the legal rights that the legislative rights conferred. In this respect, Brennan J held at 12 that the law ‘can attribute priority to one right over another, but it cannot recognise the co-existence in different hands of two rights that cannot both be exercised at the same time’. The issue of inconsistency had to be resolved as a ‘matter of law’ rather than one of fact. In dissent, Brennan CJ held that the Wik and Thayorre peoples’ claim failed because native title was extinguished by the pastoral leases. His Honour concluded that exclusive possession was conferred by the terms of the leases and, as the lease was directly inconsistent with native title, the rights of the pastoral lessees prevailed and native title was extinguished. His Honour concluded that the ordinary rules of interpretation require, in the absence of any contrary indication, that the use in a statute of a term that has acquired a technical legal meaning, is to be taken to prima facie bear that meaning. In determining the issue of extinguishment, Brennan CJ focused upon the intention of the Crown. The intention, he emphasised, must be manifest through the exercise of legal rights and powers and is therefore an objective test. Where the legal effect of a grant is to create rights in third parties that are inconsistent with native title, and to confer a reversionary estate on the Crown, native title will be extinguished to the extent of the inconsistency. Further, where the Crown exercises its sovereign power to use unalienated land for its own purposes, native title may be partially or wholly extinguished. 479

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8.25  Revision Questions 1. What is the scope of the common law doctrine of extinguishment and in what circumstances may native title survive the issuing of a Crown grant? 2. According to Toohey J, there would be something ‘curious’ if native title suddenly ceased to exist, not by reason of a legislative declaration to that effect but because of some limited dealing by the Crown with Crown land. What sort of legislative intention would be required, according to Toohey J, to extinguish native title? 3. L Godden in ‘Wik: Feudalism, Capitalism and the State: A Revision of Land Law in Australia?’ (1997) 5 Australian Property Law Journal 162, made the following comments at 167: … to cast the innovative institutions of property that developed in colonial Australia as only a creation of the needs of the Imperial policy and the dictates of a capitalist based economy is to ignore the main thrust of the Wik majority judgments. The tenor of the judgments emphasises the need to understand local circumstance and Australian history as it affected indigenous peoples. A  situation which gave rise to statutory ‘bundles’ of rights, such as a perpetual pastoral lease — an institutional form unknown to traditional English concepts of ‘lease’ — and of course germane to one of the central issues in Wik, whether a lease conferred a right of exclusive possession. That exclusive possession has long been the touchstone which at common law has delimited the real property interest from the non-property or usufructuary interest is acknowledged. The majority judgments in Wik do not explicitly challenge that categorisation of property from non property at common law. But by implication the decision throws open the question whether the common law conceptual framework in its entirety continues to have relevance to the very different social, economic, cultural and physical environment that distinguished, and continues to distinguish, Australia from feudal England. Indeed, integral parts of the foundation of traditional English land law in their application to Australia have come to be questioned.

Discuss these conclusions. What does the author mean? Do you agree? 8.26  The scope and effect of the extinguishment tests and, in particular, the possibility

of native title being partially extinguished, was further examined by the High Court in the subsequent decision of Western Australia v Ward (2002) 76 ALJR 1098, extracted below.

—  Western Australia v Ward — (2002) 76 ALJR 1098 Facts: The claimed area amounted to approximately 7900 acres in the East Kimberley area. The issue was whether native title had been extinguished in this area. The primary judge, Lee J, concluded that native title endured over a large section of the claimed area which included a right to maintain, protect and prevent the misuse of cultural knowledge. Further, his Honour held that several mining leases did not evince a ‘clear and plain’ intention to extinguish native title. Several of the parties to the proceedings at trial were dissatisfied with the determination and appealed to the Full Court of the Federal Court. The Full Court (Beaumont and von Doussa JJ; North J dissenting) set aside the orders made by Lee J and made a new determination which was not as extensive and which did not include a right to maintain, protect and prevent the misuse of cultural knowledge. Further, the conclusion of the Full Court of the Federal Court held that the legal incidents of the mining leases necessarily extinguished native title in those areas. 480

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Subsequently, the Ward and Ningarmara claimants sought to have the determination of the Full Court set aside and a determination providing more extensive native title rights and interests and reinstating the right to maintain, protect and prevent the misuse of cultural knowledge in the High Court. The High Court supported the exclusion of the right to maintain, protect and prevent the misuse of cultural knowledge, concluding that it was something ‘approaching an incorporeal right akin to a new species of intellectual property to be recognised by the common law under par (c) of s 223(1)’ and therefore went beyond the scope of native title. In relation to the question of extinguishment, the High Court concluded that inconsistency of incidents was the correct test and that extinguishment had occurred in areas where the legal incidents of the mining leases were directly inconsistent with native title rights. However, their Honours noted that native title was essentially ‘usufructuary’ in nature and therefore some rights could endure where they were not directly inconsistent with legal rights. In this sense, the majority approved of the concept of a partial extinguishment in accordance with the provisions of the NTA. Gleeson CJ, Gaudron, Gummow and Hayne JJ: … 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. (original emphasis) 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 par (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 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 481

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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. The third member of the Full Court (North J) took a different view about extinguishment. This proceeded from the premise that there may be ‘inconsistency between the rights and interests created by the law or act [in question] and native title but the degree of inconsistency is not sufficient to extinguish native title’ (emphasis added). A little later in his reasons, his Honour said: A minor or insignificant inconsistency between the rights or interests created and native title could not lead to such a far-reaching consequence as total abrogation of native title. There must be proportionality between the impact of the law or the act and the effect on native title. Only a law or act which has the effect of totally replacing native title by completely nullifying it will result in extinguishment of native  title. The inconsistency between the law or act must be total, fundamental or absolute to effect extinguishment. Thus, where native title is a permanent right to land, only a law or act which has permanent consequences adverse to the existence of the right to land will extinguish native title. Such a law or act must give rise to rights which fully eclipse native title. Where the inconsistency is not total or absolute it is not necessary that native title be abolished in order to allow the unfettered exercise of inconsistent rights or interests. It is only necessary that the enjoyment of the rights and interests dependent upon the holding of native title is held in abeyance for the duration of the existence of the inconsistent rights or interests. As long as the exercise of the rights or interests dependent on native title is suspended, the exercise of inconsistent rights or interests is not impeded. 482

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This approach to extinguishment as understood with respect to the withdrawal of recognition by the common law should not be adopted. First, it is an approach which proceeds from a false premise, that there can be degrees of inconsistency of rights, only some of which can be described as ‘total’, ‘fundamental’ or ‘absolute’. Two rights are inconsistent or 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. Absent particular statutory provision to the contrary, questions of suspension of one set of rights in favour of another do not arise. Secondly, it is a mistake to assume that what the NTA refers to as ‘native title rights and interests’ is necessarily a single set of rights relating to land that is analogous to a fee simple. It is essential to identify and compare the two sets of rights: one deriving from traditional law and custom, the other deriving from the exercise of the new sovereign authority that came with settlement. It is true that the NTA (in par (b)(ii) of s 23G(1)) and the State Validation Act (in par (b)(ii) of s 12M(1)) speak of the ‘suspension’ of inconsistent native title rights and interests in certain circumstances. However, this statutory outcome is postulated upon an inconsistent grant of rights and interests which, apart from the NTA and the State Validation Act, would not extinguish the native title rights and interests. An example would be a post-1975 grant which, by operation of the RDA, was ineffective to extinguish native title rights and interests. It will be necessary to return to this aspect of the legislation later in these reasons. … The traditional laws, customs and practices of the Miriuwung and Gajerrong community provided for the distribution of rights in respect of the use of the land for sustenance, ritual or religious purposes. Although not the subject of direct challenge in the appeals and cross-appeals in this Court, it is as well to say something about this passage in the reasons. The finding that predecessors of the claimants occupied the claim area at sovereignty does not, without more, identify the nature of the rights and interests which, under traditional law and custom, those predecessors held over that area. The fact of occupation, taken by itself, says nothing of what traditional law or custom provided. Standing alone, the fact of occupation is an insufficient basis for concluding that there was what the primary judge referred to as ‘communal title in respect of the claim area’ or a right of occupation of it. If, as seems probable, those expressions are intended to convey the assertion of rights of control over the land, rights of that kind would flow not from the fact of occupation, but from that aspect of the relationship with land which is encapsulated in the assertion of a right to speak for country. It is important to explore issues of this kind because questions of extinguishment of native title cannot be answered without first identifying the rights and interests possessed under traditional laws and customs which it is said have been extinguished. There is much scope for error if the examination begins from the common law expression of those rights and interests. Especially is that so if a portmanteau expression used to translate those rights and interests (‘possession, occupation, use and enjoyment … to the exclusion of all others’) is severed into its constituent parts and those parts are then treated as they would be in the description of some common law title to land. Further, recognising that the rights and interests in relation to land which an Aboriginal community may hold under traditional law and custom are not to be understood as confined to the common lawyer’s one-dimensional view of property as control over access reveals that steps taken under the sovereign authority asserted at settlement may not affect every aspect of those rights and interests. The metaphor of ‘bundle of rights’ which is so often employed in this area is useful in two respects. It draws attention first to the fact that there may be more than one right or interest and secondly to the fact that there may be several kinds of rights and interests in relation to land that exist under traditional law and custom. Not all of those rights and interests may be capable of full or accurate expression as rights to control what others may do on or with the land. 483

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… [Their Honours went on to discuss the effect of the test with respect to the mining leases.] While so much may be accepted, it does not follow that all native title rights and interests have been extinguished. Whether they have will require much closer identification of the relevant native title rights and interests than has thus far been made. The grant of exclusive possession for mining purposes is directed at preventing others from carrying out mining and related activities on the relevant land. Although the lessee could prevent anyone else seeking to use the land for mining purposes, it does not follow that all others were necessarily excluded from all parts of the lease area. In understanding what ‘mining purposes’ are, some assistance may be provided by the authorities construing the term ‘mining operations’ as it appeared in legislation giving favourable treatment to taxpayers engaged in that activity. The term embraces operations pertaining to mining beyond the extraction of minerals from the soil and ‘is a very large expression’. Further, account must also be taken of the fact that a grant of a right (in this case to mine) encompasses those rights necessary for its meaningful exercise. The holder of a mining lease having a right to exclude for the specified purposes, the holder may exercise that right in a way which would prevent the exercise of some relevant native title right or interest for so long as the holder of the mining lease carries on that activity. Just as the erection by a pastoral lease holder of some shed or other structure on the land may prevent native title holders gathering certain foods in that place, so too the use of land for mining purposes may prevent the exercise of native title rights and interests on some parts (even, in some cases, perhaps the whole) of the leased area. That is not to say, however, that the grant of a mining lease is necessarily inconsistent with all native title. But due to the generality of the determination respecting the content of the native title being asserted, it is not possible, subject to one exception, to accurately determine the native title rights and interests that have been extinguished or to identify those that remain …

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 484

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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. 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 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. 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 485

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Australian Property Law 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 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. 486

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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 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.

Commentary 8.27  In the decision of Western Australia v Ward the High Court made the following

comments:

No doubt account may be taken of what was decided and what was said in [Mabo] when considering the meaning and effect of the NTA. This especially is so when it is recognised that paras (a) and (b) of s 223(1) plainly are based on what was said by Brennan J in Mabo (No 2). It is, however, of the very first importance to recognise two critical points: that s 11(1) of the NTA provides that native title is not able to be extinguished contrary to the NTA and that the claims that gave rise to the present appeals are claims made under the NTA for rights that are defined in that statute: (2002) 191 ALR 1, at 16 per Gleeson CJ, Gaudron, Gummow and Hayne JJ.

These comments reveal the emphasis given to the provisions of the NTA in assessing extinguishment issues. In particular, the High Court in Ward concluded that, under the NTA, native title acquired the status of a ‘bundle of rights’. This narrow focus had a significant effect upon the scope of native title as it allowed for the possibility of a partial or complete extinguishment of native title in a broader range of circumstances. According to Gleeson CJ, Gaudron, Gummow and Hayne JJ in Ward, 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. When this test is applied, wherever rights to the land are created in third parties, a native title right allowing the holders to use the land and/or control access could be said to be extinguished. The court expressed a clear preference for this approach, known as the ‘inconsistency of incidents’ test, over the clear and plain intention test because of what it identified as the more structured ‘rights’ based focus of the NTA. The court concluded that the clear and plain intention expression: … must not be 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 487

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Australian Property Law

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: see Western Australia v Ward (2002) 191 ALR 1 at [78] per Gleeson CJ, Gaudron and Gummow JJ.

While the majority found that native title was not completely extinguished by the Western Australian pastoral leases that pre-dated the mining leases, fundamental access rights held by native title claimants were extinguished. Any further extinguishment of native title rights would, however, depend upon the application of the inconsistency of incidents test and the scope of extinguishment would depend upon the particular facts. The court further noted that Crown reservations could extinguish native title. Finally, in assessing the type of native title rights that could be recognised under the NTA, the High Court held that claims to protection of cultural knowledge that go beyond denial or control of access to land or waters go beyond the scope of the NTA although the law respecting confidential information, copyright, or fiduciary duties may afford some protection to these rights. The conclusions in Ward were subsequently reinforced by the High Court in Western Australia v Brown (2014) 306 ALR 168, where French CJ, Hayne, Kiefel, Gageler and Keane JJ rejected a test for inconsistency that evaluated the manner in which the rights were exercised rather than the nature of the rights exercised. On the facts, the plurality held that the conferral of mining leases to joint venturers was not wholly inconsistent with native title rights because the leases in issue did not give the joint venturers any right of exclusive possession. The court went on to hold at [64] that the exercise of particular rights pursuant to those mining leases did not extinguish native title even though the rights that the joint venturers had, and exercised, ‘took priority over the rights and interests of the native title holders for so long as the joint venturers enjoy and exercise those rights. Any competition between the exercise of the two rights must be resolved in favour of the rights granted by statute. But when the joint venturers cease to exercise their rights (or their rights come to an end) the native title rights and interests remain,  unaffected.’ These conclusions were subsequently upheld in West Australia v Ward (No 3) (2015) 233 FCA 1, where the Federal Court evaluated the effect of an oil licence upon native title. Barker J held at [178] that it was not possible to conclude, in light of the authority of Ward, as confirmed by Brown, that the rights granted to the licensee by the oil licence to enter the subject area (the claim area) and conduct prospecting for mineral oil are, conceptually, any different from the grants of the pastoral leases and mining leases considered in Ward and to which reference has just been made. 8.28  The decision in Fejo v Commonwealth involved an assessment of the scope of native title extinguishment by an inconsistent Crown grant. The High Court considered the impact upon a native title interest of the grant of a fee simple estate. The court concluded that the rights conferred under a fee simple grant do not permit the enjoyment of any other right and therefore, once issued, such a grant will completely extinguish native title, making it impossible for native title to be subsequently revived. The decision is extracted below.

—  Fejo v Commonwealth — (1999) 195 CLR 96 HCA Facts: In 1996 the Larrakia people, a community or group of Aboriginal Australians whose traditional lands encompassed land and waters around Darwin and the Cox Peninsula in the Northern Territory, lodged an application for determination of native title with the Native Title 488

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Registrar. The application related to extensive portions of land in the area of Darwin, Palmerston and Litchfield. In 1996, prior to the lodgment of the application, the land was subdivided by the Northern Territory into 15 parcels and the Northern Territory granted Crown leases in respect of each 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. In December 1997, the appellants, on behalf of themselves and the Larrakia people, brought proceedings in the Federal Court of Australia. The appellants contended that the original grant did not extinguish native title but merely suspended it. They argued that if the original 1882 grant affected native title at all, it did no more than suspend the right of the traditional owners to exercise native title, a right which was subsequently revived when the grants re-vested in the Northern Territory Government. The High Court rejected this argument. Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ:

The effect of the grant of a fee simple 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): 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 (eg, authorities to prospect for minerals). Similar references to extinguishment are to be found elsewhere in Mabo (No 2): … 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: 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: … 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: 489

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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 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 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 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

490

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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 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 do not arise. 491

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Australian Property Law

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. The facts that the original grant was made by the Governor of South Australia and the land was resumed by the Commonwealth (and later passed to the Northern Territory) may very well present difficulties in the way of an argument that native title was revived when the land came to be held once more by the Crown (or, as it was put sometimes in argument, inaccurately, ‘reverted to the Crown’). In addition, such an argument would have also to deal with the problems presented by the vesting of the land and the legal estate in the Commonwealth pursuant to s 16 of the 1906 Act ‘freed and discharged from all … interests’ and by the conversion into a claim for compensation of ‘the estate and interest of every person’, as provided by s 17 of that Act. But it is not necessary to deal with those matters here. The argument that native title may revive fails because the rights are extinguished by the grant of freehold title; they are not merely suspended. That the grant of freehold title extinguishes rather than suspends native title rights follows from the way in which the sovereign power to create rights and interests in land was exercised. The legislation that provided for the making of grants in fee simple of waste lands provided for the creation of rights in respect of the land that were inconsistent with any continued right to native title. The rights created by the exercise of sovereign power being inconsistent with native title, the rights and interests that together make up that native title were necessarily at an end. There can be no question, then, of those rights springing forth again when the land came to be held again by the Crown. Their recognition has been overtaken by the exercise of ‘the power to create and to extinguish private rights and interests in land within the Sovereign’s territory’. The 1882 grant extinguished native title to the land …

Commentary 8.29  The decision by the High Court in Fejo involved two important issues. First,

confirmation of the principle set out in Mabo (No 2) that the grant of a fee simple estate will completely extinguish all native title interests because the full ownership rights associated with fee simple are directly inconsistent with native title interests. Second, confirmation that where native title rights have been extinguished, they are extinguished absolutely. Thus, where a fee simple has been granted and the land is subsequently reacquired by the Crown, native title rights and interests cannot be revived. The rationale for this is that the rights issued under the fee simple are rights that exist under the common law. When these rights intersect with customary law and raise a direct inconsistency, native title will be extinguished fully and completely and not merely suspended. The sovereignty of power that the Crown retains within the tenure framework allows it to issue a fee simple grant and in so doing the bare radical title that the Crown holds over unalienated land is transformed into full beneficial ownership over alienated land. The Crown becomes, as is necessarily the case within a land system founded upon feudal tenure, the paramount lord over the land which is subject to the fee simple grant. This transformation has the effect of extinguishing native title under both the common law and statute because the rights attached to a fee simple are fundamentally inconsistent with any continuing expression of native title. The capacity of the Crown to reacquire the land where it is needed at a future date does not diminish the effect of the extinguishment process. As noted by Kirby J in Fejo v Northern Territory (1998) 195 CLR 96 at 151, the extinguishment of native title by a fee simple grant means that it ceases to exist ‘within the legal space of the common law’. This was confirmed by the Supreme Court of New South Wales in Lawson v Minister for Environment and 492

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Water [2020] NSWSC 186, where Ward CJ held that the s 18 vesting provision in the River Murray Act 1915 (NSW) intended to confer an estate in fee simple on the South Australian government on the commencement of the act and there was nothing in the wording of the Act to suggest it was purely an enabling provision to enable works to be carried out. Her Honour further held that this had the effect of extinguishing native title because an estate in fee simple is one of the most comprehensive forms of proprietary interests. To this end, her Honour quoted at [162] from the court in Fejo, who stated, ‘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’ (per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ at [43]). A further issue that the courts have explored is whether registration of a fee simple estate under the Torrens system has the effect not only of extinguishing native title rights and interests, but also of removing any entitlement to compensation. This issue was explored by the Full Federal Court in Jango v Northern Territory of Australia [2007] FCAFC 101. In that case, the Commonwealth relied on the indefeasibility principle to support the proposition that (even though the original grants in fee simple over Crown land were invalid when made) registration of the fee simple estates under the Real Property Act 1886 (SA) extinguished any surviving native title rights and interests over land including any right to compensation. French CJ, Finn and Mansfield JJ held that the indefeasibility provisions of the Act did not extinguish any surviving native title rights and interests over the land because such rights had already been extinguished by the previous exclusive possession acts of the Northern Territory, and registration of those acts was not inconsistent with the RDA. Further, their Honours held that registration under the Real Property Act did not in any way interfere with the compensation requirements set out under s 23J of the Native Title Act 1993 (Cth) and any argument to the contrary would ‘seriously compromise’ the compensation regime set up pursuant to s 23J. Their Honours made the following comments at [111]: In the scheme of the Real Property Act, the making of the grants predated the registration of the grantees’ certificates of title: see Real Property Act ss 25 and 50. Whatever may have been the consequence of registration on native title rights and interests at the time of registration by virtue of the indefeasibility provisions, on and from the enactment of the Validation Act, those rights and interests were taken for the purposes of NTA to have already been extinguished ‘completely’: see s 23A(2); by the anterior previous exclusive possession acts of the Northern Territory, ie by the making of the grants: see Fejo v Northern Territory 195 CLR at [43]. Nothing in the NTA provided for, or warranted, the undoing of that complete extinguishment. In other words, registration may have had effects as a matter of State law (assuming both the registration was itself effective: see below; and that its effects were not in the circumstances inconsistent with the Racial Discrimination Act). What registration did not do is affect in any way an entitlement to compensation under the NTA given by s 23J. For its purposes, notwithstanding the later registration of the grants, the native title rights and interests in the lands granted would not have been extinguished ‘otherwise than under this Act’.

Extinguishment of native title will not occur where legislative provisions constrain rather than operate inconsistently. Hence, as outlined by French CJ and Crennan J in Akiba v The Commonwealth (2013) 300 ALR 1 at [24]: 493

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‘Extinguishment’ in relation to native title refers to extinguishment or cessation of rights. Such extinguishment of rights in whole or in part is not a logical consequence of a legislative constraint upon their exercise for a particular purpose, unless the legislation, properly construed, has that effect. To that proposition may be added the general principle that a statute ought not to be construed as extinguishing common law property rights unless no other construction is reasonably open.

In Congoo on behalf of the Bar-Barrum People v The State of Queensland [2014] FCAFC 9, the Full Federal Court concluded that provisions which were inconsistent with the exercise of native title rights in the National Security Act 1939 (Cth), and which were designed to be operative for a limited period of time during wartime, did not extinguish native title. North and Jagot JJ concluded that the primary objective of the Commonwealth in implementing this legislation was not to impose any absolute prohibition. On appeal, the High Court in Queensland v Congoo (2015) 256 CLR 239 agreed. French CJ and Keane J noted that the statutory powers that were conferred on the Commonwealth, while including the right of possession, were not unqualified in the same sense as a fee simple grant. Broad as they were, the powers were to be exercised in accordance with the scope, subject matter and purpose of the National Security Act 1939 (Cth). Their Honours went on to state at [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.

By contrast, in Lawson v Minister for Environment and Water, the Supreme Court of New South Wales held that a vesting provision in the River Murray Waters Act 1915 (NSW) was intended to provide certainty in relation to South Australia’s water rights and therefore to vest a fee simple on the commencement of the legislation. Ward CJ held that there was nothing to suggest that the vesting was conditional or that the provision only intended to confer limited powers of control of management. Rather, the vesting conferred a fee simply upon the government and amounted to a previous exclusive possession act under the NTA.

Native Title and Coastal Waters 8.30  The decision in Mabo (No 2) dealt with land-based native title claims. Native title

claims that are made against water, including those made within territorial waters and in extended jurisdictional boundaries beyond the territorial waters, are not, therefore, sourced in the common law but, rather, are founded upon the specific legislative provisions in the NTA. Section 223(1) of the NTA specifically extends the definition of native title to both land and waters. Section 6 of the NTA defines waters to include both internal waters, coastal waters and waters to which Australia asserts jurisdiction pursuant to its offshore legislation. Section 253 of the NTA then goes on to state that ‘waters’ in relation to native title rights include the sea, a tidal inlet, a bay, an estuary, a harbour or subterranean waters, as well as the bed or subsoil under or airspace over any waters. In combination, the effect of these provisions is to give native title claims against coastal seas a statutory foundation. Claims may be recognised within the territorial sea of the Commonwealth and also within waters which are under state control. The provisions make it clear that native title may only

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be asserted in waters over which Australia asserts sovereignty pursuant to s 6 of the Seas and Submerged Lands Act 1973 (Cth). This will allow native title to be asserted within the zone of the territorial sea as well as extended zones of jurisdiction beyond the territorial sea that have been approved by the 1982 United Nations Law of the Sea. New zones of resource jurisdiction include the contiguous zone, the exclusive economic zone and the continental shelf. The NTA does not authorise the recognition of native title rights and interests in waters beyond these extended zones. The tests that have evolved to deal with native title claims in coastal waters have developed a different emphasis to those which are focused upon land-based claims for a number of reasons. First, the claim is statute based; second, the absence of radical title in the Crown means that native title cannot be articulated as an encumbrance upon the underlying title of the Crown; and third, the existence of public and international rights of fishing and navigation within coastal waters has introduced an enhanced need to ensure consistency. Hence, while it remains necessary to establish the traditionality of native title rights and interests claimed within the territorial sea, it is also necessary to establish that the recognition of such rights and interests is consistent with the continued enforcement of public and international principles of fishing and navigation. This has resulted in the non-recognition of native title rights of exclusivity because the level of control they confer is directly inconsistent with the proper recognition of public and international rights of fishing and navigation.2 This issue was explored by the High Court in Commonwealth v Yarmirr (2001) 208 CLR 1. The facts of Yarmirr concerned a native title claim by the Indigenous inhabitants of Croker Island against the waters in the inter-tidal zone of the Croker Island. The claimants argued that they have continuously observed hunting, fishing and gathering rights in the claimed area, and that these rights incorporated rights to control entry into such areas. Gleeson, Gaudron, Gummow and Hayne JJ held that native title rights and interests could be recognised in the territorial sea, despite the absence of radical title in the Crown, but only where such rights were not inconsistent with fishing and navigational principles. Their Honours stated at [96] that the ‘tension between, on the one hand, the rights to “occupy, use and enjoy the waters of the determination area to the exclusion of all others” (which the claimants sought in their amended notice of appeal to this Court) and “to possess those waters to the exclusion of all others” and on the other, the rights of fishing, navigation and free passage is self-evident’. As such, their Honours concluded at [97]–[98] that the nature and extent of this inconsistency meant that there was ‘a fundamental inconsistency between the asserted native title rights and interests and the common law public rights of navigation and fishing as well as the right of innocent passage. The two sets of rights cannot stand together and it is not sufficient to attempt to reconcile them by providing that exercise of the native title rights and interests is to be subject to the other public and international rights.’ In determining what type of rights will amount to rights of exclusivity, it has been held that commercial rights to fish do not amount to rights of exclusivity and therefore may 2. Note, however, that a majority of the High Court in Northern Territory of Australia v Arnhem Land Aboriginal Trust (The Blue Mud Bay case) (2008) 236 CLR 24 (Gleeson CJ, Gummow, Hayne, Crennan and Kirby JJ, Kiefel J in dissent) concluded that a grant issued under s 70(1) of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) could confer rights of exclusivity that would preclude the right of holders of fishing licences issued under the Fisheries Act (NT) from entering waters that were the subject of such a grant. 495

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be recognised. In Akiba v The State of Queensland (2010) 270 ALR 564, a case concerning native title claims against the waters of the Torres Strait islands, Finn J held that it would be ‘curious’ and ‘untenable’ to invalidate commercial rights to fish on the grounds that they constituted rights of exclusivity given that such rights had long been exercised by the Crown who, in the absence of radical title, had practised them without the assumption of any exclusive control. His Honour made the following comments at [753]–[755]: What is difficult to understand is why a right to take marine resources for trading or commercial purposes is said to presuppose a right to exclusive possession. Such a proposition is belied by the common law experience in this country. As was said in Yarmirr HC at [53]: Before federation the boundaries of the colonies ended at low-water mark. Any assertion of sovereignty, before federation, over the area beyond low-water mark was made, therefore, by the Imperial Crown, not the colonies. Britain acquired territorial seas around the Torres Strait Islands when they were annexed in 1872 or 1879: on sovereignty and the territorial sea see generally Churchill and Lowe, The Law and the Sea, Ch 4 (3rd ed 1999). … The State’s contention becomes the more curious — and untenable — given that, in relation to the common law’s public right to fish, no restrictions were imposed on the quantity or size of fish which could be taken … If it be said that it is the Islander society’s laws and customs which require a right to exclusive possession before the group members of a particular island can take marine resources from their area for trading or commercial purposes, that characteristic of the laws has to be demonstrated. It has not.

8.31  The enforceability of a native title right to hunt and fish for commercial purposes and

its durability in light of the implementation of Queensland and Commonwealth fisheries legislation, which precludes such a right in the absence of an issued licence, was examined by the High Court in Akiba v The Commonwealth (2013) 300 ALR 1, which is extracted below. The High Court examined both the fundamental nature of native title rights as they apply to the territorial sea and their ongoing enforceability in light of regulatory provisions imposing a licencing framework upon fishing and marine resources. The judgments of French CJ and Crennan J are extracted:

—  Akiba v The Commonwealth  — (2013) 300 ALR 1 Facts: The applicants were granted special leave to appeal to the High Court on the following grounds: whether the majority of the Full Court had erred in holding that notwithstanding the overall purpose of the Commonwealth and Queensland fisheries legislation, a native title right to engage in taking fish and other aquatic resources is extinguished by a legislative provision requiring any such taking to be done pursuant to an issued licence. Further, whether the majority of the Full Court erred in holding that rights held under traditional laws and customs on the basis of a ‘reciprocal relationship’ with a holder of ‘occupation based rights’ are not native title rights or interests within the meaning of s 223(1) of the Native Title Act 1993 (Cth). French and Crennan JJ:

Extinguishment and fisheries legislation in the Federal Court The effects of colonial, State and Commonwealth fisheries legislation on the native title right ‘to take for any purpose resources in the native title areas’ were considered by the primary judge and the Full Court. That consideration involved a review of historical and contemporary statutes. It is not necessary for present purposes to repeat that review in detail. The succession of relevant statutes was set out in the judgment at first instance and extracted from that judgment at some length in the majority judgment of the Full Court. It is sufficient to say that the history of 496

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the relevant colonial and State legislation dates back to the Queensland Fisheries Act 1877 (Q). The history of the relevant Commonwealth legislation began with the Fisheries Act 1952 (Cth) and the Pearl Fisheries Act 1952 (Cth). It was not in dispute that between them the relevant statutes applied to all of the waters in the determination area. The common feature of the legislation, which was invoked by the Commonwealth and by the State of Queensland in favour of their extinguishment submissions, was the imposition of a prohibition against any person taking fish and other aquatic life for commercial purposes without a licence granted under the relevant statute. It was that feature which the parties debated in this Court. No contention was advanced before the primary judge that: native title had been extinguished in any part of the determination area by leases or licences given under Queensland statutes attaching exclusive rights to such grants; the right to fish for particular species or a number of species for commercial purposes had been legislatively extinguished and replaced by rights granted pursuant to, or in connection with, statutory management plans. The State of Queensland submitted to the primary judge that its successive legislative regimes since 1877 had abrogated or extinguished any pre-existing native title rights to fish for commercial purposes and replaced them with rights conferred only upon those who held the necessary statutory licences. The legislative history was said to have resulted in the extinguishment of any rights to take or use the resources of the claim area for trading or commercial fishing purposes. The Commonwealth submission, reflecting that of the State, pointed to a history of increasingly comprehensive management regimes and the retention by the Crown exclusively for itself and its agencies of the capacity to manage the seas, including those in the claim area. Fisheries management had focused upon commercial fishing, reflecting the treatment of fisheries in the sea as a public resource and concerns about the long-term development and sustainability of the fishing industry. The appellant submitted before the primary judge that the relevant native title right was the right to access and take marine resources and not a differentiated right to take resources for trade or commercial purposes. Neither the State nor the Commonwealth argued that the native title right to take marine resources had itself been extinguished. The appellant submitted that the effect of the successive regulatory schemes was to regulate the exercise of native title rights and not to extinguish them or their incidents. There was nothing to suggest, and no party suggested, that native title holders had ever been precluded from applying for licences to fish for commercial purposes under the successive regimes or are now precluded from doing so. In a key passage in his reasons for judgment on the extinguishment issue, his Honour said: ‘The native title right I have found is a right to access and take marine resources as such — a right not circumscribed by the use to be made of the resource taken.’ His Honour nevertheless accepted that an activity carried on in exercising a native title right might be treated as a distinct ‘incident’ of the right for extinguishment purposes when the activity had a discrete and understood purpose. It was in that context that his Honour rejected the appellant’s submission that it was impermissible to subdivide the general right to take resources. He said: The distinction between engaging in an activity for commercial purposes or for non-commercial, private or other purposes is one commonly made. It was from the outset, and remains, a characteristic of the fisheries legislation considered in this matter. It is reflected in the differentiation of purposes in s 211 of the NT Act. A broadly defined native title right such as the right ‘to take for any purpose resources in the native title areas’ may be exercised for commercial or non-commercial purposes. The purposes may be well defined or diffuse. One use may advance more than one purpose. But none of those propositions requires a sectioning of the native title right into lesser rights or ‘incidents’ 497

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defined by the various purposes for which it might be exercised. The lesser rights would be as numerous as the purposes that could be imagined. A native title right or interest defines a relationship between the native title holders and the land or waters to which the right or interest relates. The right is one thing; the exercise of it for a particular purpose is another. That proposition does not exclude the possibility that a native title right or interest arising under a particular set of traditional laws and customs might be defined by reference to its exercise for a limited purpose. That is not this case. The right defined by Order 5(b) of the Determination, which, save for the extinguishment question, was not in dispute, was a right ‘to take for any purpose resources in the native title areas.’ His Honour treated the exercise for commercial purposes of the group right to take resources in the native title areas as though it were the exercise of a right to take marine resources for commercial purposes. That equivalence attracted the application of principles governing the extinguishment of native title. On that basis, the question of construction, as his Honour posed it, was whether successive Queensland and Commonwealth legislative regimes had disclosed a clear and plain intention to extinguish that right. His Honour held that they had not: the legislative regimes of the State since 1877, and of the Commonwealth since 1952, concerning fisheries did not, and do not, severally or together evince a clear and plain intention to extinguish native title rights to take fish for commercial purposes. To the extent that those legislative regimes regulate the manner in which, and the conditions subject to which, commercial fishing can be conducted in a fishery in the native title holders’ marine estate, or prohibits qualifiedly or absolutely particular activities in relation to commercial fishing in the fishery in that estate: cf s 211 of the NT Act; the native title holders must, in enjoying their native title rights, observe the law of the land. This is their obligations as Australian citizens. But complying with those regimes provides them with the opportunity — qualified it may be — to exercise their native title rights. The majority in the Full Court, in a similar vein, focused upon ‘the effect of successive licensing regimes whereby, in simple terms, fishing for commercial purposes without a licence issued by the government of Queensland or the Commonwealth was prohibited.’ Their Honours concluded that it was sufficient to establish extinguishment of a native title right to take fish for commercial purposes that the Fish and Oyster Act 1914 (Q) and the Fish and Oyster Act 1952 (Cth) prohibited that activity without licences granted under those respective statutes. Central to their Honours’ reasoning was the proposition that the prohibition could not be characterised as mere regulation of fishing in the native title area. Consideration of the Full Court’s judgment directs attention to the distinction between rights and their exercise for particular purposes, and to the concepts of ‘extinguishment’ and ‘native title right’ and their interaction. Those matters are inter-related and, to the extent that they involve the concept of extinguishment as an effect of legislative action, a question of statutory construction is raised.

Rights, extinguishment and statutory construction ‘Extinguishment’ in relation to native title refers to extinguishment or cessation of rights. Such extinguishment of rights in whole or in part is not a logical consequence of a legislative constraint upon their exercise for a particular purpose, unless the legislation, properly construed, has that  effect. To that proposition may be added the general principle that a statute ought not to be construed as extinguishing common law property rights unless no other construction is reasonably open. Neither logic nor construction in this case required a conclusion that the conditional prohibitions imposed by successive fisheries legislation in the determination area were directed to the existence of a common law native title right to access and take marine resources for commercial purposes. In any event, nothing in the character of a conditional prohibition on taking fish for commercial purposes requires that it be construed as extinguishing 498

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such a right. Recognition of the distinction between a broadly stated right and its exercise in particular ways or for particular purposes is implicit in the legislative scheme of the NT Act dealing with extinguishment. The NT Act contemplates the existence of legislative or executive acts which ‘affect’ native title rights and interests by constraint or restriction but do not extinguish them. Section 227 provides: 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’ there includes the making, amendment or repeal of any legislation and includes legislation which is partly inconsistent with the continued enjoyment or exercise of native title rights and interests. The plurality in Western Australia v Ward adverted to ‘the distinction between the extinguishment of native title rights and interests and partial inconsistency’ in the NT Act which was continued by the amendments to that Act in 1998. That distinction, which is made in s 227, is also brought out in s 238, which ‘sets out the effect of a reference to the non-extinguishment principle applying to an act.’ The non-extinguishment principle is applied to various classes of ‘act’ by the NT Act. If an ‘act’ to which it applies affects any native title in relation to the land or waters concerned, then ‘the native title is nevertheless not extinguished, either wholly or partly.’ Section 238(4) provides: If the act is partly inconsistent with the continued existence, enjoyment or exercise of the native title rights and interests, the native title continues to exist in its entirety, but the rights and interests have no effect in relation to the act to the extent of the inconsistency. The ‘non-extinguishment’ principle is a statutory construct. It is nevertheless underpinned by a logical proposition of general application: that a particular use of a native title right can be restricted or prohibited by legislation without that right or interest itself being extinguished. The distinction between the existence and exercise of a right appears in s 211 of the NT Act. Because the section was mentioned by the primary judge and in submissions, it is desirable to set out the relevant parts of it: Requirements for removal of prohibition etc on native title holders (1) Subsection (2) applies if: (a) the exercise or enjoyment of native title rights and interests in relation to land or waters consists of or includes carrying on a particular class of activity (defined in subsection (3)); and (b) a law of the Commonwealth, a State or a Territory prohibits or restricts persons from carrying on the class of activity other than in accordance with a licence, permit or other instrument granted or issued to them under the law; and … Removal of prohibition etc on native title holders (2) If this subsection applies, the law does not prohibit or restrict the native title holders from carrying on the class of activity, or from gaining access to the land or waters for the purpose of carrying on the class of activity, where they do so: (a) for the purpose of satisfying their personal, domestic or non-commercial communal needs; and (b) in exercise or enjoyment of their native title rights and interests.

Note: In carrying on the class of activity, or gaining the access, the native title holders are subject to laws of general application. 499

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Definition of class of activity (3) Each of the following is a separate class of activity: (a) hunting; (b) fishing; (c) gathering; (d) a cultural or spiritual activity; (e) any other kind of activity prescribed for the purpose of this paragraph. The distinction between native title rights and their exercise is made explicit in s 211 and was noted by the plurality in Yanner v Eaton. Their Honours said that: the section necessarily assumes that a conditional prohibition of the kind described [in s 211(1)(b)] does not affect the existence of the native title rights and interests in relation to which the activity is pursued. There is a tension between that observation and an element of the reasoning in Western Australia v The Commonwealth (Native Title Act Case) in which the plurality Justices appeared to equate each broadly stated ‘class of activity’ described in s 211(3) with a usufructuary right or interest, being an incident of a more broadly stated native title. That will be so in many, if not most, cases. Whether it is a proposition that emerges from the construction of s 211 was not a question whose resolution formed any part of the reasoning which led their Honours to hold that s 211 was a valid exercise of Commonwealth power. The existence of the distinction between the exercise of a native title right for a particular purpose or in a particular way, and the subsistence of that right, is relevant to the construction of statutes said to effect the extinguishment of native title rights. Put shortly, when a statute purporting to affect the exercise of a native title right or interest for a particular purpose or in a particular way can be construed as doing no more than that, and not as extinguishing an underlying right, or an incident thereof, it should be so construed. That approach derives support from frequently repeated observations in this Court about the construction of statutes said to extinguish native title rights and interests. The early approach of this Court in Mabo v Queensland (No 1) and Mabo v Queensland (No 2) to determine whether native title rights or interests had been extinguished by legislative or executive action focused upon the intention to be imputed to the legislature or the executive. For both legislative and executive action, a plain and clear intention to extinguish native title was required. Imputed legislative intention is, and always was, a matter of the construction of the statute. As was stated in Lacey v Attorney-General (Qld): Ascertainment of legislative intention is asserted as a statement of compliance with the rules of construction, common law and statutory, which have been applied to reach the preferred results and which are known to parliamentary drafters and the courts. (footnote omitted) The identification of a statute’s purpose may aid in its construction. That identification may be done by reference to the apparent legal effect and operation of the statute, express statements of its objectives and extrinsic materials identifying the mischief to which it is directed. However, purposive construction to ascertain whether a statute extinguishes native title rights or interests is not without difficulty where the statute was enacted prior to this Court’s decision in Mabo (No 2) that the common law could recognise native title. The difficulty was described by Gummow J in Wik Peoples v Queensland. The Court in that case was, as his Honour pointed out, construing statutes ‘enacted at times when the existing state of the law was perceived to be the opposite of that which it since has been held then to have been.’ That reality affected the application of the purposive approach to construction. The Court therefore focused on inconsistency as the 500

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criterion for extinguishment. In the case of competing rights — native title rights and interests on the one hand and statutory rights on the other — the question was: whether the respective incidents thereof are such that the existing right cannot be exercised without abrogating the statutory right. If it cannot, then by necessary implication, the statute extinguishes the existing right. His Honour observed that that notion of inconsistency included the effect of a statutory prohibition of the activity in question. In Fejo v Northern Territory the plurality held that a grant of land in fee simple extinguished underlying native title because the two sets of rights were inconsistent with each other. Similarly, in Yanner v Eaton the plurality said: ‘native title is extinguished by the creation of rights that are inconsistent with the native title holders continuing to hold their rights and interests.’ Nevertheless, ‘[t]he extinguishment of such rights must, by conventional theory, be clearly established.’ The inconsistency criterion was considered in relation to statutory regulation in Yanner v Eaton. The plurality observed that ‘regulating the way in which rights and interests may be exercised is not inconsistent with their continued existence.’ Gummow J, in a separate judgment, noted that a requirement for an Indigenous person to obtain a permit under the Fish and Oyster Act 1974 (Q) to hunt did not abrogate the native title right to hunt. ‘Rather, the regulation was consistent with the continued existence of that right.’ Inconsistency analysis was applied by this Court to the question whether the common law would recognise native title in the territorial sea. The answer to that question was in the affirmative. In The Commonwealth v Yarmirr, the Court found no inconsistency to exist between past or present laws relating to the territorial sea and recognition by the common law of Australia of native title rights and interests in relation to the seas and sea-beds in that area. There was, however, an inconsistency between native title rights to exclusive possession and common law public rights to navigate and to fish and the international right of innocent passage recognised by Australia. So it is that in this case the right to access and take the resources of the native title area is not an exclusive right. The pre-eminence of inconsistency as the criterion of extinguishment of native title rights by the grant of rights by the Crown or pursuant to statutory authority was reiterated by the plurality in Western Australia v Ward. Their Honours warned against misunderstanding the criterion of ‘clear and plain intention’ to extinguish, which had been used in earlier decisions of the Court. The subjective states of mind of those whose acts were alleged to have extinguished native title were irrelevant: ‘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.’ In so saying, their Honours emphasised the need to identify and compare the two sets of rights. In so doing, they distinguished between activities on land and the right pursuant to which the land is used. Their Honours went on to reject the proposition that there could be degrees of inconsistency between rights or, absent statutory powers, suspension of one set of rights in favour of another and said: ‘Two rights are inconsistent or 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.’ The State of Queensland relied upon that observation in its written submissions. While this case is concerned with inconsistency, it is not concerned with inconsistency of rights. The question in this case is whether successive statutory regimes were inconsistent with the recognition by the common law of an asserted native title right. The State of Queensland characterised the successive colonial, State and Commonwealth fisheries laws as inconsistent with a right to take fish or aquatic life for commercial purposes. The asserted inconsistency turned, critically, upon the general application of the statutory prohibitions against taking fish and aquatic life for such purposes, absent a licence. Extinguishment was said to flow from a comparison of the statutory regime and the rights claimed. The Commonwealth 501

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identified an inconsistency arising ‘because of the limited and defined creation of statutory rights to fish for commercial purposes which did not allow for the continued enjoyment of native title rights … to fish for those purposes.’ The Commonwealth and the State of Queensland relied upon the decision of this Court in Harper v Minister for Sea Fisheries. The question in that case was whether a fee charged for a licence to take abalone in Tasmania was an excise. To take abalone without a licence was prohibited by regulation. The Court held the fee was not a tax and therefore not a duty of excise. The licence conferred a privilege analogous to a profit à prendre. The fee for the licence was a charge for the acquisition of that right, which was akin to a property right. The effect of the licensing regime was to convert what was formerly in the public domain into ‘the exclusive but controlled preserve of those who hold licences.’ The public right to take abalone, ‘being a public not a proprietary right, [was] freely amenable to abrogation or regulation by a competent legislature’. As the appellant submitted, Harper is not authority for the proposition that native title rights and interests, derived from traditional laws and customs and recognised by the common law, are as freely amenable to abrogation as public rights derived from the common law. Moreover, the decision in Harper did not deal with the question whether what is affected by a licensing regime is the exercise, for a particular purpose, of a broadly stated native title right capable of being exercised for any purpose. The submissions as to inconsistency made by the Commonwealth and the State of Queensland ought not to be accepted. The premise upon which they rest is the characterisation of the exercise, for a particular purpose, of a general native title right as the exercise of a lesser right defined by reference to that purpose. That characterisation is not a logical necessity. Nor is it necessary for coherence in the law. Its rejection is consistent with the maintenance of a proper distinction between proprietary or usufructuary rights and their exercise in particular ways or for particular purposes. The appeal on the first two grounds should be allowed.

The reciprocal rights ground As appears from the Determination and the reasons of the primary judge, his Honour found that while all of the claim group members were, in aggregate, the holders of all of the native title rights, they did not hold them communally. They were best described as ‘group rights and interests’. The groups comprised the claim group members of each of the island communities who held emplacement-based rights in their respective areas or estates. There were also rights held by claim group members of more than one island community in shared areas. The appellant had sought inclusion in the Determination of persons said to be the holders of ‘reciprocal rights’. The primary judge held that those rights, being relationship-based, were not rights ‘in relation to’ waters within the meaning of s 223(1) of the NT Act. The Full Court dismissed the appellant’s cross-appeal against this aspect of the primary judge’s decision. The reciprocal rights asserted by the appellant derived from the ‘customary marine tenure model’, which the primary judge found to encompass two types of rights. The first were ‘ancestral occupation based rights’ or ‘emplacement based rights’. The second were ‘reciprocal rights’. His Honour found that the latter differed from ‘occupation based rights’. Their defining characteristics were that they: (a) are held by each person who has or each group of persons who have a relevant reciprocal relationship (whether based in kinship or of another kind, such as tebud/ thubud) with an ancestral occupation based rights holder or group of such rights holders; and (b) can be called rights or interests because they are enforceable and sanctioned by appeal to the law or custom that associates the reciprocal obligation with the relationship and the law or custom that sanctions consequences for denial of the reciprocal obligation; (c) are ‘group’ or ‘individual’ rights; (d) cover the area covered by the rights held by the person or group upon whom the right depends (but ultimately subject to regulation by that person or group or by the descent group of ancestral 502

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occupation based rights holders for that area); (e) the content of the rights is reciprocal shared access and use which permits the same activities as may be done by the person or group upon whom the right depends but does not include territorial control or livelihood and the exercise of the right is subject ultimately to control by ancestral occupation based rights holders. (emphasis in original) His Honour accepted that the Islander society has a body of laws and customs founded upon a dominant and pervasive principle of reciprocity and exchange. It is a principle which expresses notions of ‘respect, generosity and sharing, social and economic obligations and the personal nature of relationships’. The relationships and the rights and obligations which arose out of them were personal in that the discharge of the performance obligation was the responsibility of the Islander host (in the case of a tebud relationship) or of the relative and not of the Island community. The relationship could be passed down through generations. His Honour concluded that the parties to such status-based relationships had what could properly be described as rights and obligations recognised and expected to be honoured or discharged under Islander laws and customs. They were not mere privileges. However, they were not rights in relation to land or waters. His Honour said: ‘They are rights in relation to persons. The corresponding obligations are likewise social and personal and can be quite intense in character. This emerges clearly in the Islander evidence, the predominant emphases being on helping, sharing, being hospitable.’ The Full Court dismissed the cross-appeal on this ground, substantially for the reasons given by the primary judge. In their joint judgment, Keane CJ and Dowsett J observed that the primary judge’s use of the term ‘status-based’ as a description of the reciprocal relationships was derived from the evidence of an expert witness called on behalf of the appellant. Their Honours said: ‘Such rights cannot be said to be possessed by the claimants themselves, so far as they relate to land and waters: such rights are not held by reason of the putative holders’ own connection under their laws and customs with the land and waters in question but are held mediately through a personal relationship with a native title holder who does have the requisite connection’. Putting to one side the reference to ‘connection’, which was criticised by the appellant in his submissions to this Court, it is sufficient to say that the primary judge was correct in his characterisation, on the basis of the evidence before him, of the reciprocal rights as rights of a personal character dependent upon status and not rights in relation to the waters. The appeal against this aspect of the Full Court’s judgment should be dismissed.

Conclusion For the above reasons, the appeal should succeed on the extinguishment question, but fail on the reciprocity of rights question. The following orders should be made: Appeal allowed in part.

Commentary 8.32  The conclusions of French CJ and Crennan J in Akiba v The Commonwealth make

it clear that the introduction of Queensland and Commonwealth fisheries legislation was not inconsistent with the continued existence of a common law native title right to take fish and marine resources. Their Honours noted that the creation of limited and defined statutory rights to take fish for commercial purposes was not inconsistent with the continued existence of native title rights to take fish for commercial purposes because common law native title rights are not as ‘freely amenable’ to abrogation as public rights derived from the common law. In particular, their Honours distinguished between common law native title rights that are proprietary, usufructuary rights, and the way in which those rights are exercised. Their Honours argued that the facts of Akiba were not truly connected with ‘inconsistency of rights’, which is the core issue connected with 503

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extinguishment but rather, with the issue of whether successive statutory regimes were inconsistent with the recognition by the common law of an asserted native title right. In this respect, the regulatory rather than prohibitive character of the Fishing Act (Cth) precludes a finding of inconsistency. Subsequently, in Karpany v Dietman (2013) 303 ALR 216, the High  Court considered whether native title rights to fish, which included the right to fish for ‘undersized’ abalone, had been extinguished by the introduction of the Fisheries Act 1971 (SA). French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ, following the broad conclusions of the High Court in Akiba concluded that the legislation regulated rather than prohibited fishing in the area and that the provisions did not extinguish and were not inconsistent with the continued existence of a native title right to fish. Further, native title rights would come within the scope of rights that were exempted from the licensing framework pursuant to the specific provisions of the Act pursuant to s 211(2) of the NTA, which specifically exempts native title rights and interests exercised for domestic, personal, non-commercial purposes. In Western Australia v Willis (2015) 239 FCR 175, the Full Federal Court of Western Australia, following the conclusions of the High Court in Akiba, held that the right of the claimants to take resources in the claimed area, which was the Western Desert region, a large, flat, saline and infertile region, included taking resources for both commercial and non-commercial purposes. The court noted the history of trading within the region by the Pilki people and concluded that the evidence did not exclude practices that incorporated commercial exploitation of the resources. Dowsett J made the following observations at [44]: Given the history of trade in the wider Western Desert area, one must ask why the resources of the claim area, such as they were and are, would not have been used for trade or commercial purposes. There is no obvious answer to that question. It is more likely that the absence of evidence of trade in resources from this area is attributable to the lack of resources than to any limitation upon the general right to take and use them. The claim to be entitled to take resources from the claim area should not be seen as a claim to lesser rights and interests than those exercised in other parts of the Western Desert by the larger group of which the claim group is part.

The Native Title Act: An Outline of Key Provisions 8.33  The Native Title Act 1993 (Cth) (NTA) was introduced with the aim of codifying

the definition of native title, validating past Crown grants and setting out a protocol for dealing with future acts and setting up a regime for the determination of native title claims. The stated aims of the NTA may be summarised as follows: • recognise and define the scope of native title rights and interests in Australia; • provide a framework for the determination of native title claims through the mechanism of a qualified and specialised tribunal; • provide for the validation of ‘past acts’ and ‘intermediate period acts’ that may be invalid because of the existence of native title, and confirm the extinguishment of native title in some circumstances; • provide for a future Act regime in which procedural conditions may be imposed on future grants that affect land and waters coming within native title claims; and • provide a regime for the implementation of compensation for the extinguishment and partial extinguishment of native title interests having occurred after the introduction of the RDA. The manner in which each of these aims has been implemented is briefly explored below.

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Recognition of native title 8.34  The NTA adopts the common law definition of native title but expands it to apply to

both land and water. Section 223 of the Act (discussed above at 8.11–8.13) defines native title as the communal group or individual rights and interests that Aboriginal peoples or Torres Strait Islanders have in land or waters in accordance with their traditional laws and customs. Such rights include rights to live on the land, conserve the natural resources for their benefit, maintain, use and manage the land by protecting significant sites, determine disputes, conduct social, religious, cultural and spiritual activities on the land, and make decisions about the controlled access to land. Following the inception of the NTA, native title rights and interests are not able to be extinguished contrary to the legislation: s 11.

The determination of native title 8.35  The NTA provides a mechanism to determine whether or not native title exists

and what the rights and interests are that comprise native title: see ss 13 and 61. The Act sets up the National Native Title Tribunal (NNTT) which is empowered to determine the validity of all native title claims including an assessment of: whether or not native  title exists; the relevant person(s) or community that should hold such title; the nature and extent of the rights and interests pertaining to a particular native title claim; and the relationship between native title rights and other interests that may apply to the claimed area. Section 225 of the NTA is extracted below. EXTRACT Native Title Act 1993 (Cth) — s 225 225  Determination of native title A determination of native title is a determination whether or not native title exists in relation to a particular area (the determination area) of land or waters and, if it does exist, a determination of: (a) who the persons, or each group of persons, holding the common or group rights comprising the native title are; and (b) the nature and extent of the native title rights and interests in relation to the determination area; and (c) the nature and extent of any other interests in relation to the determination area; and (d) the relationship between the rights and interests in paragraphs (b) and (c) (taking into account the effect of this Act); and (e) to the extent that the land or waters in the determination area are not covered by a non-exclusive agricultural lease or a non-exclusive pastoral lease — whether the native title rights and interests confer possession, occupation, use and enjoyment of that land or waters on the native title holders to the exclusion of all others. Note: The determination may deal with the matters in paragraphs (c) and (d) by referring to a particular kind or particular kinds of non-native title interests.

The NTA provides for the establishment of three public registers: • native title claims: Register of Native Title Claims Pt 7; • native title determinations: National Native Title Register Pt 8; and • registered agreements: Register of Indigenous Land Use Agreements Pt 8A. 505

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Validation and confirmation of past Acts 8.36  Following the conclusions of the High Court in Mabo (No 2) concerning the validity of native title rights and interests, it was deemed appropriate to enact legislative provisions securing the validity of ‘past’ acts of the Crown, where such title has been issued without reference to native title rights or interests and is therefore potentially in breach of the RDA. Section 14 of the NTA provides for the validation of past Commonwealth Acts. Section 19 enables states and territories to validate their past acts on the same terms. Past acts are defined as Crown grants prior to 1 January 1994 and legislation prior to 1 July 1993: see s 228. The RDA requires all acts after 1975, which extinguish native title, to be compensated but the NTA sets out that the RDA will not affect the validity of past acts issued after 1975 that do not provide for the compensation of native title. In such circumstances, the NTA provides a framework for the validation of such acts, their effect upon any native title interests and the applicability of appropriate compensation: see generally ss 17(2) and 240. The validation of past acts is divided into categories under the NTA. Past acts will only have the effect of extinguishing native title completely where the act is a category A act: ss 15(1)(a)–(b) (extracted below) and 229. A category A past act amounts to a grant of a freehold estate or a commercial, agricultural, pastoral or residential lease (defined in ss 246–249), or the construction of a public work: s 253. Category B past acts include all other forms of leasehold grants not already within category A other than a mining lease where the lease was made before 1 January 1994 and remains in force on 1 January 1994. The validation of category B past acts will, apart from express exceptions, extinguish native title to the extent of any inconsistency between the two sets of rights and interests: ss 15(1)(c) and 230. There will be no extinguishment where the grant ceased to have effect, or the public work ceased to exist, before 1 January 1994, where the grant was to the Crown or a statutory authority, where the grant was made under legislation for the benefit of Aboriginal peoples or Torres Strait Islanders or where a leasehold grant was over land that on 1 January 1994 was held pursuant to grants under such land rights legislation: ss 229(2), (3) and 230. Category C validates past act mining leases and category D validates all past acts not coming within the categories A–C. A category C or D act will not extinguish native title; rather, native title rights and interests will be subjected to what the legislation describes as the non-extinguishment principle: ss 15(1)(d), 231 and 232. The non-extinguishment principle is defined in s 238 to mean that native title rights are suspended for the duration of the grant, but may be revived once the grant expires or is determined. The past act regime may also validate acts that have taken place after 1 January 1994, where those acts are linked to acts done in the past. These include the exercise of options and legally enforceable rights or the extension or renewal of grants made in the past: s 228. Native titleholders are entitled to compensation for the effect of the validation of past acts on their rights. Compensation will be on just terms where native title has been extinguished: ss 17, 20 and 51. Compensation will be assessed according to the ‘similar compensable test’ in s 240 where native title is impaired but not extinguished: ss 17, 20 and 51(3). State or territory legislation that purports to validate past acts without following the NTA scheme runs the risk of being ineffective for breach of the RDA.

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EXTRACT Native Title Act 1993 (Cth) — s 15 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, regrant or extension of which is validated by section 14.

Validation of intermediate period Acts 8.37  Prior to the Wik decision and following the decision in Mabo (No 2) it was widely assumed that native title was extinguished by all leases, whether common law or statutory in nature. The conclusions of the High Court in Wik altered this. However, to take into account the ‘intermediate period’ between the commencement of the NTA in 1993 and the handing down of the Wik decision in 1996, where landlords may have relied upon the conclusions in Mabo (No 2) and assumed that all leasehold interests extinguished native title, the NTA was amended in order to specifically validate these potentially invalid grants. The NTA clarified the effect of these intermediate period acts (ie acts done between 1 January 1994 and 23 December 1996 (the date when the Wik decision was handed down per s 232A) holding that Commonwealth (s 22A) and state (s 22F) acts were valid. The new regime for dealing with future acts was enacted on 30 September 1998 with the amended NTA. The effect of a validated intermediate period act on native title was similar to that of a past act (depending upon the category of the act, native title is either extinguished absolutely, extinguished to the extent of any inconsistency, or subjected to the non-extinguishment principle). However, in line with the Wik decision, intermediate period acts that amount to pastoral or agricultural leases and that do not confer exclusive possession are treated as category B acts rather than category A acts. This means that such acts will not extinguish native title absolutely: s 232C. These grants are defined as ‘previous non-exclusive 507

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possession acts’ and they cover grants of non-exclusive agricultural or pastoral leases that are attributable to either the Commonwealth or a state, and that have been granted prior to 23 December 1996: ss 23F, 247B and 248B. The rights of a previous non-exclusive possession act will prevail over native title rights and native title will be extinguished to the extent of that inconsistency and holders will be entitled to compensation for such extinguishment: ss 23F–23J. In all other cases, where an inconsistency exists, native title rights will be suspended for the duration of the lease: s 23G(1). Further, holders of intermediate period, non-exclusive possession pastoral and agricultural acts may be entitled to have their rights expanded to include a broader category of what are described as ‘primary production’ rights (ss 24GA and 24GB(1)(d)(i)) or to include an associated incidental activity: s 24GB(1)(d)(ii). The additional rights must have been granted before 31 March 1998 and may be granted even where they affect existing native title interests. The NTA specifically excludes from the category of ‘primary production’ rights: the grant of a right to use the majority of a large pastoral lease for non-pastoral purposes (s  24GB(4)(a)); conversion of a non-exclusive pastoral or agricultural lease into an exclusive possession lease or freehold estate (s 24GB(4)(b)); or the grant of a right to carry on farm tourism that involves observing activities or cultural works of Aboriginal peoples or Torres Strait Islanders: s 24GB(3). Where future additional rights are granted to non-exclusive possession pastoral leases, and those rights affect existing native title rights, extinguishment will only occur to the extent of any inconsistency: ss 24GB(6) and 24GC. Also, because future additional rights are subjected to the future act regime, native title parties must be notified of the proposed grant of rights and given an opportunity to comment: s 24GB(9). Examples of additional primary production activities include: cultivating land, maintaining or agisting animals, catching fish or shellfish, forest operations (defined in s 253), horticultural activities, aquacultural activities, but not mining activities. Section 24GB(2) specifically includes farm tourism in these activities. However, rights not included are the direct observation of activities or cultural works of Aboriginal peoples or Torres Strait Islanders. Section 24GB(3) and 24GB(4) require the non-exclusive possession lease to cover an area of at least 5000 hectares with the majority of the area to be used for non-pastoral purposes. Primary production activities are set out in the NTA s 24GB, which is extracted below. EXTRACT Native Title Act 1993 — s 24GB Acts permitting primary production on non-exclusive agricultural and pastoral leases (1) This section applies to a future act if: (a) a non-exclusive agricultural lease (see section 247B) or non-exclusive pastoral lease (see section 248B) was granted on or before 23 December 1996; and (b) the grant was valid (including because of Division 2 or 2A); and Note: As at the commencement of this section, grants before 1 January 1994 that were invalid because of native title have been validated by or under Division 2. (c) the future act takes place after 23 December 1996; and 508

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(d) the future act permits or requires the carrying on of any of the following while the lease (including as renewed on one or more occasions) is in force: (i) a primary production activity (see section 24GA) on the area covered by the lease; or (ii) another activity, on the area covered by the lease, that is associated with or incidental to a primary production activity covered by subparagraph (i), provided that, when the other activity is being carried on, the majority of the area covered by the lease is used for primary production activities; and (e) the future act could have been validly done or authorised at some time before 31 March 1998, if any native title in relation to the area covered by the lease had not then existed. Note: For the renewal, regrant, remaking or extension of certain acts covered by this section, see Subdivision I.

Farm tourism included (2) This section applies to a future act that: (a) takes place after 23 December 1996; and (b) permits or requires a farm tourism activity in the area covered by a lease meeting the requirements of paragraphs (1)(a) and (b) while the lease is in force (including as renewed on one or more occasions).

Exception to subsection (2) (3) However, this section does not apply to a future act permitting or requiring farm tourism if the act permits or requires tourism that involves observing activities or cultural works of Aboriginal peoples or Torres Strait Islanders.

Certain acts not covered (4) This section does not apply to a future act if: (a) where the lease covered by paragraph (1)(a) is a non-exclusive pastoral lease covering an area greater than 5,000 hectares--the act has the effect that the majority of the area covered by the lease is required or permitted to be used for purposes other than pastoral purposes; or (b) in any case--the act converts a lease covered by paragraph (1)(a) into a lease conferring a right of exclusive possession, or into a freehold estate, over any of the land or waters covered by the lease. Note: If such an act is done in exercise of a legally conferred right, it could be covered by section 24ID. A lease conferring such rights or a freehold estate could be granted after a compulsory acquisition of native title under section 24MD or under certain indigenous land use agreements.

Validation of act (5) If this section applies to a future act, the act is valid.

Non-extinguishment principle (6) The non-extinguishment principle applies to the act. 509

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Compensation (7) The native title holders concerned are entitled to compensation for the act in accordance with Division 5.

Who pays compensation (8) The compensation is payable by: (a) if the act is attributable to the Commonwealth--the Crown in right of the Commonwealth; or (b) if the act is attributable to a State or Territory--the Crown in right of the State or Territory.

Notification (9) If: (a) the primary production activity mentioned in subparagraph (1)(d)(i) or (ii) is forest operations, a horticultural activity or an aquacultural activity; or (b) the lease mentioned in paragraph (1)(a) is a non-exclusive pastoral lease and the primary production activity mentioned in subparagraph (1)(d)(i) or (ii) is an agricultural activity; before the future act is done, the person proposing to do the act must: (c) notify, in the way determined, by legislative instrument, by the Commonwealth Minister, any representative Aboriginal/Torres Strait Islander bodies, registered native title bodies corporate and  registered native title claimants  in relation to the  land  or  waters  covered by the non-exclusive agricultural lease or nonexclusive pastoral lease that the act, or acts of that class, are to be done in relation to the particular land or waters; and (d) give them an opportunity to comment on the act or class of acts

The Assessment of Compensation under the NTA 8.38  The criteria for determining compensation for many of the acts affecting native title

is set out in s 51 of the NTA. Section 51(1) requires that the entitlement to compensation under certain provisions is an entitlement on just terms to compensate the native title holders for any loss, diminution, impairment or other effect of the act on their native title rights and interests. Section 51A then goes on to define the limit of compensation by reference to the compensation payable in the event that it was a freehold estate. Section 51A(2) notes that this section has effect subject to s 53, which requires that compensation be provided on just terms, in accordance with the Constitution. Where an act is for the benefit of a third party or a private party it will generally attract the right to negotiate; for example, the grant of a mining tenement will attract this right. Section 33(1) of the NTA sets out that the right to negotiate includes, if relevant, the possibility of including a condition that has the effect that native title parties are to be entitled to payments worked out by reference to: (a) the amount of profits made; or (b) any income derived; or (c) any things produced by any grantee party as a result of doing anything in relation to the land or waters concerned after the act is done. The parties should negotiate in good faith for a period of at least six months and then they may either extend that period or seek to have the matter determined by arbitration. The requirements for consideration under arbitration are outlined in s 38(1B)(2), which sets out that the

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arbitral body must not determine a condition under para (1)(c), which has the effect that native title parties are to be entitled to payments worked out by reference to: (a) the amount of profits made; or (b) any income derived; or (c) any things produced by any grantee party as a result of doing anything in relation to the land or waters concerned after the act is done. Indigenous land use agreements (ILUAs), as set out in subdivs B, C and D of Division 3 of the NTA may also provide a range of options for parties to negotiate without the need for statutory intervention. As outlined below, the matters that may be included within an indigenous land use agreement are very broad because these agreements are not subject to statutory notification and procedural requirements relevant to the right to negotiate. Where compensation is sought under the terms of the NTA, its assessment is, as outlined above, subject to a number of applicable principles. These may be summarised as follows: • There is a core requirement that compensation be on just terms for ‘for any loss, diminution, impairment or other effect’ of a compensable act on native title rights and interests. Section 51(1) is the relevant provision. It provides that: Subject to subsection (3), the entitlement to compensation under Division 2, 2A, 2B, 3 or 4 is an entitlement on just terms to compensate the native title holders for any loss, diminution, impairment or other effect of the act on their native title rights and interests.

This section makes it clear that it is the person or persons who hold the native title who are entitled to compensation on just terms. The holders are entitled to compensation for any loss, diminution, impairment or other effect of the act on their native title rights and interests. An act will affect native title if it extinguishes rights and interests. While the NTA does not expressly set out the date upon which the entitlement to compensation will arise, or the date when the value of the native title right and interest that is extinguished is to be determined, given that the compensation is for the act (not the validation of the act), the relevant date should be the date when the act occurred. Further, s 51(1) recognises two aspects of native title rights and interests: the physical or material aspect (the right to do something in relation to land) and the cultural or spiritual aspect (the connection with the land). Each of these aspects may be affected by a compensable act in a different way. As outlined by Kiefel CJ, Bell, Keane, Nettle and Gordon JJ in Northern Territory v Griffith (2019) 364 ALR 208 at [46]: ‘each compensable act will be fact specific but the manner in which the native title rights and interests are affected by the act will vary according to what rights and interests are affected and according also to the native title holders’ identity and connection to the affected land’. • The total compensation payable for an act that extinguishes native title must not exceed the amount that would be payable if the act were instead a compulsory acquisition of a freehold estate (NTA s 50A). This requirement is subject to the s 51(1) requirement that the compensation be on just terms. • Where there is a Commonwealth or state compulsory acquisition law providing for compensation for compulsory acquisition, a court may give regard to the principles or criteria for determining compensation in that law (NTA s 51(2)). Compensation may be assessed by reference to three distinct categories: 511

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• economic value of the impairment or extinguishment; • interest on economic value; and • non-economic value which concerns the loss of spiritual or religious connection with the land.

Economic value 8.39  The economic value of native title is not assessed in the same way as freehold title,

although the equivalent value of freehold title is relevant because it represents the upper limit available for compensation. The orthodox valuation methodology was outlined by the High Court in Spencer v the Commonwealth (1907) 5 CLR 418. According to this approach, value is determined according to what a willing but not anxious purchaser from a willing but not anxious vendor would pay. This method is not directly applicable to native title; however, the High Court indicated it may be indirectly relevant. This is because native title compensation cannot be more than equivalent freehold value and the assessment can involve a consideration of any factor that may impact the enjoyment of native title rights. In most cases, compensation for native title will not, however, be equivalent to the freehold value of the land.

Interest on economic value 8.40  There has been some debate as to how interest should be applied to the economic

value of the compensation and whether the interest should be simple interest or compound interest. Simple interest is calculated on the principal amount of economic loss. Compound interest is calculated on the principle amount of economic loss and also on the accumulated interest of previous periods and is, in effect, interest on interest. The High Court in Northern Territory v Griffith (2019) 364 ALR 208 held that interest should be assessed by reference to the requirement of just compensation and it must necessarily be a component of the compensation award rather than an additional amount representing interest on that compensation award. On the facts of that case, this amounted to an award of simple interest. However, the court did not completely discard the possibility of compound interest being awarded as a component of just compensation in future cases.

Non-economic value: Cultural or spiritual value 8.41  Cultural or spiritual value is difficult to assess. Quantifying the intangible spiritual

relationship Aboriginal people have with the country and translating this loss into tangible compensation is complex. It has been held that, to a certain extent, this assessment is intuitive and approximate. It will also be fact specific and can include emotional distress arising from interference, for example, with cultural and spiritual narratives. As outlined by Kiefel CJ, Bell, Keane, Nettle and Gordon JJ in Northern Territory v Griffith (2019) 364 ALR 208 at [154]: ‘Compensation for the non-economic effect of compensable acts is compensation for that aspect of the value of land to native title holders which is inherent in the thing that has been lost, diminished, impaired or otherwise affected by the compensable acts. It is not just about hurt feelings, although the strength of feeling may have evidentiary value in determining the extent of it. It is compensation for a particular effect of a compensable act — what is better described as “cultural loss”.’ This can include an assessment of: diminution in spiritual connection to the lands, the impact of a harm to ‘country’ such as the destruction of significant sites and the consequential inability to practice customs and conditions and the effect of dispossession on spiritual and cultural values.

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8.42  The High Court considered the nature and scope of compensation under the NTA

upon the Ngaliwurru and Nungali Peoples and the scope of the different categories of available compensation in Northern Territory v Griffith (2019) 364 ALR 208. The joint judgment of Kiefel CJ, Bell, Keane, Nettle and Gordon JJ is extracted below:

—  Northern Territory v Griffith  — (2019) 364 ALR 208 Facts: The Northern Territory government granted 53 tenures and constructed public works in the town of Timber Creek between 1980 and 1996 that either impaired or extinguished native title rights and interests held by the Ngaliwurru and Nungali Peoples of the Northern Territory. These native title rights were granted in 2006 within the boundaries of Timber Creek. The rights included within the native title claim were: to travel over, move about and have access to the land; to hunt, fish and forage on the land; to gather and use the natural resources of the land such as food, medicinal plants, wild tobacco, timber, stone and resin; to have access to and use of the natural water of the land; to live on the land, to camp, to erect shelters and structures; to engage in cultural activities, conduct ceremonies, to hold meetings, to teach the physical and spiritual attributes of the places and areas of importance on or in the land, and to participate in cultural practices related to birth and death, including burial rights; to have access to, maintain and protect sites of significance on the land; to share or exchange subsistence and other traditional resources obtained on or from the land (but not for any commercial purpose). The compensation claim included economic loss determined as if each act were equivalent to the NT government compulsorily acquiring a freehold estate in the land. They also included compound interest on that loss from the date of assessment until judgment and compensation for loss or diminution of connection or traditional attachment to land, and the intangible disadvantages from lost rights to live on and gain spiritual and material sustenance from the land. The trial judge, Mansfield J, assessed the compensation amount at $3.3 million: $512,000 as 80% of the total freehold estate value, $1.4 million in simple interest, and a cultural loss of $1.3 million. This was subsequently reduced by the Full Court so that the economic loss was 65% but all other findings were upheld. The NT and Commonwealth government appealed to the High Court arguing that the Full Court should not have assessed the economic loss at any more than 50% of the freehold value and should not have upheld $1.3 million cultural loss. The claim group argued that the economic loss should not have been reduced at all and that the relevant interest should be compound rather than simple interest. Kiefel CJ, Bell, Keane, Nettle and Gordon JJ: The system established by the Native Title Act to address, in a practical way, the consequences of acts impacting native title rights and interests is complex. That complexity arises because the Act seeks to deal with concepts and ideas which are both ancient and new; developed but also developing; retrospective but also prospective. It arises because the Native Title Act requires the just and proper ascertainment and recognition of native title rights and interests; that certain acts that extinguish native title rights and interests are to be validated or allowed; that, where appropriate, native title should not be extinguished, but should be revived after a validated act ceases; and that, where native title rights and interests are extinguished, compensation on just terms is to be provided. As has been seen, there are different categories of compensable acts in issue, and those acts took place at different times. The statutory source of the entitlement to compensation, and the consequences that flow from validation of an act, depend on the category of act, and whether the act was a past act, an intermediate period act or a previous exclusive possession act within the scope of Divs 2, 2A and 2B of Pt 2 of the Native Title Act. Hence, the categorisation of the act and the timing of the act are both relevant. Turning first to past acts, they are addressed in Div 2 of Pt 2 of the Native Title Act. A past act is, relevantly, an act which occurred before 513

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1 January 1994  when native title existed in relation to particular land, which act was invalid (apart from the Native Title Act) to any extent but would have been valid to that extent if native title did not exist. In short, a past act is a pre-January 1994 act which is invalid because of the existence of native title. There are four categories of past act. A category A past act relates to a grant of certain freehold estates, a grant of certain leases and the construction of certain public works. A category B past act relates to a grant of certain leases A category C past act relates to the grant of mining leases and a category D past act is one that is not a category A, B or C past act. The classification of an act affects the impact of the act on native title. Category A past acts, relevantly, extinguish native title and category B past acts extinguish any native title to the extent of any inconsistency. The non-extinguishment principle applies to category C and D past acts. Where the non-extinguishment principle applies, the Native Title Act does not extinguish native title but native title may be suspended wholly or in part to take account of the act. Putting the categories aside, the classification of an act as a ‘past act’ determines the validation mechanism in respect of that act. In the present appeals, all but five of the acts were past acts within the meaning of s 228 of the Native Title Act. Those past acts were attributed to the Northern Territory[56] and were validated on 10 March 1994 by s 19 in Div 2 of Pt 2 of the Native Title Act and s 4 of the Validation (Native Title) Act (NT). Both of those provisions, in their terms, provide that a past act is valid and is taken always to have been valid. That validation perfected, or made absolute, the compensable acts and removed any restriction by which the acts had no validity as against the native title holders. In short, validation effected a clearing of the native title rights and interests from the freehold title. Separate to past acts are ‘intermediate period acts’. In these appeals, the remaining five acts were intermediate period acts. Intermediate period acts [58]  are acts which, relevantly, occurred between 1 January 1994 and 23 December 1996, where native title existed in relation to particular land, which acts were invalid (apart from the  Native Title Act) to any extent but would have been valid to that extent if native title did not exist. Division 2A of Pt 2 of the Native Title Act deals with validation of intermediate period acts. The intermediate period acts were validated on 1 October 1998 by s 22F in Div 2A of Pt 2 of the Native Title Act and s 4A of the Validation (Native Title) Act  (NT). There is a further relevant category of acts, being ‘previous exclusive possession acts’. Division 2B of Pt 2 of the Native Title Act, headed ‘[c]onfirmation of past extinguishment of native title by certain valid or validated acts’, deals with previous exclusive possession acts.  Section 23B  of the  Native Title Act  provides that a previous exclusive possession act is, relevantly, a grant made before 23 December 1996 which was validated under Div 2 or Div 2A of Pt 2 of the Native Title Act (thereby confirming that certain validated past acts and intermediate period acts were validated). Thus, both past acts and intermediate period acts may be previous exclusive possession acts. The important distinction to bear in mind is that acts to which the non-extinguishment principle applies are not previous exclusive possession acts, a point to which it will be necessary to return. The majority of the compensable acts in these appeals  were previous exclusive possession acts within the meaning of  s 23B  of the Native Title Act. Validation of a previous exclusive possession act results in extinguishment of native title. The previous exclusive possession acts in these appeals, attributable to the Northern Territory, extinguished native title. The exceptions were category D past acts within the meaning of s 232 of the Native Title Act. These acts were not previous exclusive possession acts, because the non-extinguishment principle applied to these acts. However, all but three of the category D past acts were followed by subsequent previous exclusive possession acts affecting the same lots which extinguished native title over those lots. Section 23J in Div 2B of  Pt 2  of the  Native Title Act  provides that native title holders are entitled to compensation in accordance with Div 5 for any extinguishment under Div 2B of their native title rights and interests. Accordingly, by operation of s 23J in Div 2B, in relation to the compensable acts which were previous exclusive possession acts, the native title holders were entitled to compensation in accordance with Div 5 for the extinguishment of their native title rights and interests by each 514

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act. For the category D past acts which were not followed by subsequent previous exclusive possession acts, the native title holders were entitled to compensation under  s 20  in Div 2 of Pt 2 of the Native Title Act, which, in turn, provides that they are entitled to compensation under  s 17(1)  or (2) on the assumption that  s 17  applied to those category D past acts.  Section 17, by its terms, applies only to acts attributable to the Commonwealth. However, when read with s 20(1), s 17 is to be read and applied as if it covered acts attributable to the Northern Territory. Relevantly for the purposes of these appeals, s 17(2) provides, under the heading ‘[n] on-extinguishment case’: If it is any other past act [other than a category A or category B past act], the native title holders are entitled to compensation for the act if: (a) the native title concerned is to some extent in relation to an onshore place and the act could not have been validly done on the assumption that the native title holders instead held ordinary title to: (i) any land concerned; and (ii) the land adjoining, or surrounding, any waters concerned; or … (emphasis added) These appeals were conducted on the basis that the date of validation of all acts was 10 March 1994. After an entitlement to compensation has been established, the compensation payable under Div 2, 2A, 2B, 3 or 4 of Pt 2 of the Native Title Act in relation to an act is payable only in accordance with Div 5[69]. As has been seen, the compensation payable to the Claim Group arises under either Div 2 or Div 2B of  Pt 2  of the  Native Title Act,  and accordingly,  s 51(1) applies in relation to determining the compensation claims in these appeals. Section 51(1) is the core provision. It provides that: Subject to subsection (3), the entitlement to compensation under Division 2, 2A, 2B, 3 or 4 is an entitlement on just terms to compensate the native title holders for any loss, diminution, impairment or other effect of the act on their native title rights and interests. (emphasis added) Specific aspects of s 51(1) must be recognised at the outset. It is the native title holders — relevantly, the person or persons who hold the native title — who are entitled to compensation on just terms. And those native title holders are entitled to compensation for any loss, diminution, impairment or other effect of the act on their native title rights and interests. Relevantly, an act is an ‘[a]ct affecting native title’ if it extinguishes the native title rights and interests. The Native Title Act  does not expressly provide the date upon which the entitlement to compensation arises, or the date on which the value of the native title right and interest being extinguished is to be determined. However, as the entitlement to compensation is for the ‘act’ itself and the validation provisions deem the extinguishing act to be valid and always to have been valid from the time of the act, the date for the assessment of the compensation is the date of the act. Next, s 51(1), in its terms, recognises the existence of the two aspects of native title rights and interests identified in s 223(1) to which reference has already been made — the physical or material aspect (the right to do something in relation to land) and the cultural or spiritual aspect (the connection with the land) — as well as the fact that the manner in which each aspect may be affected by a compensable act may be different. Both aspects are addressed in terms by  s 51(1) providing for an entitlement on just terms to compensation to the native title holders for ‘any loss, diminution, impairment or other effect of the act on their native title rights and interests’ (emphasis added). Section 51(1)  thus recognises that the consequences of a compensable act are not and cannot be uniform. The act and the effect of the act must be considered. The sub-section also recognises not only that each compensable act will be fact specific but that the manner in which the native title rights and interests are affected by the act will vary according to what rights and interests are affected and according also to the native title holders’ identity and connection to the affected land. As the trial judge held, s 51(1) does not in its terms require that the consequence directly arise from the compensable act. The court’s task of assessment under s 51(1) is to be undertaken in the particular context of the Native Title Act, the particular 515

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compensable acts and the evidence as a whole. Section 51(2) then addresses acquisition of native title rights and interests under compulsory acquisition law. Section 51(3) deals with an act which is not the compulsory acquisition of all or any of the native title rights and interests of the native title holders but which satisfies the ‘similar compensable interest test’. That test is satisfied if, in relation to a past act, an intermediate period act, or a future act, the native title concerned relates to an onshore place and the compensation would, apart from the Native Title Act, be payable under any law for the act on the assumption that the native title holders instead held ordinary title to any land or waters concerned and to the land adjoining, or surrounding, any waters concerned. None of the compensable acts in these appeals falls within either  s 51(2) or (3). Where neither s 51(2) nor (3) applies, s 51(4) provides that if there is a compulsory acquisition law for the Commonwealth (if the act giving rise to the entitlement is attributable to the Commonwealth) or for the State or Territory to which the act is attributable, the court, person or body making the determination of just terms may, subject to s 51(5)–(8), in doing so have regard to any principles or criteria set out in that law for determining compensation. Here, there was such a law — the Lands Acquisition Act (NT). Section 51A provides that, subject to s 53, the total compensation payable under Div 5 for an act that extinguishes all native title in relation to any particular land or waters must not exceed the amount that would be payable if the act were instead a compulsory acquisition of a freehold estate in the land or waters. Section 53 provides that where the application of any of the provisions of the Native Title Act in any particular case would result in a s 51(xxxi) acquisition of property of a person other than on s 51(xxxi) just terms, the person is entitled to compensation as is necessary to ensure that the acquisition is on just terms. Section 53 is a shipwrecks clause. Section 51A  provides a cap on compensation by providing that the  total compensation payable under Div 5 for an act that extinguishes all native title in relation to particular land or waters must not exceed the amount that would be payable if the act were instead a compulsory acquisition of a freehold estate in the land or waters. The statutory recognition in s 51(1) that the two aspects of native title rights and interests — the economic value of the native title rights and interests and the non-economic value of those rights and interests — are to be compensated assists in understanding the work to be done by s 51A of the Native Title Act. As the Commonwealth submitted, those two aspects of native title rights and interests inform the operation of s 51A. When introducing s 51A as part of the 1998 amendments to the Native Title Act following this Court’s decision in Wik Peoples v Queensland, Senator Minchin said that the ‘underlying premise of the Native Title Act is to equate native title with freehold for the purposes of dealing with native title’ and the cap ‘should reflect the compensation payable if native title amounted to freehold’. Under the general law, the compensation for the compulsory acquisition of land comprises the freehold value of the land as well as compensation for severance, injurious affection, disturbance, special value, solatium or other non-economic loss. Consistent with equating native title rights and interests with freehold for the purposes of compensation,  s 51(2) and (4) of the Native Title Act refer to the fact that the court, person or body making the determination of compensation on just terms may have regard to any principles or criteria set out in a compulsory acquisition law for the Commonwealth, or for the State or Territory to which the act is attributable [81]. Those various acquisition laws address the non-economic aspect of the compensation in different terms. It is important, however, not to allow words like ‘solatium’ in land acquisition statutes, or cases about those statutes, to deflect attention from the nature of the rights and interests that have been acquired and the compensation that must be assessed to provide just terms for their acquisition. Asking what would be allowed as ‘solatium’ on the acquisition of rights that owe their origin and nature to English common law distracts attention from the relevant statutory task of assessing just terms for the acquisition of native title rights and interests that arise under traditional laws and customs which owe their origins and nature to a different belief system. The label ‘solatium’ is also distracting in another way. What the Native Title Act requires to be compensated is the cultural loss arising on and from the extinguishment 516

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of native title rights and interests. Given that the Native Title Act is a Commonwealth Act which, under Div 5, equates native title rights and interests to freehold for the purposes of dealing with native title, and is intended to provide compensation for the extinguishment of those rights and interests on just terms to all native title holders affected by a compensable act, ss 51 and 51A are to be read as providing that the compensation payable to the native title holders is to be measured by reference to, and capped at, the freehold value of the land together with compensation for cultural loss. Principles or criteria set out in a compulsory acquisition law for the Commonwealth, or for the State or Territory to which the compensable act is attributable, may be of assistance but they are not determinative of the issues arising under s 51(1).

Economic Loss In this Court, all parties accepted that the economic value of the native title rights and interests should be determined by application of conventional economic principles and tools of analysis, and, in particular, by application of the Spencer test adapted as necessary to accommodate the unique character of native title rights and interests and the statutory context. The difference between the parties was as to how the Spencer test should be applied. The Full Court were right to begin their ascertainment of the economic value of the native title rights and interests with the identification of those rights and interests. At common law, freehold ownership or, more precisely, an estate in fee simple is the most ample estate which can exist in land. As such, it confers the greatest rights in relation to land and the greatest degree of power that can be exercised over the land; and, for that reason, it ordinarily has the greatest economic value of any estate in land. Lesser estates in land confer lesser rights in relation to land and, therefore, a lesser degree of power exercisable over the land; and, for that reason, they ordinarily have a lesser economic value than a fee simple interest in land. Similar considerations apply to native title. Native title rights and interests are not the same as common law proprietary rights and interests but the common law’s conception of property as comprised of a ‘bundle of rights’ is translatable to native title, and, as has been held, draws attention to the fact that, under traditional law and custom, some but not all native title rights and interests are capable of full or accurate expression as rights to control what others may do on or with the land. So, therefore, just as it is necessary to determine the nature and extent of common law proprietary rights and interests as a first step in their valuation, it is necessary to identify the native title rights and interests in question as the first step in their valuation. As the trial judge found, the Claim Group’s rights and interests were essentially usufructuary, ceremonial and non-exclusive. The Claim Group’s rights and interests were perpetual and objectively valuable in that they entitled the Claim Group to live upon the land and exploit it for non-commercial purposes. But they were limited. As earlier mentioned, the historic grant of the pastoral leases extinguished the Claim Group’s traditional right to control access to the land and to decide how the land should be used; and, once so extinguished, the right did not revive. Thereafter, the Claim Group had no entitlement to exclude others from entering onto the land and no right to control the conduct of others on the land. Nor did the Claim Group have the right to grant co-existing rights and interests in the land. And because the Claim Group’s native title rights and interests were non-exclusive, it was also open to the Northern Territory to grant additional co-existent rights and interests in and over the land, including grazing licences, usufructuary licences of up to five years’ duration and licences to take various things from the land. The economic value of the Claim Group’s native title rights and interests fell to be valued accordingly. The task required an evaluative judgment to be made of the percentage reduction from full exclusive native title which properly represented the comparative limitations of the Claim Group’s rights and interests relative to full exclusive native title and then the application of that percentage reduction to full freehold value as proxy for the economic value of full exclusive native title. The Claim Group contended that so to proceed offended the Racial Discrimination Act in two respects. The first was said to be that, because the Full Court did not equate the measure of compensation payable to native title holders to the compensation payable to the 517

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holders of other forms of title, the Full Court’s reasoning was  ex facie  inconsistent with the protection afforded by  s 10(1)  of the  Racial Discrimination Act. So much plainly followed, it was said, from the following observations of Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ in Western Australia v The Commonwealth (Native Title Act Case): ‘Security in the right to own property carries immunity from arbitrary deprivation of the property. Section 10(1) thus protects the enjoyment of traditional interests in land recognised by the common law. However, it has a further operation. If a law of a State provides that property held by members of the community generally may not be expropriated except for prescribed purposes or on prescribed conditions (including the payment of compensation), a State law which purports to authorise expropriation of property characteristically held by the “persons of a particular race” for purposes additional to those generally justifying expropriation or on less stringent conditions (including lesser compensation) is inconsistent with s 10(1) of the Racial Discrimination Act.’ (footnote omitted). In that connection, the Claim Group also relied on the observation of Gleeson CJ, Gaudron, Gummow and Hayne JJ in Ward that: … the [Racial Discrimination Act] must be taken to proceed on the basis that different characteristics attaching to the ownership or inheritance of property by persons of a particular race are irrelevant to the question whether the right of persons of that race to own or inherit property is a right of the same kind as the right to own or inherit property enjoyed by persons of another race. In the Claim Group’s submission, it followed that  s 10(1)  of the  Racial Discrimination Act required that the Claim Group’s non-exclusive native title rights and interests be valued in no different fashion from exclusive native title rights and interests, and, therefore, at not less than freehold value. Those contentions must be rejected. Whether or not the value of any given native title is to be equated to freehold value for the purposes of assessing just compensation must depend on the exact incidents of the native title rights and interests. If the native title rights and interests amount or come close to a full exclusive title, it is naturally to be expected that the native title rights and interests will have an objective economic value similar to freehold value. By contrast, if the native title rights and interests are significantly less than a full exclusive title, it is only to be expected that they will have an objective economic value significantly less than freehold value. There is nothing discriminatory about treating non-exclusive native title as a lesser interest in land than a full exclusive native title or, for that reason, as having a lesser economic value than a freehold estate. To the contrary, it is to treat like as like. The point made in both the Native Title Act Case and Ward was that, although native title rights and interests have different characteristics from common law land title rights and interests, and derive from a different source, native title holders are not to be deprived of their native title rights and interests without the payment of just compensation any more than the holders of common law land title are not to be deprived of their rights and interests without the payment of just compensation. Equally, native title rights and interests cannot be impaired to a point short of extinguishment without payment of just compensation on terms comparable to the compensation payable to the holders of common law land title whose rights and interests may be impaired short of extinguishment. There was no suggestion in either the Native Title Act Case or Ward that the nature and incidents of particular native title rights and interests are irrelevant to their economic worth or to the determination of just compensation for extinguishment or impairment. To the contrary, it is plain from the holding [111] in Ward that, because the non-exclusive native title rights and interests in that case did not amount to having ‘lawful control and management’ of the land, the native title holders were not to be assimilated to ‘owners’ but could at best be regarded as ‘occupiers’ and thus could be compensated only at the lesser rate applicable to occupiers. As Gleeson CJ, Gaudron, Gummow and Hayne JJ stated: ‘This result is no different from that which would obtain in respect of any holder of rights and interests that did not amount to the “lawful control and management” of the land. The [Racial Discrimination Act] is therefore not engaged on this basis.’ In sum, what the Racial Discrimination Act requires in its application 518

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to native title is parity of treatment and there is no disparity of treatment if the economic value of native title rights and interests is assessed in accordance with conventional tools of economic valuation adapted as necessary to accommodate the unique character of native title rights and interests and the statutory context. To argue, as the Claim Group did, that there is disparity because their native title rights and interests have a lesser economic value than the economic value of an estate in fee simple is to ignore that the Claim Group’s native title rights and interests were comparatively limited and considerably less extensive than full exclusive native title. Thus, as has already been emphasised, the proper comparison was not between the native title rights and interests and the rights and interests which comprise an estate in fee simple, but between the native title rights and interests and the rights and interests of a full exclusive native title. The second respect in which it was contended that the Full Court’s analysis offended the  Racial Discrimination Act was that the Full Court took into account that the Claim Group’s native title was vulnerable to diminution by the grant by the Northern Territory of lesser co-existing titles. The Claim Group contended that the operation of  s 10(1)  of the  Racial Discrimination Act precluded the Northern Territory from granting any further interest in the land unless the same interest could have been granted over freehold or leasehold land under the Crown Lands Ordinance (NT) or the Crown Lands Act (NT), and thus that the Northern Territory would have been prevented from granting rights and interests over the land even if those grants were not inconsistent with the continued existence of the Claim Group’s non-exclusive native title rights and interests. Alternatively, it was contended that, even if it had been open to the Northern Territory to grant such further interests, on the facts of this case the Northern Territory would not realistically have done so. Those contentions must also be rejected. It is necessary to consider the treatment of pastoral leases under the relevant legislation. Pastoral leases, before the determination in Wik, satisfied the definition of a category A past act in the Native Title Act (an act which wholly extinguished native title if still in existence on 1 January 1994). In Wik, this Court held that a pastoral lease was not necessarily inconsistent with all native title rights and interests. The  Native Title Act  was subsequently amended  by the inclusion of a definition of previous non-exclusive possession act, and by prescription of the effect of a previous nonexclusive possession act on native title. Whilst that amendment acknowledged there could be a grant of a non-exclusive pastoral lease, there was no reversal of total extinguishment of native title by previous exclusive possession acts as had already occurred under the  Native Title Act (as first enacted). Accordingly, if an exclusive pastoral lease granted after the enactment of the Racial Discrimination Act were still in force on 1 January 1994 that lease would be classified as a category A past act which wholly extinguished native title. If, however, a non-exclusive pastoral lease were to some extent not inconsistent with native title, the grant was not classified as a past act but rather as a previous non-exclusive possession act and thus, native title was extinguished only to the extent of any inconsistency with native title. According to the Claim Group’s argument, every pastoral lease enacted after the commencement of the  Racial Discrimination Act that was still in force on 1 January 1994 would have been invalid. But if that were so, it would mean that, perforce of ss 23G(2) and 15(1) of the Native Title Act, every such pastoral lease would be taken wholly to have extinguished native title. Contrary to the Claim Group’s submissions, it has consistently been held that the question of validity of pastoral leases enacted after the commencement of the Racial Discrimination Act is to be determined according to whether the grant of a pastoral lease had any further extinguishing effect on native title. Provided such further rights and interests were not inconsistent with the continued existence of native title, they did not detract from the native title holders’ rights and interests and so did not discriminate against them. The Claim Group’s contention as to the improbability of the Northern Territory granting further interests in the land is beside the point. The contention as advanced focused on pastoral leases alone. It is plain, however, that the Full Court had in mind a variety of other interests, including grazing licences, usufructuary licences and licences to take things from the land. Furthermore, even if the likelihood of grants of further interests was 519

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slight, and none were in fact granted, it was the possibility of or potential for such grants that was relevant to economic value. For reasons already given and which will be discussed in more detail later in these reasons, it is the incidents of native title rights and interests and not the way in which they might be or not be exercised that is determinative of their nature and thus their economic value. The way that native title rights and interests are used and enjoyed may affect their non-economic or cultural value, which is dealt with separately, later in these reasons. The Claim Group argued that, even if that were so, the native title rights and interests were not concurrent with other rights and interests, because no other person held any rights or interests in the subject land that were valid against the native title rights and interests; that the recognition of native title rights and interests by the common law meant that those rights and interests could have been protected by legal and equitable remedies as if they were common law interests in land; and that the historic extinguishment of the Claim Group’s right of exclusive possession did not in fact lessen the ability of the Claim Group to determine the use of their country by others through their power to surrender native title so as to enable the conferral of valid rights on others. Those arguments must also be rejected. The fact that the Claim Group may have had use and enjoyment of the subject land says nothing directly as to the nature of their native title rights and interests in the land and therefore nothing directly as to the entitlement of the Northern Territory to grant co-existing titles. Equally, the fact that infringement of the Claim Group’s native title rights and interests might have been prevented by legal or equitable remedies says nothing against the entitlement of the Northern Territory to grant co-existing titles. And to the extent that the argument should be understood as being that the Claim Group had some sort of qualified right otherwise to control access to land, it is precluded by analogy with the holding in Ward that the grants of pastoral leases in that case were inconsistent with the continued existence of the native title right to control access to land and make decisions as to how the land could lawfully be used by others. … Consistently with the aim of the Native Title Act that the economic value of full exclusive native title in land be equated to the economic value of a freehold title in that land, the economic value of non-exclusive native title in land falls to be determined by making an evaluative judgment of the percentage reduction from full exclusive native title which properly represents the comparative limitations on the non-exclusive title relative to a full exclusive native title and then applying that percentage reduction to the economic value of a freehold estate in the land as proxy for the economic value of a full exclusive native title in the land … Likewise, the economic valuation of rights and interests is an objective exercise and so, as has been emphasised, essentially an objective question of how much a willing but not anxious purchaser would be prepared to pay to a willing but not anxious vendor to obtain the latter’s assent to their extinguishment. Plainly enough, a willing purchaser would be likely to pay more to achieve the extinguishment of native title rights and interests over high-value land in a developed area (given that the economic potential of that kind of land is likely to be greater) than for the extinguishment of native title rights and interests over low-value land in a remote area (where the economic potential of the property is likely to be sparse). Consequently, it is neither irrational nor surprising that the economic value of native title rights and interests in developed areas should, in many cases, prove to be greater than the economic value of comparable native title rights and interests in a remote location.

E  Interest on the economic loss claim It was common ground that interest should be awarded on the economic value of the extinguished native title rights and interests in order to reflect the time between when the entitlement to compensation arose and the date of judgment, and that the function of such an award is to compensate a party for the loss suffered by being kept out of his or her money during that period. The issue was whether the interest should be calculated on a simple basis or compound basis and, if on a compound basis, at what rate it should be compounded … In short, as will be explained, equity allows for simple interest in proceedings for specific performance of a contract 520

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for the sale of land and although that rule has been extended to the compulsory acquisition of land, the rule provides for simple interest, not compound interest. Equity does allow for compound interest for suits for recovery of money obtained by fraud or withheld or applied in breach of fiduciary duty but the facts in these appeals do not fall into either of those categories. Finally, although a plaintiff may be able to claim restitution of a defendant’s unlawful enrichment and that claim may include a claim for compound interest, the Claim Group did not make a claim for restitution of benefits; and the benefits derived by the Northern Territory are statutory and thus there was no ‘unjust enrichment’. … an award of interest in the present proceedings is not compensation for the extinguishment of native title but, consistent with the legislative scheme for the establishment and extinguishment of, and compensation for, native title that is set up by the Native Title Act, is compensation for being kept out of that amount which the Claim Group should have received at the time of extinguishment.

F  Cultural Loss … Section 51(1) provides for compensation on just terms for any loss, diminution, impairment or other effect of the act on native title rights and interests. The inquiries will vary according to the compensable act, the identity of the native title holders, the native title holders’ connection with the land or waters by their laws and customs and the effect of the compensable acts on that connection. Thus, what might be an appropriate award of compensation will vary according to the results of those separate but inter-related inquiries. So, for example, as noted earlier, a sense of loss of connection to country resulting from the loss, diminution, impairment or other effect of an act on native title rights and interests in areas where land has been developed may prove less than the sense of loss of connection to country in relation to native title rights and interests in remote, less developed, areas. That is because, depending on the facts of the case, the sense of connection to country may have declined in developed areas (with higher economic value) as a result of encroaching developments before the act of extinguishment or other compensable diminishment. Where that is so, the amount to be awarded for noneconomic loss will be less. The court’s task of assessment under s 51(1) is necessarily undertaken in the particular context of the  Native Title Act, the particular compensable acts and the evidence as a whole. As the trial judge found, s 51(1) does not in its terms require that the detrimental consequence directly arise from the compensable act. The task required by  s 51(1), as the sub-section itself recognises, requires a number of separate but inter-related steps: identification of the compensable acts; identification of the native title holders’ connection with the land or waters by their laws and customs; and then consideration of the particular and inter-related effects of the compensable acts on that connection. In considering, and analysing, each of those separate but inter-related steps, the trial judge made extensive findings. Each act affected native title rights and interests with respect to a particular piece of land. But each act was also to be understood by reference to the whole of the area over which the relevant rights and interests had been claimed. As was explained earlier, each act put a hole in what could be likened to a single large painting — a single and coherent pattern of belief in relation to a far wider area of land. It was as if a series of holes was punched in separate parts of the one painting. The damage done was not to be measured by reference to the hole, or any one hole, but by reference to the entire work. Given those findings, it would be wrong to consider each compensable act in these appeals in isolation….. Much of the argument in this Court was directed to a contention that the three particular considerations in the final section of the trial judge’s reasons on the issue of non-economic, or cultural, loss were determinative of his Honour’s reasoning and that, if none of the considerations was justified (the Commonwealth and the Northern Territory taking issue in particular with the second and third considerations), the trial judge’s entire reasoning was undermined. That contention proceeds from a misreading, or misunderstanding, of the trial judge’s assessment of compensation for cultural loss. Given the complexity of the assessment task, focusing on one aspect of one part of the trial judge’s reasons is apt to result in error. The structure, content and reasoning of the trial judge’s judgment 521

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have been addressed. As is apparent from that analysis, the contention that the three particular considerations in the final section of the trial judge’s reasons on the issue of non-economic, or cultural, loss were determinative of his Honour’s reasoning is not supported by a fair reading of those reasons. The use of, and reference to, the three particular considerations was to reinforce what his Honour had said earlier: the consequences of acts can be incremental and cumulative; the people, the ancestral spirits, the land and everything on it are ‘organic parts of one indissoluble whole’; the effects on the sense of connection are not to be understood as referable to individual blocks of land but understood by the ‘pervasiveness of Dreaming’; the effects are upon an Aboriginal person’s feelings, in the sense of a person’s engagement with the Dreamings; an act can have an adverse effect by physically damaging a sacred site, but it can also affect a person’s perception of and engagement with the Dreamings because the Dreamings are not site specific but run through a larger area of the land; and as a person’s connection with country carries with it an obligation to care for it, there is a resulting sense of failed responsibility when it is damaged or affected in a way which cuts through Dreamings. And it must be recalled that the trial judge did so in the context of the area of land that remained available to the Claim Group to exercise and enjoy their traditional laws and customs on country relative to the area the subject of the compensable acts. That reasoning of the trial judge did not reveal legal error. It was the task required by s 51(1) of the Native Title Act: identification of the compensable acts; identification of the native title holders’ connection with the land or waters by their laws and customs; and then consideration of the particular and inter-related effects of the compensable acts on that connection. As s 51(1) itself recognises, the steps are separate but inter-related. Thus, the Full Court were right to reject the specific complaints made by the Commonwealth and the Northern Territory that the trial judge was wrong to give any weight to the second and third considerations — the extent to which the compensable acts affected not only the precise geographical area of the lot on which the act took place, and the fact that each of the compensable acts to some degree ‘chipped away’ at the geographical area resulting in incremental detriment to the enjoyment of the native title rights and interests over the entire area leading to a collective diminution of the Claim Group’s cultural and spiritual connection with the land and a sense of failed responsibility, under the traditional laws and customs, to have cared for and looked after the land. Contrary to the submissions of the Commonwealth and the Northern Territory, the trial judge would have been wrong not to take account of these matters. That is so given the nature and extent of the collateral detrimental effects of the compensable acts found by the trial judge. Each effect was found by the trial judge to be ‘by the act’. Each effect was, in a practical sense, caused by the compensable act. A failure to take account of those effects in assessing the compensation claim would have ignored critical aspects of those findings — critical parts of the overall picture — and resulted in legal error. For those reasons, those complaints of legal error on the part of the trial judge should be rejected.

Commentary On the facts of the case in Northern Territory v Griffith there were 56 compensable acts, mainly development leases, attributed to the Northern Territory government. Twelve of those acts were classified as Category D past acts and the non-extinguishment principle was applicable. Some of those past acts were followed by previous exclusive possession acts (PEPAs) which resulted in the complete extinguishment of native title over the relevant lots. The NTA establishes a right to compensation for the extinguishment or impairment of native title occasioned by past acts, and PEPAs. Compensation is payable under the NTA on just terms for any loss, diminution, impairment or other effect’ of a compensable act on native title rights and interests. The total compensation payable for loss suffered should not exceed the amount payable if the act were instead a compulsory acquisition of a freehold estate and relevant Commonwealth or state compulsory acquisition law could provide guidance in the complex task of assessment. Just terms could include three categories: economic loss, interest on economic loss and non-economic loss (cultural or spiritual loss). On the facts, the Commonwealth argued that the economic 522

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value of native title should be assessed at 50% of the freehold value with any additional uplift for loss of spiritual or religious attachment to the land not assessed as ‘special’ value but rather accounted for as ‘solatium’ (emotional value). The High Court unanimously concluded that the economic loss assessment of the compensation should, on the facts, be reduced to 50% of the freehold value of the land. The court reasoned that the claim group’s rights were usufructuary and ceremonial and the economic value needed to be reduced by a percentage that reflected the character of these rights as opposed to full, exclusive native title. The non-inclusion of rights of exclusivity, admission and commercial exploitation meant that any amount in excess of 50% of the freehold value was manifestly excessive. The High court rejected the argument by the Northern Territory and the Commonwealth against the cultural loss amount and upheld the decision of the trial judge to award $1.3 million. In this, the court held cultural loss is based upon the spiritual relationship between the Ngaliwurru and Nungali Peoples and their country and the aim was to try and translate the ‘spiritual hurt’ caused by the compensable acts into a monetary amount. Following the approach of the trial judge, the High Court examined the connection to country, the effect according to traditional laws and customs, when country is ‘harmed’, and the effects of the compensable acts. The connection to country was found to be ‘deep and broad’ and included: rituals and ceremonies practiced for over four centuries, four Dreaming sites, an extensive system of rights and obligations to country that passed by descent and the expectation that entry by non-indigenous persons to country required permission. The harming effects to connection, according to traditional law and custom, occurred from the building of a causeway, a proposed Army bridge, a gravel scraping site, and a proposed diamond mine. The effects of the compensable acts included dispossession, serious and ongoing emotional hurt, impediment to hunting, damage to sacred sites, impediments to the ability to practice traditions and customs and the ability to fulfil duties to country. Overall, this resulted in a cultural loss assessment valued at $1.3 million.

Future Act Regime 8.43  The NTA set up a regime for the regulation of all future grants or legislation over

land amenable to native title interests or claims. A future Act is any legislation enacted after 30 June 1993 or any act after 31 December 1993 and does not include past acts: s 233(1)(b). Intermediate period acts are dealt with under s 232A. Future Acts will either be valid or invalid. To be valid, future Acts must comply with the administrative requirements imposed upon them by the regime set out under the NTA. Future acts will be invalid, meaning that they will not extinguish or impair native title rights, if they do not comply with this regime. This is covered in Pt 2 Div 3 of the NTA. The future Act regime only applies to Acts that affect native title and areas of land that are subject to registered native title claims. If native title has been extinguished prior to 1975 then the future Act regime will not apply because the land is treated as if native title does not exist. The regulatory requirements under the future act regime apply two primary principles: the non-discrimination principle and the non-extinguishment principle. The regime aims to ensure that an act affecting native title is subjected to the same procedural and substantive requirements as are applicable to an act affecting a common law estate. Further, where an act does affect native title, native title will not be extinguished unless such extinguishment is consistent with the provisions in the NTA. The NTA divides future acts into permissible and non-permissible groups. Permissible future acts may be carried out over land and water affected by native title and have been specifically approved within the NTA. Non-permissible acts are those that have not been specifically approved within the NTA. Permissible future acts include: 523

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• acts granted pursuant to a registered land use agreement with a native title party: subdivs B, C, D and E; • acts granted over land where native title does not exist: subdiv F; • acts in relation to pastoral lease land, and other coexisting tenures: subdiv G; • acts in relation to water and living aquatic resources or offshore: subdiv H or N; • acts that are pursuant to a pre-existing right or renewals of existing interests: subdiv I; or • acts pursuant to existing reservations or leases: subdiv J; • acts that provide facilities for services to the public (subdiv K), or that have a low impact (subdiv L), or that pass the freehold test: subdiv M; • low impact acts, such as the excavation or clearing of the land, the construction of buildings etc (subdiv L); • acts that pass the ‘freehold test’ because they could be validly done against ordinary title (subdiv M). The NTA does not confer power upon the Crown to actually perform future permissible acts but, rather, makes it clear that these acts may be carried out despite the existence of native title rights and interests. Renewals and extensions of a legally enforceable right created on or before 23 December 1996 or acts giving effect to a good faith offer, commitment or undertaking given on or before 23 December 1996 of which there is evidence may be carried out without the need to comply with the future act regime (subdiv I). Native title will be extinguished by the grant or conferral of such a renewal or extension (s 24ID(1)(b)); however, the person seeking renewal must provide notification to the native title parties and give them an opportunity to comment: s 24ID(3). EXTRACT Native Title Act 1993 (Cth) — s 24AA 24AA   Overview Future acts (1) This Division deals mainly with future acts, which are defined in section 233. Acts that do not affect native title are not future acts; therefore this Division does not deal with them (see section 227 for the meaning of acts that affect native title). Validity of future acts (2) Basically, this Division provides that, to the extent that a future act affects native title, it will be valid if covered by certain provisions of the Division, and invalid if not. Validity under indigenous land use agreements (3) A future act will be valid if the parties to certain agreements (called indigenous land use agreements — see Subdivisions B, C and D) consent to it being done and, at the time it is done, details of the agreement are on the Register of Indigenous Land Use Agreements. An indigenous land use agreement, details of which are on the Register, may also validate a future act (other than an intermediate period act) that has already been invalidly done. 524

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Other bases for validity (4) A future act will also be valid to the extent covered by any of the following: (a) section 24FA (future acts where procedures indicate absence of native title); (b) section 24GB (acts permitting primary production on non-exclusive agricultural or pastoral leases); (c) section 24GD (acts permitting off farm activities directly connected to primary production activities); (d) section 24GE (granting rights to third parties etc on non-exclusive agricultural or pastoral leases); (e) section 24HA (management of water and airspace); (f) section 24IA (acts involving renewals and extensions etc of acts); (g) section 24JA (acts involving reservations, leases etc); (h) section 24KA (acts involving facilities for services to the public); (i) section 24LA (low impact future acts); (j) section 24MD (acts that pass the freehold test — but see subsection (5)); (k) section 24NA (acts affecting offshore places). Right to negotiate (5) In the case of certain acts covered by section 24IC (permissible lease etc renewals) or section 24MD (acts that pass the freehold test), for the acts to be valid it is also necessary to satisfy the requirements of Subdivision P (which provides a ‘right to negotiate’). Extinguishment/non-extinguishment; procedural rights and compensation (6) This Division provides that, in general, valid future acts are subject to the nonextinguishment principle. The Division also deals with procedural rights and compensation for the acts. Activities etc prevail over native title (7) To avoid doubt, section 44H provides that a valid lease, licence, permit or authority, and any activity done under it, prevail over any native title rights and interests and their exercise. Statutory access rights (8) This Division confers access rights in respect of non-exclusive agricultural and nonexclusive pastoral leases on certain persons covered by registered native title claims (see Subdivision Q).

The registration test 8.44  Where native title claimants have met what is known as the ‘registration test’, the

claimants will be entitled to invoke the procedural rights under the future act regime. The procedural rights include the right of negotiation, the right to access land covered under non-exclusive pastoral and agricultural leases, and the right to enter into an Indigenous land use agreement. To satisfy the registration test, the claimants must establish that their claim identifies the land or waters clearly, that the claim group is defined with sufficient certainty, that the rights and interests are identifiable, and that the facts provide a sufficient basis to support the assertion of such claims: s 190. 525

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Right to negotiate 8.45  The right to negotiate is a special statutory procedural right conferred upon native

title claimants who satisfy the registration test and it is outlined in subdiv P of the NTA. The right to negotiate will apply to the creation or extension of a right to mine and the compulsory acquisition of native title where the purpose of the acquisition is to confer private rights in that land upon third parties. There are, however, a range of exceptions to the applicability of the right. No right to negotiate will exist over compulsory acquisitions for the purpose of constructing an infrastructure facility or if the purpose is to confer rights in the land upon the government. No right to negotiate exists with respect to rights to mine that are created for the purpose of constructing infrastructure or approved exploration acts that are unlikely to have a significant impact on the land or opal or gem mining grants that are limited in duration or renewals of mining leases that specifically exclude a right to negotiate. The right means that the government must give all native title parties an opportunity to make submissions regarding the proposed act and the negotiation must be in good faith: s 31 (extracted below). If the right to negotiate is not complied with, the act will be invalid to the extent that it affects native title. The right to negotiate is overseen by an arbitral body that is either the NNTT or an equivalent state body. The right to negotiate does not apply to some mining grants; for example, small-scale gold prospecting, created for the sole purpose of constructing infrastructure associated with mining etc: see generally s 26(2) and (3). The Attorney-General may also exempt certain other acts from the right to negotiate provisions: s 26(2). The parties involved in the negotiation include the government party proposing the act, the grantee party requesting the act and the native title parties. In the absence of any expedited procedure (see s 237) the government party must uphold the right of native title parties to make submissions whether orally or in writing and must negotiate in good faith with those parties with the aim of obtaining agreement to the proposed act: s 31. Negotiation can include a right to impose conditions favourable to native title parties and must take into account the existing use of the land or waters by native title parties. EXTRACT

Native Title Act 1993 (Cth) — s 31 31  Normal negotiation procedure (1) Unless the notice includes a statement that the Government party considers the act attracts the expedited procedure: (a) the Government party must give all native title parties an opportunity to make submissions to it, in writing or orally, regarding the act; and (b) the negotiation parties must negotiate in good faith with a view to obtaining the agreement of each of the native title parties to: (i) the doing of the act; or (ii) the doing of the act subject to conditions to be complied with by any of the parties. Note: The native title parties are set out in paragraphs 29(2)(a) and (b) and section 30. If they include a registered native title claimant, the agreement will bind all of the persons in the native title claim group concerned: see subsection 41(2). Negotiation in good faith 526

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Negotiation in good faith (2) If any of the negotiation parties refuses or fails to negotiate as mentioned in paragraph (1)(b) about matters unrelated to the effect of the act on the registered native title rights and interests of the native title parties, this does not mean that the negotiation party has not negotiated in good faith for the purposes of that paragraph. Arbitral body to assist in negotiations (3) If any of the negotiation parties requests the arbitral body to do so, the arbitral body must mediate among the parties to assist in obtaining their agreement. Information obtained in providing assistance not to be used or disclosed in other contexts (4) If the NNTT is the arbitral body, it must not use or disclose information to which it has had access only because it provided assistance under subsection (3) for any purpose other than: (a) providing that assistance; or (b) establishing whether a negotiation party has negotiated in good faith as mentioned in paragraph (1)(b); without the prior consent of the person who provided the NNTT with the information.

ILUAs 8.46  The NTA provides for the making of an ILUA. These agreements are alternatives

to litigation on native title that can be costly, time consuming and uncertain. The aim of the ILUA is to offer native title claimants the opportunity to secure practical native title rights, the right to negotiation and compensation entitlements regarding future acts carried out over traditional lands. The ILUA does not depend upon the existence of native title; however, the force of the claim will generally improve the bargaining power of the Indigenous parties.3 An ILUA is an agreement between a native title group and others about the use and management of land and waters, and it can be negotiated and registered whether there is a native title claim over the area or not.. Such agreements are regulated under the NTA pursuant to ss 24BA–24EC and may be registered. There are different forms of ILUA’s. An area ILUA is one form of ILUA. The area ILUA is an agreement entered into between native title claimants or their representatives and third parties. An area ILUA is entered into with native title claimants and does not apply to any area of land or water where there is a determined native title interest. Where the terms and conditions extinguish native title interests, the state must also be a party (s 24CA and ss 24CB–CE). The main purpose of the area ILUA is to reach a negotiated outcome regarding the permissibility of a future act over impacted native title claims. This can include the confirmation of native title rights provided for in what is known as a consent determination between the parties as well additional economic, social or cultural benefits negotiated (s 24CB). If a registered native title body corporate exists in the area, a body corporate ILUA must be entered into (s 24CC). Before an area ILUA can be registered and 3. For an analysis of the scope and nature of the ILUA see generally: M Langton and L Palmer, ‘Modern Agreement Making and Indigenous People in Australia: Trends and Issues’ (2003) 8(1) Australian Indigenous Law Reporter 1; L Godden and S Dorsett, ‘The Contractual Status of Indigenous Land Use Agreements’ (2000) 2(1) Land, Rights, Laws: Issues of Native Title 1 and 2; S Kee, ‘Indigenous Land Use Agreements: Which, Why and Where?’ in Bryan Keon-Cohen (ed), Native Title in the New Millennium: A Selection of Papers from the Native Title Representative Bodies Legal Conference, 16–20 April 2000 (AIATSIS, 2001) 341. 527

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the ILUA can take legal effect between the parties it must either be certified or authorised. If an area ILUA is not certified, it must be accompanied by a statement setting out that these identification and authorisation requirements have been satisfied. The critical requirement for authorisation is that every person with an actual or potential native title claim be identified. In the words of Reeves J in Kemppi v Adani Mining Pty Ltd [No 4] [2018] FCA 1245: ‘authorisation is to be construed expansively and inclusively to mean every individual, group of persons, or community, of Aboriginal or Torres Strait Islander descent, who holds native title, or by any means makes a claim to hold native title, or otherwise has a characteristic from which it is reasonable to conclude that person, group, or community holds native title, in any part of the area covered by the agreement’ (at [112] referring to QGC Pty Ltd v Bygrave (No 3) [2011] FCA). The courts have also imposed very strict guidelines regarding which bodies may exercise authority for a native title group. The body must exist under customary law, be recognised by group members, have authority to make decisions binding group members and give their authority, as required by the NTA. In Bolton on behalf of the Southern Noongar Families v State of Western Australia [2004] FCA 760, French J held that the native title group must agree and adopt a decision, and that decision should be traced back to their collective choice, to pursue the ILUA process. Certification differs from authorisation. Certification involves the issuance of a certificate, by a native title representative body, setting out that in their opinion, all reasonable efforts have been made to ensure that all persons who hold or may hold native title in relation to land or waters in the area covered by the agreement have been identified and that those identified persons have authorised the making of the agreement (NTA: ss 24 CG(1), 203BE and 251A(1)). Certification cannot be delegated as it is essentially the assertion, by the representative body, that authorisation has occurred. Section 24EA of the NTA sets out that the ILUA takes effect, once registered, as if it were a contract between the parties and all persons holding native title in relation to any of the land or waters in the area covered by the agreement, who are not already parties to the ILUA, are bound by the agreement in the same way as the registered native title bodies corporate, or the native title claimants. Section s 24EA gives special contractual force to the ILUA and therefore can bind parties who are not signatories to the initial contract. This is important because it means the ILUA can bind other native title claimants within the area covered by the agreement. In McGlade v Native Title Register [2017] FCAFC 10, the Federal Court considered whether an ILUA can be registered in a situation where not all of the native title claimants have signed the ILUA. The court found that this required an examination of the scope of the reference to native title bodies in s 24CD. North and Barker JJ concluded at [264]– [265] that the following statutory construction should apply: If the claim group have generally authorised a number of their group to act representatively as ‘applicant’ for them on the claim, and they are also thereby identified by s 24CD as the persons who must be parties to an area agreement, then it may be concluded that they have a special responsibility under the NTA towards the claim group not only in dealing with the claimant application but also when it comes to agreement making under Subdiv C. Each person in the applicant/claim group must be a party to the agreement and must individually sign the written agreement in cases such as the present. Additionally, the claim group must authorise the agreement, in relation to which the representative body (in this case, SWALSC) bears the important function of certification. As inconvenient as this outcome may be considered to be by some, especially in a case such as the present where a large number of persons jointly comprise the registered native title claimants; where some signatures may have been difficult to obtain; and where some persons are deceased, the textual requirements of the 528

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NTA in Subdiv C are as they are. While this may mean that any one of the persons who jointly comprise a registered native title claimant can effectively veto the implementation of a negotiated area agreement by withholding their signature to the agreement, that is what the NTA recognises as possible.

The decision in McGlade potentially invalidated a number of existing ILUA’s and consequently, to avoid uncertainty, legislative amendments were introduced to the NTA. Section 251A of the NTA, which relates to how persons may authorise the making of ILUAs, was amended. Section 251A(2) now allows a native title claim group to nominate one or more of the persons who comprise the registered native title claimant to be a party to the ILUA and this includes an ability to specify a process for determining which of the persons who comprise the native title claimant is to be that party. Where there is a registered native title claimant in respect of the land or waters in the proposed area, the nominated party must be a party to the ILUA. If a nomination of determination has not been made pursuant to s 251A(2), a majority of the persons who comprise the registered native title claimant must be a party or parties to the ILUA. Agreements made on or before 2 February 2017 are validated if they are of a type that purported to be an ILUA, but were not because the agreement was not compliant with the McGlade determination regarding signing.

8.47  Revision Questions 1. In Fejo v Northern Territory the High Court concluded at [58] that where rights created by the exercise of sovereign power are inconsistent with native title, the rights and interests that together make up that native title must necessarily be at an end and ‘There can be no question … of those rights springing forth again when the land came to be held again by the Crown’. Why is it not possible for native title rights to be ‘revived’ once land that has been the subject of a fee simple grant from the Crown is subsequently reacquired? 2. What is the difference between the ‘clear and plain’ intention test and the ‘inconsistency of incidents’ test and why was the latter preferred by the High Court in Western Australia v Ward? 3. What is the difference under the NTA between extinguishment to the extent of any inconsistency and the non-extinguishment principle? 4. Will the validation of a past act issued prior to the RDA entitle native titleholders to any compensation? 5. What is the difference between an ‘exclusive possession’ act and a ‘nonexclusive possession’ act and to which do the extended primary production activities under the NTA apply and why? 6. What is the difference, if any, between the tests relevant for determining the existence of native title on land and those relevant to offshore areas? Should a distinction be drawn between commercial and non-commercial rights? What approach did the High Court take to this issue in Akiba? 7. What is the difference between a permissible and a non-permissible future act?

NTA Overview 8.48  The statutory regime enacted under the NTA now provides the primary basis for

all the native title determination and regulation. Summarising charts of the provisions are set out below: 529

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Categorisation of Crown Grants Under NTA

530

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Effect of Validation on Native Title

531

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Future Act Regime: Nature, Effect and Requirements

532

Chapter 9

Equitable Interests The Equitable Jurisdiction 9.1 The Difference Between Common Law and Equitable Interests 9.2 Different Forms of Equitable Title 9.3 Express equitable interests 9.3 Elements of a trust 9.4 Case: Westdeutsche Landesbank Girozentrale v Islington London Borough Council 9.4 Commentary 9.5 Case: DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) 9.6 Commentary 9.7 Formality Requirements for the Creation of Express Trusts 9.8 Formality Requirements for the Creation of Equitable Interests in Land: Statute of Frauds 9.9 Extract: Property Law Act 1958 (Vic) — s 53 9.10 Extract: Conveyancing Act 1919 (NSW) — s 54A 9.10 Overview: Property Law Act 1958 (Vic) — s 53 9.12 Revision Questions 9.13 Doctrine of Part Performance 9.14 Case: Pipikos v Trayans 9.15 Commentary 9.16 Implied Equitable Interests 9.17 Resulting trusts 9.17 Failed Express Trust 9.18 Specific Purpose Loan 9.19 Revision Questions 9.20 Contributions to Property: Purchase Money Resulting Trusts 9.21 Case: Trustees of the Property of Cummins (a bankrupt) v Cummins 9.22 Commentary 9.23 Other Forms of Implied Equitable Interests: The Equitable Lien 9.24 Imposed Equitable Interests 9.25 Remedial constructive trust 9.25 533

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Australian Property Law Case: Muschinski v Dodds 9.26 Commentary 9.27 Case: Baumgartner v Baumgartner 9.28 Commentary 9.29 Case: Giumelli v Giumelli 9.30 Commentary 9.31 Revision Questions 9.32 The Institutional Constructive Trust 9.33 Case: Lysaght v Edwards 9.34 Commentary 9.35 Case: Tanwar Enterprises Pty Ltd v Cauchi 9.36 Commentary 9.37 Revision Questions 9.38 The Personal (Mere) Equity 9.39 Case: Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) 9.40 Commentary 9.41 Revision Questions 9.42 Overview of Equitable Proprietary Interests 9.43

The Equitable Jurisdiction 9.1  The equitable jurisdiction administers equitable doctrines and remedies that were, historically, developed through separate courts known as Courts of Chancery. The purpose of the equitable jurisdiction was to supplement the deficiencies of the common law by issuing relief for cases not covered by the common law. Applicants would petition the King for a remedy for their particular grievance in circumstances where relief was not available under the common law. Over the course of time, the Courts of Chancery developed a body of equitable principles supporting but distinct from the common law. Within a contemporary legal system, a reference to equity is a reference to that body of law which emerged from the Courts of Chancery and which has evolved and developed over time. Equity has become, therefore, a source of legal principles in much the same way as the common law. The fundamental difference between common law and equity today lies in the method of implementation. Equitable principles are administered according to processes, which have evolved in the courts of equity that include: equitable discretions, equitable maxims and equitable remedies, and these principles are only relevant to the administration of the equity jurisdiction. The jurisdictional purpose of the equitable jurisdiction is to support, rather than overwhelm, the common law. While equitable principles were intended to alleviate the deficiencies of the common law, they still gave effect to the spirit and intent of the law. Equity is not obliged to follow the letter of the law, where the universality of this ‘letter’ produces injustice; equitable principles follow the ‘reason and spirit’, so that deficiencies arising from a strictly literal interpretation can be corrected. As outlined by William Blackstone: ‘Equity, in its true and genuine meaning, is the soul and spirit of all law; positive law is construed, and rational law is made by it. In this, equity is synonymous with justice in that, to the true and sound interpretation of the rule’: W Blackstone, Commentaries on the Laws of England, Book III at p 429. The importance of equity to the development of the common 534

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law was highlighted by R Pound in his famous article, ‘The Decadence of Equity’ (1905) 5 Columbia Law Review 20 at 35 where he stated: Law must be tempered with equity, even as justice with mercy. And if, as some assert, mercy is part of justice we may say equally that equity is part of law, in the sense that it is necessary to the working of any legal system.

However, given its inherently discretionary and individualised nature, the equitable jurisdiction is often regarded as antithetical to the goals of certainty and, in this respect, the conflict between the goals of certainty and of individual justice has created an ambivalent attitude of the law towards equity. Consider the following comments by R A Newman in Equity in the World’s Legal Systems: A Comparative Study, Belgium, 1973 at 15–17: Equity plays a strange role in the structure of law; separate from, and yet a part of the legal norms. The relationship between law and equity in modern times has never been clearly established, and the nature of equity remains shrouded in mystery. The search for the meaning of justice, which began in the corridors of the Academy at Athens is still an unfinished story. Much of the uncertainty which surrounds the meaning of equity is due to the fact that law must balance the interests of the individual against the interests of society, and each set of interests is differently affected by moral codes … It is probably because of the dichotomy between the goals of social order and individual justice that the word ‘equity’ and its various synonyms are used in two widely different senses; in the general sense of what is fair and just, which is the objective of all law, and in the specific sense of an element of law which introduces distinctive ethical values into the legal norms. In neither the civil law nor the common law has equity been completely absorbed into the mainstream of the law. In the common law, equity is still looked upon, as a result of the former practice of administering equitable relief in a separate court, as an auxiliary system of law, to be resorted to only in cases of extreme hardship and in the absence of an adequate remedy in the form of damages. … The difficulties which have been encountered throughout history in integrating equity and law stem in the last analysis from the presence in the law of goals which are in direct and perennial conflict; the goal of certainty and the goal of individual justice. … The conflict between the goals of certainty and of individual justice has created an ambivalent attitude of the law toward equity, to which the law is attracted by reason of the identity of equity in the general sense of justice, but which the law rejects because of the law’s concern for certainty. This ambivalence has given rise to what might be called a law of equitable fission, which causes the principles of equity, when they are introduced into the relatively unfriendly atmosphere of strict law, to lose their force and to fly apart, like atoms in an exploding universe, inhibiting their complete reception and leaving in their wake, scattered on the surface of legal institutions, only fragmentary applications of the principles.

See also R A Newman, ‘The Place and Function of Pure Equity in the Structure of the Law’ (1965) 16 Hastings Law Journal 401; H W Oleck, ‘Historical Nature of Equitable Jurisprudence’ (1951) 20 Fordham Law Review 23; F Tudsbery, ‘Equity and the Common Law’ (1913) 29 Law Quarterly Review 154.

The Difference Between Common Law and Equitable Interests 9.2  The equitable jurisdiction originally started to develop ownership principles as a means of supporting the common law; in particular, the rigid approach that the common law took to the enforcement of contingent remainder interests provided an opportunity for the Courts of Chancery to develop a different approach to ownership perspectives. The courts of chancery recognised the validity of an interest on the basis of conscience obligations rather than successive entitlements as had previously been the case under 535

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common law. By making it clear that a transfer ‘to T for the use of B’ conferred equitable entitlements upon B, which were enforceable against T, the equitable jurisdiction avoided the extenuating difficulties that the common law faced with successive interests that did not vest consecutively. The ‘use’ was an early equitable device, which was developed by the Courts of Chancery as a means of avoiding the common law strictures. The common law struck down contingent legal remainder interests that did not vest at or before the expiration of the life estate on the grounds of a lack of seisin. Where the interest was created as a use, the Courts of Chancery would uphold the ‘benefit’ of the third party by recognising that their rights to enforce the ‘use’ against the legal titleholder amounted to a form of ownership. From the early fifteenth century the Chancellor enforced the ‘use’ as a binding obligation upon the conscience of the feoffees. After the introduction of the Statute of Uses 1535, the courts of equity refused to recognise the use but eventually upheld the validity of the ‘second use’ which came to be known as the trust. This second use came to be referred to as a devise ‘unto and to the use of T and his heirs in trust for B and his heirs.’ The justification for recognising that the beneficiary held an estate in equity was well summarised by D E C Yale, ‘Revival of Equitable Estates in the 17th Century: An Explanation by Lord Nottingham’ (1957) 15 Cambridge Law Journal 79: The moral justification for enforcing all lawful trusts is clear and is thus put by Ames: ‘The spectacle of one retaining for himself a legal title, which he had received on the faith that he would hold it for the benefit of another, was so shocking to the sense of natural justice that the Chancellor at length compelled the faithless legal owner to perform his agreement. But to allow a gift to A and his heirs to the use of B and his heirs to the use or (or in trust for) C and his heirs to have the desired effect needed something more than an appeal to natural justice.’

See also: W N Hohfeld, ‘The Relations between Equity and Law’ (1913) 11 Michigan Law Review 537, where the author noted at 539: ‘A jural relation may be concurrently legal and equitable — that is, one recognised and vindicated both by law courts and by equity courts. As regards every such case, there is, of course, no conflict between equity and law’. And see: J B Ames, ‘Purchaser for Value without Notice’ (1887) 1 Harvard Law Review 1; A W Scott, ‘The Nature of the Rights of the Cestui Que Trust’ (1917) 17 Columbia Law Review 269; F W Maitland, Maitland’s Equity, 2nd ed, 1936, at pp 16–18. The beneficial ownership that the Court of Chancery recognised therefore differs substantially from common law ownership in three important ways. First, equitable title is more susceptible to postponement than a legal title because an equitable interest will be postponed in favour of a bona fide purchaser who has acquired the legal title to the land for value without notice. Second, the ‘bundle of rights’ pertaining to equitable title differs to those applicable for legal title. The holder of an equitable interest does not have any right to possess the object that is the subject of the property relationship because that right is already vested in the legal titleholder. The equitable interest holder can seek to be put in possession, but this right is only enforceable by a court exercising equitable jurisdiction. The position has been well explained by Hope JA in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510 at 519–20: As legal owner, and subject to any disposition of that right, such as would occupy 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 [beneficiary] has no 536

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right of possession. He cannot sue the trustee at common law for ejectment … 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.

Third, not all equitable title will constitute ownership. Some equitable interests confer rights against property while others confer rights that are better described as in personam in nature. In order for an equitable interest to constitute a proprietary interest it must be supported by equitable relief that is enforceable against the property although determining the initiating factor for such relief has been described as a ‘jurisprudential mystery’. In the words of Kearney J in Burns Philp Trustee Co Ltd v Viney [1981] 2 NSWLR 216 at 223: A right enforceable in personam in equity confers an equitable or proprietary interest only when there is a nexus of sufficient propinquity between the right and the specific property to which the right relates. What is a nexus of sufficient propinquity is the conundrum. It has been recognised that ‘there is some circuity involved in finding the starting point for the existence of … an equitable interest, the problem being to isolate as the initiating factor the proprietary interest or the right to enforce the interest’. This problem is almost a jurisprudential mystery.

The primary characteristic of equitable title lies in its enforceability. This means that in order for an equitable interest to constitute a property right, the holder must be able to enforce that title against all other interest holders apart from a bona fide third party purchaser for value without notice. As further noted by Kearney J in Burns Philp Trustee Co Ltd v Viney [1981] 2 NSWLR 216 at 224, the quality or extent of equitable title must be ‘commensurate with the relief which equity will grant to enforce it, whether by injunction, specific performance or other equitable remedy’: Trustees, Executors and Agency Co Ltd v Federal Commissioner of Taxation (1917) 23 CLR 576; Suncorp Insurance and Finance v Commissioner of Stamp Duties [1998] 2 Qd R 285 at 310 per Fitzgerald P; Stern v McArthur (1988) 165 CLR 489 at 511 per Brennan J. Equitable rights that are not proprietary will only confer upon the holder a right to seek equitable relief. Where equitable relief is enforceable against specific property, the equitable right is elevated to the status of a property interest. In this sense, there is a direct connection between the scope of the equitable obligation and the fact that it is imposed upon a specific thing. As outlined by B McFarlane (2008) 2 Singapore Journal of Legal Studies 308 at 313: A property right is therefore defined here as a right that: (i) imposes a prima facie duty on the rest of the world; and (ii) relates to a thing (an object that can be physically located). There is a clear link between property rights and the law of obligations: property rights can be discerned by the duties they create. However, a property right remains fundamentally different from a personal right: rather than merely imposing a duty on a specific person, it imposes a prima facie duty on the rest of the world.

Finally, unlike common law title, equitable ownership may arise where it is expressly intended or, alternatively, it may be imposed as an appropriate remedial response where the conscience of the jurisdiction demands it. This reflects the scope and capacity of the equitable jurisdiction. An interest may be expressly created where the grantor specifically intends to confer an equitable title, for example via the creation of an express trust. Intention in this context may be supported by an explicit act of formal creation or, via sufficient acts of part performance that are unequivocally connected to an intention to create an interest. Alternatively, an equitable interest may be imposed by a court irrespective of intention, as a remedial response in circumstances where it would be inequitable to deny the existence 537

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of such ownership. The institutional and remedial capacity of the equitable jurisdiction has been outlined by Deane J in Muschinski v Dodds (1985) 160 CLR 583 at [9]: Long before Lord Seldon’s anachronism identifying the Chancellor’s foot as the measure of Chancery relief, undefined notions of ‘justice’ and what was ‘fair’ had given way in the law of equity to the rule of ordered principle which is of the essence of any coherent system of rational law. The mere fact that it would be unjust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another provides, of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other. Such equitable relief by way of constructive trust will only properly be available if applicable principles of the law of equity require that the person in whom the ownership of property is vested should hold it to the use or for the benefit of another. That is not to say that general notions of fairness and justice have become irrelevant to the content and application of equity. They remain relevant to the traditional equitable notion of unconscionable conduct that persists as an operative component of some fundamental rules or principles of modern equity.

See also Giumelli v Giumelli (1999) 73 ALJR 547 per Gleeson CJ, McHugh, Gummow and Callinon JJ at 556; Cetojevic v Cetojevic [2007] NSWCA 33 at [34] per Hodgson JA.

Different Forms of Equitable Title Express equitable interests 9.3  The most common form of expressly created equitable title is the beneficial title that arises under the express trust. An express trust may arise where the owner of property intends to create a trust (the settlor) and transfers the legal title to a third party (the trustee) for the benefit of defined third party(s) (beneficiary(s)). The preconditions for creating an express trust are: • The property to be held on trust must be clearly identifiable and in existence. Where a third party is to be trustee, the settlor must have complied with all of the formality requirements to transfer the legal title in the property into the name of the third party trustee. • The settlor must express a clear intention (this usually needs to be set out in writing; however, in some circumstances an oral declaration is sufficient) that the legal title is to be held by the transferee on trust for the beneficiaries. An express trust cannot arise without a clear manifestation of intent. A ‘trust-creating intention’ must be apparent from the totality of the circumstances and it must clearly identify a trustee, trust property and beneficiaries: Legal Services Board v Gillespie-Jones (2013) 249 CLR 493, [119]; Korda v Australian Executor Trustees (SA) Ltd (2015) 255 CLR 62 per Gageler J at [109]. See also Staatz v Berry, in the matter of Wollumbin Horizons Pty Ltd (in liq) (No 3) (2019) 138 ACSR 231 per Derrington J at [124]. • The settlor must clearly set out who the beneficiaries are. There should be no uncertainty as to the specific individuals or class of individuals who are to benefit from the trust whether the trust is a fixed, discretionary or unit trust. The equitable beneficial interest will not arise until the trust is completely constituted. In CPT Custodian Pty Ltd v Commissioner of State Revenue (2005) 224 CLR 98, Gleeson CJ, McHugh, Gummow, Callinan and Heydon JJ held that a validly created unit trust conferred upon the beneficiaries an interest, vested in possession, in all of the trust assets and this included a right to terminate the trust. 538

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Elements of a trust 9.4  The requirements and consequences of creating an express trust were discussed in some detail by Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669 at 684–5. An extract from this judgment is set out below.

—  Westdeutsche Landesbank Girozentrale v Islington London Borough Council  — [1996] AC 669 Lord Browne-Wilkinson: The Relevant Principles of Trust Law (i) Equity operates on the conscience of the owner of the legal interest. In the case of a trust, the conscience of the legal owner requires him to carry out the purposes for which the property was vested in him (express or implied trust) or which the law imposes on him by reason of his unconscionable conduct (constructive trust). (ii) Since the equitable jurisdiction to enforce trusts depends upon the conscience of the holder of the legal interest being affected, he cannot be a trustee of the property if and so long as he is ignorant of the facts alleged to affect his conscience, ie until he is aware that he is intended to hold the property for the benefit of others in the case of an express or implied trust, or in the case of a constructive trust, of the factors which are alleged to affect his conscience. (iii) In order to establish a trust there must be identifiable trust property. The only apparent exception to this rule is a constructive trust imposed on a person who dishonestly assists in a breach of trust who may come under fiduciary duties even if he does not receive identifiable trust property. (iv) Once a trust is established, as from the date of its establishment the beneficiary has, in equity, a proprietary interest in the trust property, which proprietary interest will be enforceable in equity against any subsequent holder of the property (whether the original property or substituted property into which it can be traced) other than a purchaser for value of the legal interest without notice. These propositions are fundamental to the law of trusts and I would have thought uncontroversial. … A person solely entitled to the full beneficial ownership of money or property, both at law and in equity, does not enjoy an equitable interest in that property. The legal title carries with it all rights. This proposition is supported by Re Cook [1948] Ch 212; Vandervell v IRC [1967] 2 AC 291, 311G, per Lord Upjohn, and 317F, per Lord Donovan; Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694, 712B–E; Underhill and Hayton, Law of Trusts and Trustees 15th ed (1995), p 866 … Since the equitable jurisdiction to enforce trusts depends upon the conscience of the holder of the legal interest being affected, he cannot be a trustee of the property if and so long as he is ignorant of the facts alleged to affect his conscience, ie until he is aware that he is intended to hold the property for the benefit of others in the case of an express or implied trust, or in the case of a constructive trust, of the factors which are alleged to affect his conscience.

Commentary 9.5  As Lord Browne-Wilkinson outlines in Westdeutsche, in the context of an express trust equitable ownership can only occur where all of the legal requirements for the 539

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creation of the trust are established. This is because an equitable title can only arise under an express trust once the trust is effective. Thus, the date when the trust is created will also be the date when equitable ownership vests in the beneficiary. It is important to appreciate the fact that legal ownership per se does not carry with it separate legal and equitable components. Legal title will endure as a cohesive and unqualified whole until equitable title is created. It is only when equitable title is created that separate legal and equitable titles emerge. This important point was well articulated in DKLR Holding Co (No 2) Pty Ltd v  Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510, where the scope and nature of equitable ownership under an express trust was considered in detail by Hope JA. The case went on to the High Court; however, the conclusions of Hope JA in the Court of Appeal have been approved by subsequent decisions: see Vopak Terminals Australia Pty Ltd v Commissioner of State Revenue (2004) 12 VR 351 at [77]; Commissioner of Taxation v Linter Textiles Australia Ltd (in liq) (2005) 215 ALR 1 at 14. 9.6  An extract from the Court of Appeal decision in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) is set out below.

—  DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW)  — [1980] 1 NSWLR 510 (CA) Facts: A company owning certain land requested an associated company hold the land on trust. The directors of the first company resolved that the proposed trustee would hold the legal estate in the land for the benefit of the first company. The proposed trustee executed the declaration of trust by which it declared that it would hold the land upon trust absolutely for the first company and would do all such things as were necessary to vest the land back in its name and would deal with the land solely as it should direct. The first company then executed a memorandum of transfer of the land to the trustee and a nominal consideration was paid to the company by the trustee. One of the issues for the court was whether the declaration of trust over the ‘bare legal’ title in the land was such that equitable beneficial ownership remained with the first company. The case went to the High Court but this extract is from Hope JA in the Court of Appeal, and it focuses upon the nature of a trust and the circumstances where equitable beneficial ownership may arise. Hope JA: 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 that which the owner had enfeoffed another person with land. When the Chancellor began to enforce the uses so confided, he intervened 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.’ 540

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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 434, 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, 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’. 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 that 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 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.’: Harmwood 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 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 on 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 541

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any person who, without his consent, takes possession. At law a cestui que trust has not 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; 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 has long been able, by statute, to plead in the action at law. … 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. 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 …

Commentary 9.7  Equitable beneficial interests arise wherever a trust is created. In O’Sullivan v Commissioner of Stamp Duties (Qld) [1984] 1 Qd R 212, Williams J stated at pp 229–30: ‘By definition, a trust is an equitable obligation, binding the trustee to deal with property in respect of which he has either legal title or control, for the benefit of a beneficiary. The obligation is not only one in personam, but also one which is affixed to the property in question.’ See also Re Transphere Pty Ltd (1986) 5 NSWLR 309 at 311; Re Bank of Credit and Commerce International SA (No 8) [1998] AC 214; Sportscorp Australia Pty Ltd v Chief Commissioner of State Revenue (2004) 58 ATR 1 at [82]; Commissioner of State Revenue v Lend Lease Funds Management Ltd [2011] VSCA 182 at [98]–[105]. Equitable beneficial interests are not the only form of equitable interest that may be expressly created. Other forms include equitable charges and equitable liens. These are both security interests created in circumstances where the interest is intended to secure the performance of a primary contractual agreement but the formalities for creating a legal security interest have not been satisfied. For example, if two parties enter into a loan transaction and it is clear that the borrower intended to confer a security interest upon the lender but the legal formalities for the creation of such an interest have not been complied with, equity may validate the conferral of a charge or a lien. Generally, in circumstances where an agreement to appropriate specific property in order to discharge a debt is capable of being specifically enforced, an equitable charge will arise. In Carreras Rothmans Ltd v  Freeman Mathews Treasure Ltd [1985] Ch 207, Gibson J at 227 noted that an equitable charge, ‘is created by an appropriation of specific property to the discharge of some debt or other obligation without there being any change in ownership either at law or in equity’. The rights of the holder of a charge do not include a transfer of title or possession, but rather the right to enforce the interest against the property in circumstances where the terms of the loan contract are not complied with. In this respect, an equitable charge confers upon the holder 542

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a a right to payment of the debt out of the property: In re Bank of Credit and Commerce International SA (No 8) [1998] AC 214 at 226 per Lord Hoffmann; Associated Alloys Pty Ltd v ACN 001 452 106 Pty Ltd (2000) 202 CLR 588 at [7]; AVCO Financial Services v White [1977] VR 561 at 563 per Gillard J. See also Morris Finance Ltd v Free [2017] NSWSC 1417 at [29] per Ward CJ.

Formality Requirements for the Creation of Express Trusts 9.8  Express trusts cannot arise until the requisite legal formalities have been complied with. There are two forms of express trust: the express trust by transfer and the express trust by declaration. An express trust by transfer involves a transfer of the trust property to a third party trustee for the benefit of defined beneficiaries. In order to be legally effective, this type of trust must satisfy the legal or equitable requirements for assigning the trust property to the trustee and must satisfy the formality requirements for the creation of an equitable beneficial interest in land and/or personal property: see overview chart at 9.12. An express trust by declaration arises wherever the settlor declares that either themselves or a third party is to hold the property on trust for the benefit of express beneficiaries. Where a settlor declares that they are holding property on trust for the benefit of defined beneficiaries, there is no need to comply with the requirements for assigning that property where that property is already vested in the settlor. In this situation, the trust will be valid, the settlor reveals a clear intention to create a trust, where required, and complies with relevant writing and evidential requirements imposed by statute.

Formality Requirements for the Creation of Equitable Interests in Land: Statute of Frauds 9.9  The basic requirements for the creation of equitable interests by way of express trust by transfer or declaration are set out in the property legislation in each state: Conveyancing Act 1919 (NSW) s 23C; Property Law Act 1974 (Qld) s 11; Property Law Act 1969 (WA) s 34; Law of Property Act 1936 (SA) s 29; Conveyancing and Law of Property Act 1884 (Tas) s 60(2); Civil Law (Property) Act 2006 (ACT) s 201; Law of Property Act (NT) s 10. These provisions have no application to constructive or resulting trusts. Further, in some jurisdictions there are also statutory writing requirements, stemming historically from the Statute of Frauds 1677, which require all land interests, whether legal or equitable in nature, to be in writing in order to be enforceable. See: Instruments Act 1958 (Vic) s 126; Property Law Act 1974 (Qld) s 59; Conveyancing Act 1919 (NSW) s 54A (extracted below) and the Statute of Frauds s 4 (still applicable in WA but amended by the Law Reform (Statute of Frauds) Act 1962 (WA) s 2); Law of Property Act 1936 (SA) s 26(1). These provisions essentially set out that proceedings may not be brought ‘upon any contract for the sale or other disposition of land or any interest in land’ unless there is a sufficient memorandum of that contract in writing signed by the party to be charged. These provisions are subject to the doctrine of part performance (discussed below at 9.14). Historically, the rationale underpinning the introduction of provisions equivalent or similar to the Statute of Frauds lay in the importance of ensuring that contracts creating land interests were properly evidenced by writing to overcome the ambiguities of oral promises, and to ensure proper memorialisation of the agreement for subsequent reference. See further: M Teevan, ‘Seventeenth Century Evidentiary Concerns and the Statute of Frauds’ [1983] 9(2) Adelaide Law Review 252; and J Williams, The Statute of Frauds, Section 4 — 543

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In the Light of Its Judicial Interpretation, Cambridge, 1932 at xxx–xxii; Vandervell v Inland Revenue Commissioners [1967] 2 AC 291. These rationales do not necessarily have the same cogency within a digital age where many documents are electronic in nature. However, it has been argued that digital documents are broadly consistent with the objectives of the Statute of Frauds 1677 and therefore will constitute a valid ‘writing’ under the existing law. See: D L Kidd and W  H  Daughtrey, ‘Adapting Contract Law to Accommodate Electronic Contracts: Overview and Suggestions’ (2000) 26 Rutgers Computer & Technology Law Journal  215; S Christenson, ‘The Requirements of Writing for Electronic Land Contracts — The Queensland Experience Compared with Other Jurisdictions’ [2003] Murdoch University Electronic Journal of Law. 9.10  The provisions in the Property Law Act 1958 (Vic) s 53(1) (extracted below) tend to overlap and are not necessarily mutually exclusive. As an interest in land, equitable interests are required to satisfy certain formality requirements for their creation and enforceability. Section 54A of the Conveyancing Act 1919 (NSW), the Statute of Fraud provisions for NSW, are also extracted. EXTRACT

Property Law Act 1958 (Vic) — s 53 53  Instruments required to be in writing (1) Subject to the provisions hereinafter contained with respect to the creation of interests 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; (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. (2) This section shall not affect the creation or operation of resulting, implied or constructive trusts.

EXTRACT

Conveyancing Act 1919 (NSW) — s 54A 54A  Contracts for sale etc of land to be in writing (1) No action or proceedings may be brought upon any contract for the sale or other disposition of land or any interest in land, unless the agreement upon which such action or proceedings is brought, or some memorandum or note thereof, is in writing, and signed by the party to be charged or by some other person thereunto lawfully authorised by the party to be charged. 544

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(2) This section applies to contracts whether made before or after the commencement of the Conveyancing (Amendment) Act 1930 and does not affect the law relating to part performance, or sales by the court. (3) This section applies and shall be deemed to have applied from the commencement of the Conveyancing (Amendment) Act 1930 to land under the provisions of the Real Property Act 1900.

9.11  Section 54A of the Conveyancing Act 1919 (NSW) has been held to apply to a range of contracts or dispositions dealing with land including the creation of an express trust, an agreement to grant an option of purchase: Jeffrey v Anderson [1914] QSR 66; an agreement for lease: Vaughan v Hancock [1846] EngR 1012; (1846) 3 CB 766; 136 ER 307; an agreement to create an easement: McManus v Cooke (1887) 35 Ch D 681, 689, 698; and an agreement to create a profit à prendre: Webber v Lee (1882) 9 QBD 315; as well as to both executory and executed agreements to declare a trust of land: Khoury v Khouri (2006) 66 NSWLR 241. Section 53(1) of the Property Law Act 1958 (Vic) applies specifically to the creation of all trusts and other express equitable interests but not to resulting or constructive trusts: s  53(2). Where an express trust is created by way of declaration rather than transfer, s  53(1)(b) indicates that the formality requirement is that the trust be ‘manifested and proved’ by some writing. Trusts coming within the scope of this subsection need only be evidenced in writing, not created in writing. In this situation, it is possible for a trust to be created orally and subsequently enforced by evidence in writing of the terms of the trust that have been signed by the settlor. Section 53(1)(a) substantially overlaps with trusts coming within the application of subs (b); however, it has been held that where a trust over land is orally declared, subs (b) should have an independent operation. In Secretary, Department of Social Security v James (1990) 95 ALR 615 at 622, Lee J made the following comments (concerning the Western Australian equivalent: Property Law Act 1969 (WA) s 34(1)(a) and (b)): In my view, the proper construction of s 34(1)(a) and 34(1)(b) does not require a declaration of a trust in land to be treated as a special class of equitable interest only capable of being created in writing and further, to be manifested and proved by writing, signed by the declarant. Section 34(1)(b) would be either an odd exception, or otiose, if s 34(1)(a) were to be construed as including the declarations of trust in respect of land specifically provided for in s 34(1)(b). See also Hagan v Waterhouse (1991) 34 NSWLR 308, which approved of the conclusions of Lee J.

Section 53(1)(c) applies to transactions with pre-existing equitable interests. Any disposition (this term has been given a wide meaning to include a transfer, assignment or direction: Grey v Inland Revenue Commissioners [1960] AC 1 at 12–13 per Viscount Simonds) of a subsisting equitable interest must be in writing and signed by the transferor or his or her agent. Importantly, resulting and constructive trusts are exempted from the need to comply with formality requirements because these trusts arise by implication or they are imposed by a court whenever necessary to do justice between the parties and therefore are not expressed in writing. This exception is expressly set out in s 53(2) of the Property Law Act 1958 (Vic). Similar provisions exist in other states: See Conveyancing Act 1919 (NSW) s 23C(2); Property Law Act 1974 (Qld) s 11(2); Property Law Act 1969 (WA) s 34(2); Law of Property Act 1936 (SA) s 29(2); Conveyancing and Law of Property Act 1884 (Tas) s 60(2); Civil Law (Property) Act 2006 (ACT) s 201(4)(a); Law of Property Act (NT) s 10(2). 545

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9.12  The formality requirements for the creation of express trusts by transfer and by

declaration over land and personal property are overviewed in the chart below. OVERVIEW

Formality requirements for the creation of express equitable interests as set out in s 53(1) of the Property Law Act 1958 (Vic). TERMS OF REFERENCE: Disposition  This is a broad reference indicating any transfer in ownership or any act by which one divests oneself of an existing legal or equitable interest, and includes the creation of a trust by transfer, the creation of a trust by declaration and the creation of a sub-trust by transfer or declaration. Declaration of trust  The creation of a new beneficial title by the holder of the full legal and equitable owner of property. Declarations can take the form of: (i) an oral declaration; (ii) a transfer (ie, a formal documentary disposition or, in the case of chattels, delivery); or (iii) a direction to a third party trustee to hold property on behalf of a beneficiary. Subsisting  A reference to subsisting means that the equitable interest is pre-existing. This means that it has already been separated from the legal title is not created by the transaction in issue.

OVERVIEW FORMALITY REQUIREMENTS Section 53(1)(a) and (b) are restricted to the creation of interests in land and therefore do not extend to transactions with respect to personal property.

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TRANSACTION

LEGAL INTERESTS

SUBSISTING EQUITABLE INTERESTS

Express trust by transfer or declaration over personal property

None of the subsections apply to the creation of trusts by transfer or declaration where the trust property is tangible or intangible personal property.

s 53(1)(c) may apply and requires the trust to be created in writing and signed. This section will apply where a trust is being created over a subsisting equitable interest. The subsisting equitable interest may be in a pre-existing trust where the trust property is personal property: PT Ltd v Maradona Pty Ltd (1992) 27 NSWLR 241.

Express Trust by Transfer or declaration over Land

Section 53(1)(a), (b)

Section 53(1)(c)

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9.13  Revision Questions 1. What, according to Hope JA in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) were some of the differences between legal and equitable ownership? 2. Where a trust is expressly created and the owner of the trust property declares himself or herself trustee, is there any change in ownership? 3. Is equitable ownership better described as a personal obligation against the legal owner rather than a bundle of rights enforceable against a particular object? See rather Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 at 418–20, where the court held that the transfer of property subject to an obligation created an equitable charge rather than a trust: see also D Barnett, ‘The Nature of a Beneficiary’s Interest in the Assets of an Express Trust’ (2004) 10 APLJ 169. It has been suggested that an equitable interest may allow a potential beneficiary in an unadministered estate to compel an executor to comply with the specific terms of the trust: Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306. 4. What are the statutory formality requirements for the creation of an express trust by declaration over a legal interest in land? 5. What is the rationale underpinning the Statute of Frauds 1677 and its legislative equivalent in Australia?

Doctrine of Part Performance 9.14  The doctrine of part performance is an equitable doctrine that allows for the

enforcement of an oral contract which creates an interest in land, such as an interest under a lease or a mortgage, in circumstances where the party seeking to enforce the contract has carried out acts that unequivocally indicate an intention to create such an interest. The equitable jurisdiction will compel the enforcement of the contract by issuing a decree of specific performance in circumstances where it would be inequitable not to do so and in this respect the doctrine of part performance represents a qualification to the Statute of Frauds 1677 that requires all interests in land to be created in writing. In all states the doctrine of part performance is expressly protected by legislation. See: Property Law Act 1958 (Vic) s 55(d); Conveyancing and Law of Property Act 1884 (Tas) s 60(5)(d); Conveyancing Act 1919 (NSW) s 23E(d); Law of Property Act 1936 (SA) s 31(d); Property Law Act 1969 (WA) s 36(d); Property Law Act 1974 (Qld) s 6(d); Law of Property Act (NT) s 5(c); Civil Law (Property) Act 2006 (ACT) s 203(1)(d). In McBride v Sandland; (1918) 25 CLR 69, Isaacs and Rich JJ referred to the classic statement of principle by the Earl of Selborne LC in Maddison v Alderson (1883) 8 App Cas 467, 469: In Maddison v Alderson 8 App Cas, at p 469, Lord Selborne LC, in a passage now classical, stated the result of the authorities to be that in a suit founded on part performance of a parol contract relating to land the defendant is really charged ‘upon the equities resulting from the acts done in execution of the contract, and not (within the meaning of the Statute) upon the contract itself.’ It is clear from what the learned Lord Chancellor says, that in such a case the Court is not asked to give a better remedy in aid of a legal right, based on the contract, but is called upon to enforce an equity (independent of the Statute, as Story observes — Equity 547

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Jurisprudence, sec 754) which has arisen by force of circumstances subsequent to the contract itself, namely, by acts of part performance sufficient to attract the equitable jurisdiction of the Court.

The equitable basis of the doctrine of part performance was also recently outlined by Buss JA in Lighting by Design (Australia) Pty Ltd v Cannington Nominees Pty Ltd [2008] 35 WAR 520 at [66] as follows: Equity developed the doctrine of part performance to enable justice to be done in cases where a partly performed contract was unenforceable as a result of non-compliance with s 4 of the Statute of Frauds. It would not permit the Statute itself to become an instrument of fraud.

See also Maddison v Alderson (1883) 8 App Cas 467, as approved by Isaacs and Rich JJ in McBride v Sandland (1918) 25 CLR 69; Thwaites v Ryan [1984] VicRp 7; VR 65; Strachan & Co Ltd v Lyall and Sons Pty Ltd [1953] VLR 81; Miller & Aldworth Ltd v Sharp [1899] 1 Ch 622; Rawlinson v Ames [1925] Ch 96; Kingswood Estate v Anderson [1963] 2 QB 169; McMahon v Ambrose [1987] VR 817; Khoury v Khouri [2006] NSWCA 184 at [89]. In Regent v Millett (1936) 133 CLR 679 the Australian High Court did not follow the conclusions of the House of Lords in Steadman v Steadman [1976] AC 536, which had taken a more liberal approach to the determination of whether an act of performance was unequivocally referable to the alleged contract, preferring to follow Isaacs and Rich JJ in McBride v Sandland (1918) 25 CLR 69 who had concluded at p 479 that the ‘elements of the doctrine of part performance which are essential to raise the equity include the fact that the act relied on must be unequivocally and in its own nature referable to “some such agreement as that alleged.” That is, it must be such as could be done with no other view than to perform such an agreement.’ This approach has been consistently endorsed: Ogilvie v Ryan [1976] 2 NSWLR 504; Thwaites v Ryan [1984] VicRp 7; McMahon v Ambrose [1987] VicRp 66; ANZ Banking Group Ltd v Widin (1990) 26 FCR 1; Lighting by Design (Australia) Pty Ltd v Cannington Nominees Pty Ltd (2008) 35 WAR 520 at [77]. Acts that have been held to constitute acts of part performance under this test include payment of money combined with other acts such as going into possession of a property, depositing title documents or forwarding a deed of transfer. Often these acts will not constitute part performance on their own, but in combination, they may point unequivocally to a contract of the general nature alleged. 9.15  The High Court re-examined the nature of the doctrine of part performance and confirmed the importance of the unequivocally referable test in Pipikos v Trayans (2018) 359 ALR 210, which is extracted below:

— Pipikos v Trayans — (2018) 359 ALR 210 Facts: Two brothers and their wives purchased a number of properties. George was married (since divorced) to Velika who was the respondent. His brother, Leon, the appellant was married to Sophie. In 2002, George and Velika bought the Clark Road property in South Australia. Velika became the sole registered proprietor. Subsequently, in 2004, the brothers and their wives purchased the Taylors Road property. This property was held by Leon and Sophie for one half and George for the other half. They also purchased the Penfield Road property, which was held by Leon and Sophie for one half and George and Velika for the other, but the deposit and purchase price was paid for by Leon and Sophie only. A dispute arose regarding the nature of Leon and Sophie’s interest in the Clark Rd property. Leon alleged that there was an oral agreement that he was to acquire a half interest in the Clark Road Property in consideration for 548

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him funding the half share interest of George and Velika in the Penfield Road property. The only evidence of this agreement was a handwritten note from 2009, which Velika had signed at the request of Leon. In 2012, Leon lodged a caveat over the Clark Road Property. Velika sought to remove the caveat and Leon brought proceedings claiming an interest in the Clark Rd property. Meanwhile Velika and George separated and entered into a matrimonial settlement in which all of George’s interests in Clark Road, Taylors Road and Penfield Rd were transferred to Velika. Leon argued part performance of an agreement to transfer him an interest on the basis of: payment of the deposit and purchase price on the Penfield Road property; the written note signed by Velika, a payment of $2500 on the Clark Road property mortgage in 2009 and the lodgement of a caveat and proceedings in 2012. The trial judge held that the alleged acts of part performance were not unequivocally referable to the contract alleged. This was upheld by the Full Court. Leon appealed to the High Court. Kiefer CJ, Bell, Gageler and Keane JJ: It was common ground between the parties in the present case that the rationale of the doctrine of part performance is not concerned with the proof of the contract but with the enforcement of equities arising from the partial performance of the contract. On the appellant’s behalf, it was argued that the requirement of unequivocal referability is a vestige of the tenacious heresy that the doctrine of part performance is concerned with the proof of the parol contract by a process of inference from the acts of part performance. It was said that Lord Selborne had erred by applying rules of Chancery procedure that had, by the time of Maddison v Alderson, been repealed, and that this had led to courts treating the requirement of unequivocal referability as a substantive rule when, in truth, it was an erroneously invoked rule of evidence. It is true that some statements in the cases are far from clear as to the rationale of the doctrine of part performance. In some of the cases, the basal principle is stated in terms of a concern to enforce the equities that have arisen by reason of the performance of obligations under the parol contract in order to prevent the equitable fraud that would occur if the defendant were allowed to resile from a partly completed transaction. On this view, as Pomeroy says, the ground of equitable intervention is ‘a fraud inhering in the consequence of setting up the statute as a defense’. In other cases, the principle has been stated in terms of a concern that evidence is necessary to satisfy a peculiarly high standard of proof to establish the fact of the making of a parol contract for the sale of land. In Corbin on Contracts, in relation to the requirement that the acts of part performance be unequivocally referable to some such contract as that alleged by the plaintiff, it is said that the ‘principal idea that is struggling for expression is that the part performance must be clearly evidential of the existence of a contract’. The view that the court enforces the equities arising from partial performance, rather than the rights conferred by the parol contract itself, while attended with a degree of subtlety, has the powerful merit of being consistent with the Statute of Frauds. The view that part performance is concerned with matters of proof of the parol contract cannot stand with the Statute of Frauds, the evident purpose of which is to prevent the enforcement of a parol contract, however clear may be the proof of its making. It is not correct to say that Lord Selborne’s statement of principle evinces the view that part performance operates as acceptable evidence of the parol contract in question in place of the writing required by the statute. When Lord Selborne spoke of acts ‘unequivocally … referable’ to ‘some such agreement’, his Lordship was not speaking of the particular contract in question. The very circumstance that Lord Selborne spoke of referability to ‘some such agreement’ itself suggests that the requirement is not concerned with proof of the particular contract in question, but with dealings between the parties which in their nature establish that the parties are in the midst of an uncompleted contract for the sale or other disposition of land. Given that part performance is relevant only in relation to contracts for the sale or other disposition of land, it is not difficult to appreciate that the acts described by Lord Selborne are acts unequivocally and inherently referable to a transaction for the sale or other disposition of the land. Lord Selborne was clear that unequivocal referability is concerned with the proof of acts partially executing a transaction that remains uncompleted, and that 549

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proof of the agreement that had been made was not required to show the equity to have the transaction completed. It is significant in this respect that Lord Selborne expressly adopted the statement of Sir James Wigram V-C in Dale v Hamilton that it is in general of the essence of an act of part performance: ‘that the Court shall, by reason of the act itself, without knowing whether there was an agreement or not, find the parties unequivocally in a position different from that which, according to their legal rights, they would be in if there were no contract.’ In a case where the parties are found, as a matter of fact, to be in that position, equity requires that the transaction be completed notwithstanding the objection of the defendant that the contract itself cannot be enforced by reason of non-compliance with the Statute of Frauds. The requirement for unequivocal referability is essential to Lord Selborne’s thesis that the court is not enforcing the contract — that would be contrary to the Statute of Frauds — but the equities generated by its partial performance. It is only where the acts of part performance are inherently and unequivocally referable to such a contract that it cannot be objected that, in truth, and contrary to the legislation, it is the parol contract that is being enforced. In Burns v McCormick, Cardozo J explained the essential requirement this way: ‘There must be performance “unequivocally referable” to the agreement, performance which alone and without the aid of words of promise is unintelligible or at least extraordinary unless as an incident of ownership, assured, if not existing. “An act which admits of explanation without reference to the alleged oral contract or a contract of the same general nature and purpose is not, in general, admitted to constitute a part performance.” … What is done must itself supply the key to what is promised. It is not enough that what is promised may give significance to what is done.’ The equity to have the transaction completed arises where the acts that are proved are consistent only with partial performance of a transaction of the same nature as that which the plaintiff seeks to have completed by specific performance. At that point, regard may be had to the terms of the oral contract in order to ascertain the appropriate orders by way of specific performance. So, in Maddison v Alderson, Lord Selborne stated that the terms of the parol contract may be taken into account only when the equity to have the transaction carried to completion has been established and it becomes necessary to establish the terms of the order to be made. At that point: ‘The matter has advanced beyond the stage of contract; and the equities which arise out of the stage which it has reached cannot be administered unless the contract is regarded.’ In  McBride v Sandland, Isaacs and Rich JJ explained that the logical order in which the issues in a case such as the present should be addressed is first to determine whether the acts performed establish the equity and then, and only then, to refer to the terms of the parol agreement in order to ascertain the terms in which the equity is to be enforced. Applying that reasoning to the present case, because the acts of part performance relied upon by the appellant are consistent with some transaction other than a sale of the Clark Road property, he was not able to show a partially completed sale of the Clark Road property that he was entitled in equity to have fully executed by means of a decree of specific performance. It also follows from the above that the appellant’s contention that Lord Selborne erroneously applied repealed rules of Chancery procedure is incorrect, and must be rejected. On the contrary, his Lordship was expounding a rule of substance calculated to avoid Chancery acting in a manner repugnant to the Statute of Frauds.

Part performance and equitable estoppel It has been suggested that ‘the modern and divergent rules of proprietary and equitable estoppel … secret trusts … and part performance sprang from [the] common root’ that a person may not rely on his or her strict legal rights where to do so is against the conscience of equity. But the appellant’s invitation to subsume part performance within the development of equitable estoppel fails to appreciate that, while in some cases the doctrines may have an overlapping operation, they do not cover the same ground. While it may well be that equity’s concern to prevent unconscientious conduct is the common root of equitable estoppel and part performance, there are discernible differences in the scope and operation of these doctrines as each has developed 550

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in Australia. The first such difference is that part performance may be invoked by a vendor of land to enforce a parol contract, whereas equitable estoppel is available only against a vendor of land to vindicate the interests of a prospective purchaser. Next, equitable intervention by way of equitable estoppel to prevent a defendant resiling from a promise that is not enforceable at law is justified, not by the existence of an unperformed or partially performed promise, but by a concern that the plaintiff should not be left to suffer a detriment by the defendant’s so resiling. So, in Waltons Stores (Interstate) Ltd v Maher Mason CJ and Wilson J noted that, as a general rule, a ‘failure to fulfil a promise does not of itself amount to unconscionable conduct’ and so ‘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.’ In the same case, Brennan J explained: ‘The protection which equity extends is analogous to the protection given by estoppel in pais to which Dixon J referred in Grundt v Great Boulder ie, protection against the detriment which would flow from a party’s change of position if the assumption (or expectation) that led to it were deserted.’ Thirdly, the nature of the equity enforced by part performance differs from that enforced by equitable estoppel. In some cases of equitable estoppel, the relief granted may require the taking of active steps by the defendant to meet the expectations generated by the transaction, but in other cases the requirements of good conscience may mean that such an order would not reflect the measure of relief required to protect the plaintiff against the apprehended detriment. If the doctrine of part performance covered the same ground as equitable or promissory estoppel, one might have expected that there would need to be, in each case where part performance is invoked, an analysis of the extent to which a defendant’s attempt to resile from completion of the transaction would result in detriment to the plaintiff, and that the relief granted would be moulded accordingly to prevent that detriment. But that has not been the case. Indeed, in the case of part performance, as is apparent from this Court’s decision in Regent v Millett, there is not even an insistence that there be detrimental reliance on the part of the plaintiff to establish an equity to relief. A defendant’s act in putting a plaintiff into possession might not of itself be a detriment to the plaintiff, but there can be no doubt that it is a sufficient act of part performance. Where part performance is established the plaintiff will be entitled to a decree of specific performance without needing to establish that a lesser form of relief would be inadequate. In this respect, the operation of part performance may be contrasted with equitable estoppel, where, as Mason CJ and Wilson J noted in Waltons Stores (Interstate) Ltd v Maher, the plaintiff’s equity may be enforced by the grant of relief falling short of an order for the satisfaction of the plaintiff’s expectation interest. In Maddison v Alderson, Lord Selborne illustrated his thesis that the defendant ‘is really “charged” upon the equities resulting from the acts done in execution of the contract’ by the example of: ‘a parol contract to sell land, completely performed on both sides, as to everything except conveyance; the whole purchase-money paid; the purchaser put into possession; expenditure by him (say in costly buildings) upon the property; leases granted by him to tenants. The contract is not a nullity … All the acts done must be referred to the actual contract, which is the measure and test of their legal and equitable character and consequences.’ His Lordship went on to say: ‘The choice is between undoing what has been done (which is not always possible, or, if possible, just) and completing what has been left undone. The line may not always be capable of being so clearly drawn as in the case which I have supposed; but it is not arbitrary or unreasonable to hold that when the statute says that no action is to be brought to charge any person upon a contract concerning land, it has in view the simple case in which he is charged upon the contract only, and not that in which there are equities resulting from res gestae subsequent to and arising out of the contract.’ In the example offered by Lord Selborne it is readily apparent, having regard to the acts performed on the strength of the contract, that a court of equity would regard specific performance of the contract — which, ex hypothesi, would involve only an order for the transfer of the legal title — as the only remedy sufficient to do justice. A contract or other arrangement which remains largely unperformed on both sides may not always have the same 551

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claim on the conscience of equity in terms of the remedies provided by the court as a contract which has been performed to the extent of that hypothesised by Lord Selborne. And so it can be seen that it is something peculiar to part performance that the equity of the plaintiff that arises in reliance upon the partial performance of the contract has been regarded as sufficiently strong, without more, save a readiness, willingness and ability to do equity, to support an order for specific performance in order to vindicate the equity of the plaintiff that arises from the part performance of the contract. In J C Williamson Ltd v Lukey and Mulholland, Dixon J, with whom Gavan Duffy CJ agreed, explained why this is so: ‘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.’ Lord Selborne’s requirement that the acts of part performance relied upon be unequivocaly referable to a contract of the kind asserted by the plaintiff is best understood as being necessary to give rise to this peculiarly strong equity. His Lordship said: ‘the rule … requires some evidentia rei to connect the alleged part performance with the alleged agreement. There is not otherwise enough in the situation in which the parties are found to raise questions which may not be solved without recourse to equity. It is not enough that an act done should be a condition of, or good consideration for, a contract, unless it is, as between the parties, such a part execution as to change their relative positions as to the subject-matter of the contract.”

Steadman v Steadman In the appellant’s written submissions in this Court, reliance was placed on the decision of the House of Lords in Steadman v Steadman. In Steadman, it was held that acts of part performance were sufficient if they pointed to the existence of some contract between the parties and either showed the nature of, or were consistent with, the parol agreement alleged by the plaintiff. To the extent that the decision in  Steadman  points to a broadening of the doctrine of part performance, it is not to be followed in preference to the position established by  Maddison v Alderson and the earlier decisions of this Court to which reference has been made. It is noteworthy that in Steadman, none of their Lordships suggested that the decision involved a departure from the approach of Lord Selborne in Maddison v Alderson. Nevertheless, Lord Reid justified his conclusion by reasoning in terms of estoppel: If one party to an agreement stands by and lets the other party incur expense or prejudice his position on the faith of the agreement being valid he will not then be allowed to turn round and assert that the agreement is unenforceable. Two things may be said about Lord Reid’s statement of principle. First, to the extent that it speaks of the avoidance of detriment as an essential condition of the operation of the doctrine of part performance, it differs from both Lord Selborne’s reasoning and this Court’s decision in Regent v Millett; and secondly, it does not explain how it is that the doctrine supports an order for specific performance of a contract rather than an order limited to remedying the detriment to the plaintiff. In  Steadman,  Viscount Dilhorne and Lord Salmon seem, at least to some extent, to have justified their conclusions on the basis that the acts relied upon were sufficient proof of a parol contract in the absence of the writing required by the Statute of Frauds. In oral argument, senior counsel for the appellant, acknowledging the disparate reasoning of the members of the majority of the House of Lords in Steadman, rightly did not press this Court to follow that decision. Given the absence from their Lordships’ reasons of analysis critical of Lord Selborne’s reasoning, and given further that, in point of principle, the doctrine of part performance is neither a species of equitable estoppel nor a mode of proof of a parol 552

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contract, Steadman does not provide a sound basis for departing from the position established by the course of authority in this Court. In Cooney v Burns, Higgins J, writing in 1922, observed: The cases on the subject cannot be all reconciled. Lord Selborne made an heroic effort in 1883, in the case of Maddison v Alderson, to bring order to the chaos, to give system to the unsystematic; and perhaps for practical purposes, it would be well to treat that case as being, at all events primâ facie, a complete exposition of the law. The importance of the reconciliation achieved by Lord Selborne should not be discounted. It should not be thought, as the submissions advanced on behalf of the appellant appear to assume, that part performance is, like equitable estoppel, the original and unconstrained creation of the courts of equity, the elements of which can be reformulated at large to ‘do justice against a defaulting defendant’. In particular, the argument advanced on the appellant’s behalf fails to appreciate that Lord Selborne’s articulation of the law of part performance was driven by the conscious need to reconcile the decisions of the courts of equity with the clear words of s 4 of the Statute of Frauds. It may be that the Chancery judges of the late 17th century did not regard the Statute of Frauds as applying to proceedings in equity, but by the time  Maddison v Alderson  came to be decided the idea that a court of equity could regard itself as outside the prescriptions of the Parliament had become, as it remains, unacceptable. Lord Selborne’s reconciliation of the tension between the older cases and the Statute of Frauds has, for well over a century, provided an acceptable balance between parliamentary insistence on certainty in dealings in land and curial insistence on the prevention of unconscionable conduct in relation to such dealings. To detach the practical operation of the doctrine from this reconciliation, of which the unequivocal referability requirement is an integral part, is to make a case for the abolition of the doctrine as ‘a direct and inexcusable nullification’ of the Statute of Frauds. To say that the notion of unequivocal referability is unduly stringent is not to make a cogent argument for a more expansive operation for the doctrine of part performance but to demonstrate that the doctrine of part performance cannot satisfactorily be reconciled with the text of the statute and so should be discarded altogether. The enactment of s 26, including sub-s (2), after the evident approval by the High Court in McBride v Sandland and Cooney v Burns of Lord Selborne’s reconciliation confirms the strength of this consideration. It is hardly to be supposed that the enactment of s 26(2) of the Act left room for judicial development of the law relating to part performance that would upset the balance effected by Lord Selborne’s reconciliation. In this regard, it may be noted that the decision in  Steadman  was followed by the legislative abolition in the United Kingdom of the doctrine of part performance by the  Law of Property (Miscellaneous Provisions) Act 1989 (UK), which provided that s 40 of the Law of Property Act 1925 (UK) shall cease to have effect and which, by s 2(1), provided: A contract for the sale or other disposition of an interest in land can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each. This legislative response to Steadman was recommended by the Law Commission of England and Wales. The decision in  Steadman  contributed to the conclusion of the Law Commission that the doctrine of part performance was so confused that its abrogation by the legislature was desirable. The Law Commission considered that the most common example of injustice arising from undocumented dealings is the case of a plaintiff who incurs expenditure in effecting improvements to land to the knowledge of the owner and in the expectation generated by the owner of a transfer of the land; and that that injustice would be remedied by equitable estoppel. But as noted above, the ‘coverage’ provided by equitable estoppel is not the same as that provided by part performance. And the law of part performance, as explained by Lord Selborne and in decisions of this Court, does not create the confusion that the Law Commission perceived in Steadman. 553

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The result in the present case It was argued in the written submissions made on the appellant’s behalf that even if the unequivocal referability requirement were applied he should succeed on the appeal; but in the course of oral argument, it was conceded that, if Lord Selborne’s approach were applied to the circumstances of this case, the acts on which the appellant relied at trial and before the Full Court would not suffice as acts of part performance. That concession was rightly made.In Cooney v Burns, Starke J fixed upon the statement of Lord Selborne that an act is not a sufficient act of part performance ‘unless it is, as between the parties, such a part execution as to change their relative positions as to the subject-matter of the contract.’ Starke J went on to conclude that the act relied on in the case before him by way of part performance was not sufficient to support an order for specific performance because it did not ‘change the relative positions of the parties as to the subject matter of the contract, namely, the land’; in particular, the acts in question did not ‘alter the title in the land … affect the possession or the right to possession of the land, [or] … affect the use of the land or touch or concern the land in any way whatever.’ Similar observations may be made in the present case. Here, neither party performed any act that was unequivocally referable to the Clark Road property. There was no giving or taking of possession of that land. There were no other acts indicative of a change in the respective positions of the parties in relation to the land. The Full Court was therefore correct to conclude that the acts on which the appellant relied were not sufficient to engage the doctrine of part performance.

Commentary 9.16  The conclusions of the court in Pipikos v Trayans confirm the application of the

doctrine of part performance as an exception to the Statute of Frauds. The Statue of Frauds was implemented with the aim of preventing fraud in land transactions. Exceptions to writing requirements for such transactions evolved in equity as a way of ensuring it did not operate unfairly. Despite the absence of any formal mention of the doctrine of part performance within the Statute, the court held that the doctrine addresses the equity of the statute. Edelman J argued that the focus of the doctrine was a moral one because it seeks to ensure performance of a contract where that contract unequivocally exists. In this regard, his Honour rejected the idea that the doctrine of part performance operated as a rule of evidence. Similarly, Nettle and Gordon JJ held that the origin of the doctrine of part performance lay in the ability of a court of equity to compel the execution of formal covenants which had been agreed to be but not yet sealed. Significantly, Kiefel CJ, Bell, Gageler and Keane JJ held that it is the equities which arise out of the partly performed agreement which a court of equity will seek to enforce. By contrast, Edelman J held that it is not the equities but rather, the ‘contract itself ’ which a court of equity seeks to enforce (at [125]). All judges distinguished the doctrine of part performance from estoppel. Kiefel CJ, Bell, Gageler and Keane JJ noted that estoppel is focused upon detrimental reliance whereas part performance is concerned with a partly performed contract. Their Honours held that the equity that is enforced by the doctrine of part performance differs from that which is enforced by equitable estoppel because part performance requires the fulfillment of the plaintiff ’s expectation whereas estoppel provides relief to alleviate the detriment which may involve enforcing the representation and in some circumstances, the relief which is required may be less than this.

554

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Implied Equitable Interests Resulting trusts 9.17  The equitable jurisdiction may recognise and uphold the validity of an equitable

interest in circumstances where an intention to create such an interest can be inferred from the facts. The classic form of interest arising within this category is the resulting trust. Where properly recognised the resulting trust, like the express trust, will confer an enforceable equitable title upon the beneficiary(s). The foundation of the resulting trust is well established: see Dyer v Dyer (1788) 2 Cox Eq Cas 92; 30 ER 42; Napier v Public Trustee WA (1980) 32 ALR 153 at 158 per Aicken J and 246 per Gibbs CJ; and Muschinski v Dodds (1985) 160 CLR 583 at 612 per Deane J. Essentially, the resulting trust will arise to protect a transfer of property in circumstances where the transferor did not intend to benefit the recipient. In Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 at 1412, Lord Millett concluded that resulting trusts arise presumptively ‘whether or not the transferor intended to retain a beneficial interest — he almost always does not — since it responds to the absence of any intention on his part to pass a beneficial interest to the recipient’. Australian courts have recognised three primary categories of resulting trust: the first is the failed express trust and will arise where a trust has been expressly created but the interest taken by the beneficiaries does not exhaust the trust property. The second, is the voluntary transfer resulting trust, which will arise where property has been transferred, without any consideration having been provided, to a third party stranger. This category may also encompass resulting trusts that arise to protect funds which are the subject of a failed specific purpose loan. The third category is purchase money resulting trusts, which arise presumptively where property has been purchased but the title to the property is placed in the name of a third party stranger or the contribution is not reflected in the legal title: see Calverley v Green (1984) 155 CLR 242; Buffrey v Buffrey [2006] NSWSC 1349 per Palmer J at [14]. In each of these situations, the resulting trust is presumptively imposed upon the transferee’s beneficial title. The beneficial title will arise as soon as the property vests in the transferee and is a product of the presumed intention of the transferor and the presumption may be rebutted where evidence to the contrary can be established: DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 per Aicken J; Yard v Yardoo Pty Ltd [2006] VSC 109; Sivritas v Sivritas (2008) 23 VR 349. While the presumption of a resulting trust is rebuttable, it does ‘not … give way to slight circumstances’: Shephard v Cartwright [1955] AC 431 at 445 per Viscount Simonds, quoted in Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365 by Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ. See also Australian Building and Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460 at [130].

Failed Express Trust 9.18  Where a settlor intended to create an express trust, but failed because the trust was

invalid, a resulting trust may arise. This type of resulting trust will arise where the settlor has transferred the trust property to a third party trustee, and subsequently failed to comply with the remaining creation requirements. A continuing intention to create a trust and a desire to impose a beneficial title upon the settlor is inferred in circumstances where the primary intention cannot be complied with: see J Glover, ‘Re-Assessing the Uses of Resulting Trust: Modern and Medieval Themes’ (1999) 25 Monash University Law Review 110. 555

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Australian Property Law

EXAMPLE S transferred to T on trust for all of his friends. The trust fails because ‘friends’ is too uncertain. In this situation, T holds title under a resulting trust back for the benefit of S. S becomes the beneficiary because a beneficial title could not be conferred upon the ‘friends’ of S and it is presumed that S did not intend for T to hold the transferred property absolutely.

Specific Purpose Loan 9.19  It has been held that where a borrower enters into a loan contract to borrow money

for a specific purpose and that purpose provides a benefit to an identifiable beneficiary(s), the loan money will be held under an express trust until the purpose is satisfied: Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567. Where there is some intervening frustration so that the loan purpose cannot be satisfied, the borrower will then hold the loan moneys under a resulting trust back for the lender. The requirements for the Quistclose resulting trust are: • The existence of a contract with a specific purpose that is clear to both parties. The traditional form of contract is a loan contract because this was the type of contract involved in the Quistclose decision. • The existence of an implied intention that if the contract purpose cannot be achieved, money is to revert back to the original contractor/lender. • Interaction between common law contract and trusts in equity. If the designated purpose under the loan contract is not complied with, a secondary trust is to be imposed. The primary trust is express and it protects the implementation of the purpose; the secondary trust is resulting and it protects the capacity of the lender to reclaim the funds. • The classic, orthodox Quistclose trust involves two forms of trust — a primary and a secondary trust. The primary trust arises when funds are transferred to the borrower (this is an express trust but can also be constructive). Subsequently, if the funds are not used for the designated purpose, a resulting trust arises by default and the lender can claim beneficial title in the funds. Significantly, under the orthodox model, the equitable beneficial title under the presumptive resulting trust will not arise in the lender until it is clear that the borrower cannot carry out the specific purpose. There are two primary difficulties with the Quistclose version of the specific purpose resulting trust: 1. The primary express trust is a purpose trust but the purpose is not charitable and therefore offends the beneficiary principle that is well established under trust law principles. 2. It is unclear why the primary express trust fails. On the facts of Barclays Bank Ltd v Quistclose Investments Ltd, it was unclear why the bankruptcy of the trustee meant that the express trust failed. The bankruptcy should not have affected the funds that belonged to the shareholders because they were held on trust. In Re Australian Elizabethan Theatre Trust (1991) 102 ALR 681, Gummow J held that moneys deposited with the AETT as donations, for tax deduction purposes, were not held on trust because they were expressly sent as ‘unconditional’ gifts. In the course of the judgment Gummow J noted that the Quistclose express trust should not be regarded as a purpose

556

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trust, but rather an express trust that satisfied the institutional trust requirements. His Honour noted that the trust is a ‘supple’ instrument that can only arise where the relevant intention can be inferred from the language employed by the parties and the nature of the transaction. His Honour continued at 695, ‘To speak of a Quistclose trust as if it were a new legal institution rather than an example of the particular operation of principle upon the facts as found, is to set the listener or reader off on a false path’. On the facts, there was no intention to create a trust, because the money was characterised as a donation and therefore no express trust could arise. A primary express trust will not necessarily arise in circumstances where money is lent for a particular purpose because the purpose may not reveal and identifiable beneficiary.1 Further, a secondary resulting trust may not arise if the purpose of the loan transaction has been satisfied. In that situation, there is no need for a default trust because the object is satisfied and the parties will continue to be bound by their respective contractual obligations.2 The Quistclose trust was substantially revised by Lord Millett, in his dissenting judgment in Twinsectra Ltd v Yardley [2002] 2 WLR 802. His Lordship concluded that the resulting trust is best regarded as arising from the outset because the lender retains a beneficial title in the loan moneys and the borrower acquires a power to apply the money in accordance with the lender’s instructions. If the loan purpose fails, the money is returnable to the lender because the borrower no longer has any mandate to apply the funds. In such a situation, the lender can enforce the beneficial title arising under the resulting trust from the outset and reclaim the funds: see also Yeo and Tjio, ‘The Quistclose Trust’ (2003) 119 LQR 8. On the facts of Twinsectra, the specific purpose loan was treated as an ordinary commercial arrangement akin to a retention of title clause. Lord Millett suggested that the lender in a specific purpose loan transaction does not actually part with the funds until they are utilised for the purpose specified. Hence, instead of the specific purpose resulting trust arising after the failure of the primary express trust, Lord Millett argued that the specific purpose resulting trust arises automatically, as soon as the funds are transferred from the lender to the borrower. This significant shift in orthodoxy was justified on the grounds of consistency and scope. It was argued that the automatic resulting trust may apply to a broader range of different specific purpose loans that would not have come within the scope of the Quistclose version because of the difficulty of satisfying the requirements for the primary express trust. Whatever the character of the purpose, under the approach taken by Lord Millett, where it is clear that funds have been lent in a commercial context, for a specific purpose, an automatic resulting trust will arise to protect the lender’s funds. The utility of this automatic resulting trust is that where the purpose fails, there is no need to impose a default resulting trust; it already exists. In effect, the resulting trust becomes the primary trust and the lender can compel the borrower to return the money. The further question of whether the borrower must use the money for the stated purpose or whether 1. Twinsectra Limited v Yardley (2002) 2 AC 164 at [73]; P W Young AO, C Croft QC and M Smith, On Equity (2009, Thomson Reuters/Lawbook Co) at [6.1020]; Raulfs v Fishy Bite Pty Ltd; Fishy Bite Pty Ltd v Raulfs [2012] NSWCA 135 at [51] per Campbell JA; Coolbrew Pty Ltd v Westpac Banking Corporation [2014] NSWSC 1108 at [44]–[55] per Darke J; Legal Services Board v Gillespie-Jones [2012] VSCA 68 per Hansen JA at [56] (citing Re Australian Elizabethan Theatre Trusts (1991) 30 FCR 491 at 502 per Gummow J); George v Webb [2011] NSWSC 1608 at [197]; Legal Services Commissioner v Brereton [2011] VSCA 241 at [97]; Marriner v Australian Super Developments Pty Ltd [2012] VSCA 171 at [67] per Judd AJA; Rambaldi v Commissioner of Taxation (2017) 107 ATR 1. 2. See the discussion by Mandie, Neave JJA and Judd AJA in Marriner v Australian Super Developments Pty Ltd [2012] VSCA 171 at [83]. 557

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Australian Property Law

the borrower merely has a mandate to do so, and, if so, whether this mandate may be withdrawn at any point up until its exercise, are questions that depend upon the particular circumstances of the case and the nature of the loan contract. The primary difficulty with the approach of Lord Millett in Twinsectra is that the creation of an automatic resulting trust appears contrary to the fundamental default character of the resulting trust and contrary to the objectives of most loan contracts in effecting a full assignment of funds over to the borrower from the outset. In Cook v Alto Prestige Pty Ltd [2010] NSWSC 92, Bergin CJ, after reviewing Twinsectra, and noting the approach of Lord Millett in dissent, nevertheless applied the orthodox two-tiered Quistclose resulting trust. In Sino Iron Pty Ltd v Palmer (No 3) [2015] QSC 94, Jackson J at [126]–[132], referenced the conclusions of Lord Millett in Twinsectra, noting in particular that the degree of knowledge required by the parties for a Quistclose trust was, according to Lord Millett, knowledge of the facts that constitute the trust rather than knowledge that the trust would arise from the specific purpose loan transaction. Jackson J went on to distinguish this particular approach to ‘knowledge’ from that which is generally applied to constructive trusts for a breach of fiduciary duty. In Rambaldi v Commissioner of Taxation (2017) 107 ATR 1, Allsop, Dowsett and Burley JJ in the Full Federal Court held that a loan agreement between a third party and a bankrupt, taken out to discharge debt to the Commissioner of Taxation, raised a Quistclose trust. On the facts, the parties entered into a loan to pay a tax debt. Once the debt was paid, the bankruptcy trustees that had been appointed sought to recover the payment on the basis that it contravened s 122 of the Bankruptcy Act 1966 (Cth), because the money’s that were paid belonged to the bankrupt property, and the payment was preferential. The ATO counter-argued that the loan money, which was paid, was subject to a Quistclose trust. Their Honours held that the conditional loan did generate a Quistclose trust, which meant that the loan moneys did not form a part of the bankrupt’s property and, as such, the payment did not amount to a preference payment in contravention of s 122. The court said that the payment had never become a part of the borrower’s property, but rather that the borrower had merely acquired a right of possession.

9.20  Revision Questions 1. Do you think that the views of Lord Millett regarding the Quistclose resulting trust reflect the ‘default’ status of the resulting trust or are they more analogous with the creation of express trusts? 2. Is the Quistclose resulting trust more of a protective mechanism than an assessment of the ‘implied’ intentions of the lender? What is the relevance of the certainty of intention in this type of arrangement? 3. How does the ‘specific purpose loan’ resulting trust differ from a more general ‘failed express trust’ resulting trust?

Contributions to Property: Purchase Money Resulting Trusts 9.21  An implied intention to create a trust may also arise in a situation where one party

contributes to the purchase price of property but that contribution is not reflected in the legal ownership of the property. In this situation equity presumes that the contributing party intended the legal owner to hold their contribution subject to a resulting trust. This presumption may be rebutted where it can be established that the contributing party

558

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intended to advance the property to the legal titleholder. As outlined by Cummins J in Yard v Yardoo Pty Ltd [2006] VSC 109 at [320]: Purchase money resulting trusts and resulting trusts arising upon voluntary transfers of property will only be presumed if the recipient of the property is, in equity, a stranger to the transferor or the provider of the purchase money. Where the recipient is not a stranger, equity applies a countervailing presumption that an advancement or gift is intended. If a father purchases land in the name of his legitimate child the presumption of advancement will apply. Like the presumption of a resulting trust the presumption of advancement is rebuttable.

In Calverley v Green (1984) 155 CLR 242 the High Court of Australia considered the trust implications of contributions to the purchase price of a property bought by de facto partners. The appellant, Arthur George Calverley, contributed $9000 deposit for the purchase of a property for $27,250. The balance was paid from moneys obtained from a mortgage that both the appellant and the respondent, Diane Lee Green, had entered into. The legal title was transferred to Arthur and Diane as joint tenants, which meant that they obtained identical shares in the property. The relationship broke up in 1978 and the issue was whether the respondent, Diane Lee Green, could claim an equal share in the property given that the appellant had contributed more to the overall purchase price of the property. Gibbs CJ made the following comments at 256: 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, 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).

On the facts of the case, the court concluded that the appellant had no intention to confer a beneficial interest on the respondent and the only reason that the property was put into joint names was because he had experienced difficulty in obtaining finance in his own name. Thus, it was presumed from the facts that the respondent held her one-half interest in the property on a resulting trust in favour of the appellant, the extent of the appellant’s beneficial title being based upon the proportion of the purchase money that he had provided. As the appellant already held a one-half legal title to the property, the beneficial title that he held under the resulting trust represented that much of his proportionate contribution that exceeded the one-half that the respondent legally held. A significant point underlying the assessment type of trust is that the contribution must be assessed at the date of the purchase. The contributions that Arthur Calverley made 559

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included the deposit as well as entering into the mortgage liability but did not include any of the actual mortgage payments. The reason for this is that intention is inferred at the date of the actual purchase. Hence, the fact that a mortgage debt has been repaid is irrelevant in a determination of the extent of the interests under a purchase money resulting trust. However, Wheeler J in Bertei v Feher [2000] WASCA 165 at [43] considered the scope of this restriction: In my view, although that proposition is undoubtedly correct, it does not dictate a formula which must be mechanically applied. For example, when finance is raised, which is plainly intended to be ‘bridging finance’ it seems to me that it may be undesirably artificial to say that it is the money raised under the mortgage for which, temporarily, both parties may be liable, rather than what is intended to be the ultimate source of funding (for example, money from the sale of one party’s home), which constitutes the payment of the purchase price. Similarly, for example, if a relative of one of the parties provides the whole or some of the purchase price as a short term measure until that party is able to obtain funds from, for example, access to a fixed term investment, it would not, I think, be correct to regard that relative as the person making the contribution to the purchase price …

The principles set out in Calverley v Green were summarised by Beazley P in Jain v Amit Laundry Pty Ltd [2019] NSWCA 20 at [89] as follows: (1) Where property has been purchased in joint names, equity presumes a trust in favour of the party who has contributed the whole of the purchase price. (2) Where two purchasers contribute to the purchase price and the property is conveyed to them as joint tenants, equity presumes that they hold the equitable interest in the property in shares proportionate to their contribution. (3) The material time for determining the beneficial ownership of property is at the time of acquisition. (4) The purchase price is what is paid to the vendor to acquire the property. Mortgage instalments, being paid not to the vendor but to the lender, do not constitute a payment of the purchase price. (5) The entry into a mortgage constitutes a contribution to the purchase of the property as, under a mortgage, each mortgagor undertakes a joint and several liability in respect of the repayment of the mortgage. (6) The equitable presumptions may be displaced, rebutted or qualified by evidence of a contrary intention that is common to all contributors to the purchase price. (7) Usually, the common intention of the contributors to the purchase price is to be inferred from what the parties do or say, not their own uncommunicated state of mind.3

In Flourentzou v Spink [2019] NSWCA 315, Barrett AJA at [17]–[18] noted that the presumption of a purchase money resulting trust, ‘while sometimes cast as legal principles, are in truth no more than prima facie conclusions as to parties’ intentions indicated by bare facts. Where the bare facts are that two persons have contributed the purchase moneys, the prima facie conclusion is that there existed a common intention that they are to enjoy beneficial ownership in proportion to their contributions unless the existence of a particular kind of relationship between them indicates an overriding and unilateral intention of one of them (the assumed parent, in this discussion) that the other alone will benefit, which unilateral intention is destructive of any such common intention. Either or 3. See also Foundas v Arambatzis [2020] NSWCA 47 at [53] per White JA (Basten JA and Bell P agreeing). 560

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both of the prima face conclusions as to intention indicated by bare facts may be displaced by proof that the particular intention indicated at a prima facie level is inconsistent with the intention in fact existing. Indeed, it has been said that the so-called presumptions are merely “legal tools which assist in determining” the relevant intention.’ In Stack v Dowden [2007] 2 All ER 929, Baroness Hale revised the primacy of the presumptive ‘purchase money’ resulting trust in the United Kingdom, noting that it was not a rule of law and highlighting the need for pragmatism in assessing all of the circumstances rather than just a crude assessment of financial contribution. She noted at [69] that ‘In law, “context is everything” and the domestic context is very different from the commercial world’. See also Jones v Kernott [2011] 3 WLR 1121 (approving the conclusions in Stack v Dowden). This approach has not been adopted by Australian courts to date. The presumed resulting trust may be rebutted by a presumption of advancement. A presumption of advancement is essentially a presumption that the person contributing to the purchase price intended to make the contribution as a gift.4 Old authority suggests that a presumption of advancement may be raised where a man makes contributions or where property is transferred by a fiancé to his fiancée: Jenkins v Wynen [1992] 1 Qd R 40. The interrelationship between the presumptions of resulting trust and the presumption of advancement were considered by the High Court in Charles Marshall Pty Limited v Grimsley (1956) 95 CLR 353, quoting Viscount Simonds in Shephard v Cartwright [1955] AC 431: I think that the law is clear that on the one hand where a man purchases shares and they are registered in the name of a stranger there is a resulting trust in favour of the purchaser; on the other hand, if they are registered in the name of a child or one to whom the purchaser then stood in loco parentis, there is no such resulting trust but a presumption of advancement. Equally it is clear that the presumption may be rebutted but should not, as Lord Eldon said, give way to slight circumstances: Finch v Finch [1808] EngR 125; (1808) 15 Ves Jun 43 (33 ER 671) [1955] AC, at p 445.

In Damberg v Damberg [2001] NSWCA 87, Heydon JA, in assessing a presumption of advancement where one or more parents conveyed property to a child, concluded that the presumption could be rebutted, ‘by showing, on the balance of probabilities, that the parent or parents did not have that intention. In the present circumstances, where the husband alone transferred the property, it is his actual intention alone which is to be ascertained.’ A presumption of advancement may also arise where a father contributes or makes a contribution to property for a child: Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353. It has also been applied where a mother makes a contribution or transfer to a child: Nelson v Nelson (1995) 184 CLR 538. In Nelson v Nelson, the High Court noted that if the presumption arises from a sense of parental obligation, it should apply equally to both father and mother. A presumption of advancement may itself be rebutted by proof that the intention of the contributor, at the time of purchase, was to obtain an interest in the property. Where a presumption of advancement is rebutted, the resulting trust may still arise.5 In determining whether a presumption of advancement exists, it is the actual intention of the parties at the time of the purchase that is relevant and, in particular, whether there is any proof of a definite intention to retain beneficial title: Szu Tu v Lowe 4. See the discussion by J Glister, ‘Is There a Presumption of Advancement?’ (2011) 33(1) Sydney Law Review 39. 5. Xiao Hui Ying v Perpetual Trustees Victoria Ltd [2015] VSCA 124 at [39] per Beach, McLeish JJA and Dixon AJA. 561

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[2014] NSWCA 462 at [3] per Gleeson JA, Meagher and Barrett JJA. In Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495 per Ward CJ at [248], it was held that the relationship of siblings did not raise a presumption of advancement, although in certain cases the role of an older brother viz younger brothers might do so. 9.22  A further qualification to the application of the presumptive purchase money

resulting trust has been developed by the High Court. In Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 80 ALJR 589 the court concluded that the presumptive resulting trust would not arise in circumstances where the parties were married and the contribution related to the matrimonial property. The decision of the High Court in Trustees of the Property of Cummins (a bankrupt) v Cummins (2006) 80 ALJR 589 is extracted below:

—  Trustees of the Property of Cummins (a bankrupt) v Cummins  — (2006) 80 ALJR 589 Facts: In 1970, Mr Cummins who was subsequently declared Bankrupt and his wife purchased vacant land at Hunters Hill in New South Wales. They were subsequently registered as joint proprietors. Mrs Cummins contributed the majority of the purchase price of the land. Subsequently, a dwelling was constructed on the land. A mortgage over the Hunters Hill property, executed by Mr and Mrs Cummins, secured an advance to them jointly. In August 1987, Mr Cummins transferred to his wife his legal and beneficial interest as joint tenant in the property at Hunters Hill. The price stated in the contract and the transfer was one half of the valuation of the property. The transfer included acknowledgment by Mr Cummins that he had received the consideration. However, it was common ground that the purchase price, or part thereof, had not been paid. Mrs Cummins contributed 76.3% of the purchase price of the vacant land in Hunters Hill. The funding of the building of the matrimonial home on the Hunters Hill land was, most likely, joint borrowings on a mortgage, supplemented by the joint proceeds of sale of another Hunters Hill property, which the Bankrupt and his wife held as joint tenants. One of the issues for the court was whether a presumptive purchase money resulting trust arose in favour of Mr Cummins based upon his contribution. Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ: The generally accepted principles in this field, affirmed for Australia by Calverley v Green were expressed as follows in that case by Gibbs CJ: ‘[I]f two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in 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’. Further, the presumption of advancement of a wife by the husband has not been matched by a presumption of advancement of the husband by the wife. The ‘presumption of advancement’, where it applies, means that the equitable interest is at home with the legal title, because there is no reason for assuming that any trust has arisen. The subject-matter of the August transactions with respect to the Hunters Hill property was identified in the transfer as ‘all that the [sic] interest of the Transferor as joint tenant of and in the land above described’. The following remarks by Professor Butt in his work, Land Law, are in point: ‘Strictly speaking, joint tenants do not have proportionate shares in the land. However, a joint tenant is regarded as having a potential share in the land commensurate with that of the other joint tenants. Where there are two joint tenants, that potential share is one-half; where there are three joint tenants, it is one-third; and so on. This potential share the joint tenant can deal with unilaterally during his or her lifetime.’ Hence the significance of the valuation which

562

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was obtained and the identification in the transfer of a consideration of $205,250, being onehalf of the valuation. What was there to conclude in August 1987 that the face of the register did not represent the full state of the ownership of the Hunters Hill property, and that the ownership as joint tenants was at odds with, and subjected to, the beneficial ownership established by trust law? No part of the purchase price of $205,250 was paid by Mrs Cummins and the August 1987 transfer was voluntary, as explained earlier in these reasons. However, Mrs Cummins did pay the ad valorem stamp duty on the contract and the valuer’s fee. There is force in the submission for the Trustees that it is unlikely these steps would have been taken by Mrs Cummins and that the August transaction with respect to the Hunters Hill property would have been cast in the way that it was had she believed that she already held approximately a two-thirds beneficial interest. At all events, these matters suggest that in August 1987 the parties were proceeding on the conventional basis that the equitable estate was at home with the registered estate of joint tenancy. There is no necessary inconsistency between this conventional basis as to the nature of the ownership being dealt with in August 1987 and the later conventional basis on which the litigation was conducted, namely that the consideration stipulated was not paid and that the property interest, ascertained as just described, was being dealt with on a voluntary basis. It is important for a consideration of the issues concerning the operation, if any, of the principles respecting resulting trusts that the registered title was that of joint tenants rather than tenants in common. The severance effected in August 1987 had the effect of putting to an end the incident of survivorship. The dislike by equity of survivorship and of what Deane J described as ‘the gamble of the tontine’ was the expression of its preference for proportionate carriage of benefit and burden; equity reacted against the operation of chance to produce a result at odds with proportionate distribution between claimants. In Corin v Patton, Deane J said that there were two aspects of joint tenancy which attracted the operation of overriding equitable doctrine, based upon notions of good conscience and actual or presumed intention. They were ‘(i) the equality of the interests of joint tenants, regardless of intention or contribution, in the undivided rights constituting ownership of the relevant property, and (ii) the right of accretion by survivorship until there is a sole owner of the whole’. Deane J added: ‘Where legal joint tenancy persists, severance in equity must involve the creation of some distinct beneficial interests, that is to say, the creation of a trust for the joint tenants themselves as tenants in common in equal shares or for different beneficiaries or beneficial shares.’ In Malayan Credit Ltd v Jack Chia-MPH Ltd, Lord Brightman, in delivering the advice of the Privy Council, considered an argument that, in the absence of an expressed agreement, persons who take as joint tenants at law hold as tenants in common in equity only in three classes of case. The first was the provision of purchase money in unequal shares, where the beneficial interest is held to reflect those unequal shares; the second, security taken jointly by parties who advance the loan moneys in unequal shares; and the third, partnership property. The Privy Council held that the circumstances in which, in the absence of express agreement, equity may presume joint tenants at law to be tenants in common in equity of the beneficial interest of property were not limited in this way. In the circumstances of Malayan Credit, the Privy Council inferred from ‘[a]ll the circumstances’ that, since the commencement of a lease of property for the business purposes of the joint lessees, they had held beneficial interests in the lease as tenants in common in unequal shares representing the distinct and differing areas of the leased premises they occupied. Upon the sale of the leasehold premises, the net proceeds were to be divided not equally but in accordance with these proportions. This manifested the precept that among merchants the right of survivorship has no place. Among the features taken into account in Malayan Credit as pointing in equity unmistakably towards a tenancy in common in unequal shares were the facts that, after the grant of the lease, 563

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the parties had paid stamp duties and survey fees in the same unequal shares and that the rental service charges had been paid in the same way. In Malayan Credit, there was, of course, no scope for any ‘competing’ presumption of advancement seen in family relations cases. In Charles Marshall Pty Ltd v Grimsley, and subsequently in Calverley v Green, this Court was concerned with family dealings in property: shares in the first case and improved land in the second case. In Charles Marshall, the plaintiffs were daughters of the donor and the Court said that the presumption of an intention of advancement, that they be made beneficial as well as legal owners of the shares, might be rebutted by evidence manifesting a contrary intention. Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ said of the rebuttal of presumptions by manifestation of a contrary intention: ‘Apart from admissions the only evidence that is relevant and admissible comprises the acts and declarations of the parties before or at the time of the purchase (in this case before or at the time of the acquisition of the shares by allotment) or so immediately thereafter as to constitute a part of the transaction.’ (emphasis added) However, as Malayan Credit illustrates, whilst evidence of subsequent statements of intention, not being admissions against interest, are inadmissible, evidence of facts as to subsequent dealings and of surrounding circumstances of the transaction may be received. What then was the ‘transaction’ to which attention must be directed in determining whether, subsequent admissions or conventional assumptions or arrangements apart, the registered title to the Hunters Hill property acquired by Mr and Mrs Cummins was not at variance with an equitable title? The Hunters Hill property, at the time of their registration as joint proprietors on 10 August 1970, was vacant land. The purchase moneys were contributed, as explained earlier in these reasons, in the proportions 76.3 per cent (Mrs Cummins) and 23.7 per cent (Mr Cummins). A mortgage over the Hunters Hill property executed by Mr and Mrs Cummins in favour of the Commonwealth Savings Bank of Australia on 16 July 1971 secured an advance to them jointly of $8,000 on a covenant that they would erect and complete within six months of that date a dwelling house at a cost of not less than $33,500. The tax return by Mrs Cummins for the year ended 30 June 1971 but lodged by her tax agent in 1972 showed the Hunters Hill property as her place of residence. The ‘transaction’ to which attention must be directed, in the sense given in Charles Marshall respecting the principles of resulting trusts, is a composite of the purchase of the Hunters Hill property followed by construction of a dwelling house occupied as the matrimonial home for many years preceding the August transactions. The relevant facts bearing upon, and helping to explain, the nature of the joint title taken on registration on 10 August 1970 include the other elements in that composite. To fix merely upon the unequal proportions in which the purchase moneys were provided for the calculation of the beneficial interests in the improved property which was dealt with subsequently in August 1987 would produce a distorted and artificial result, at odds with practical and economic realities. Looked at in this way, this is not a case which requires consideration of the authorities where an equitable lien or charge secures expenditure on improvements made but no beneficial interest in the land is conferred. Calverley v Green concerned the beneficial ownership of an improved property acquired as joint tenants by a man and a woman who had lived together for about 10 years as husband and wife. The decision of this Court was that the presumption that they held the registered title in trust for themselves in shares proportionate to their contributions was not rebutted by the circumstances of the case. Mason and Brennan JJ referred to the statement by Lord Upjohn in Pettitt v Pettitt that, where spouses contribute to the acquisition of a property then, in the absence of contrary evidence, it is to be taken that they intended to be joint beneficial owners. Their Honours said that Lord Upjohn’s remarks reflected the notion that both spouses may contribute to the purchase of assets through their marriage ‘as they often do nowadays’ and that they would wish those assets to be enjoyed together for their joint lives and by the survivor when they were separated by death. However, Mason and Brennan JJ considered such an 564

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inference to be appropriate only between parties to a lifetime relationship, being the exclusive union for life undertaken by both spouses to a valid marriage, though defeasible and oftentimes defeated. It is unnecessary for the purposes of the present case to express any concluded view as to the perception by Mason and Brennan JJ of the particular and exclusive significance to be attached to the status of marriage in this field of legal, particularly equitable, discourse. It is enough to note that, as Dixon CJ observed 50 years ago in Wirth v Wirth, in this field, as elsewhere, rigidity is not a characteristic of doctrines of equity. The reasoning of the Privy Council in Malayan Credit is an example of that lack of rigidity. In the present case, Sackville J referred in the second judgment to the operation of statute law to produce divergent outcomes in particular classes of case. In particular, his Honour referred to the regimes established by the Family Law Act 1975 (Cth), s 79, and, in New South Wales, by the Property (Relationships) Act 1984 (NSW). The New South Wales statute provides for the declaration of title or rights in respect of property held by either party to a ‘domestic relationship’. That term is broadly defined in s 5 as extending beyond the already broad definition of ‘de facto relationship’ in s 4. The extent to which these statutory innovations may bear upon further development of the principles of equity is a matter for another day. The present case concerns the traditional matrimonial relationship. Here, the following view expressed in the present edition of Professor Scott’s work respecting beneficial ownership of the matrimonial home should be accepted: ‘It is often a purely accidental circumstance whether money of the husband or of the wife is actually used to pay the purchase price to the vendor, where both are contributing by money or labour to the various expenses of the household. It is often a matter of chance whether the family expenses are incurred and discharged or services are rendered in the maintenance of the home before or after the purchase.’ To that may be added the statement in the same work: ‘Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them, it may be inferred that it was intended that each of the spouses should have a one-half interest in the property, regardless of the amounts contributed by them.’ That reasoning applies with added force in the present case where the title was taken in the joint names of the spouses. There is no occasion for equity to fasten upon the registered interest held by the joint tenants a trust obligation representing differently proportionate interests as tenants in common. The subsistence of the matrimonial relationship, as Mason and Brennan JJ emphasised in Calverley v Green, supports the choice of joint tenancy with the prospect of survivorship. That answers one of the two concerns of equity, indicated by Deane J in Corin v Patton, which founds a presumed intention in favour of tenancy in common. The range of financial considerations and accidental circumstances in the matrimonial relationship referred to by Professor Scott answers the second concern of equity, namely the disproportion between quantum of beneficial ownership and contribution to the acquisition of the matrimonial home. In the present litigation, the case for the disinclination of equity to intervene through the doctrines of resulting trusts to displace the incidents of the registered title as joint tenants of the Hunters Hill property is strengthened by further regard to the particular circumstances. Solicitors acted for Mr and Mrs Cummins on the purchase in 1970. The conveyance was not uneventful. The contract was dated 14 April 1970 and was settled on 27 July 1970, but only after the issue by the solicitors for the vendor on 10 July of a notice to complete. It is unrealistic to suggest that the solicitor for the purchasers, Mr and Mrs Cummins, did not at any point advise his clients on the significance of taking title as joint tenants rather than as tenants in common. Secondly, use of the valuation obtained in 1987 to fix what was shown as the purchase price for the acquisition by Mrs Cummins of the interest of her husband is consistent, as already indicated, with the conventional basis of their dealings which treated the matrimonial home as beneficially owned equally. 565

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Finally, there is the question of the funding of the building operations which were necessary for the use of the previously vacant land as the matrimonial home. Reference is made earlier in these reasons to the treatment of the purchase of the unimproved land and the subsequent building operations as the one transaction for the purpose of considering the principles respecting resulting trusts. Since October 1967, Mr and Mrs Cummins had owned as joint tenants a property at 12A Ferdinand Street, Hunters Hill. This was sold in December 1971. The proceeds of that sale were paid on 22 December 1971 into a bank account styled ‘John Daniel Cummins and Mrs Mary Elizabeth Cummins Fully Drawn Loan Account’. Sackville J held that in these circumstances it appeared likely that the net proceeds of sale of the Ferdinand Street property had been paid to Mr and Mrs Cummins jointly. While there was no finding to this effect by the primary judge, there is force in the submission in this Court by counsel for the Trustees that the likely source of funds for the building operations were, first, the joint borrowing of $8,000 on the mortgage to the Commonwealth Savings Bank of Australia, supplemented after December 1971 by the joint proceeds of the sale of the other property. Sackville J correctly concluded in the second judgment that the subject of the disposition in 1987 was that which appeared on the transfer, namely the interest of Mr Cummins as joint tenant of the Hunters Hill property, without any displacement to allow for a beneficial tenancy in common in shares, of which the larger was that of Mrs Cummins.

Conclusion and orders The result is that the Trustees have succeeded in this Court on the grounds dealing both with s 121 of the Act and the beneficial ownership of the Hunters Hill property. The appeal should be allowed with costs. The orders of the Full Court should be set aside and in place thereof the appeal to that Court should be dismissed with costs. These orders will have the effect of reinstating the orders made by Sackville J on 24 October 2003.

Commentary 9.23  The conclusions of the High Court in Trustee Cummins establish a clear qualification

to the presumptive purchase money resulting trust enunciated by the High  Court in Calverley v Green, and introduce a new rebuttable presumption that spouses holding the matrimonial home, hold it as joint tenants in equal shares, irrespective of each spouse’s contribution to the purchase price. Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ expressly concluded that ‘Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them, it may be inferred that it was intended that each of the spouses should have a one half interest in the property, regardless of the amounts contributed by them’. On the facts, the unequal contribution to the purchase price of the property in Hunters Hill was found not to generate a presumptive resulting trust because married partners, contributing to the purchase of a matrimonial home expect that they will hold the property equally, despite their financial contributions. See also Combis (Trustee of the Property of Peter Jenson (Bankrupt) v Jenson (No 2) (2009) 181 FCR 178 at [52] where Collier J approved the conclusions of the High Court in Trustee Cummins.

Other Forms of Implied Equitable Interests: The Equitable Lien 9.24  The resulting trust is not the only form of implied equitable interest. It is also

possible for equitable securities to arise by implication. For example, an equitable lien may be implied in circumstances where it secures the discharge of a particular debt. A good

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example of an equitable lien is the security that a vendor acquires to the unpaid purchase moneys in a land contract. The vendor is entitled to retain possession of the land until the balance of the purchase moneys are paid in full. The equitable lien may also be imposed in circumstances where it is clear that the owner of the property holds an unextinguished debt relating to either the acquisition of that property or an expense incurred with respect to it. This was clearly set out in Hewett v Court (1983) 149 CLR 639 at 668, where Deane J held that an equitable lien may arise where there is: … an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of property or of an expense incurred in relation to it, and that the property be ‘specifically identified and appropriated to the performance of the contract’ and finally, ‘that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property …’.

An equitable lien will arise in favour of a vendor over the unpaid portion of the purchase moneys irrespective of the intention of the parties and can only be excluded by a clear and manifest intention: Barclays Bank plc v Estates & Commercial Ltd [1997] 1 WLR 415. The lien will arise as soon as the contract has been signed and will cover all unpaid purchase moneys. This lien has, however, been statutorily extinguished in the Northern Territory and Queensland: see Land Title Act 2000 (NT) s 197 and Land Title Act 1994 (Qld) s 191.

Imposed Equitable Interests Remedial constructive trust 9.25  Equitable interests may be imposed, irrespective of the intention of the parties, by a

court exercising equitable jurisdiction where it is felt that the circumstances demand it because the equitable jurisdiction is required to do what ought to be done. Constructive trusts may be imposed where a party has made a direct or indirect financial contribution to the acquisition of property and it is only fair that that contribution be recognised. It is also possible for a constructive trust to be imposed in the context of proprietary estoppel, where a party has relied upon a proprietary representation to their detriment and constructive trust is regarded as appropriate in the circumstances.

9.26  The jurisdictional focus of equity in imposing a constructive trust was examined

by the High Court in Muschinski v Dodds (1985) 160 CLR 583, which is extracted below.

—  Muschinski v Dodds  — (1985) 160 CLR 583 Facts: Mrs Muschinski and Mr Dodds were in a de facto relationship and purchased a property as tenants in common. They decided to buy land and erect a prefabricated house and to restore a cottage on the land. 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 finalisation of his divorce and from loans. The property was conveyed to the parties 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. The High Court declared that the parties held their respective legal interests upon trust to repay to each his or her 567

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respective contribution and as to the residue for both of them in equal shares. The High Court unanimously decided that there was no resulting trust, Mrs Muschinski, having intended that Mr Dodds would take his half share as beneficial co-owner. However, a majority (Gibbs CJ, Mason and Deane JJ, Brennan and Dawson JJ dissenting) concluded that the parties held their interests on constructive trust to reimburse each party’s respective contributions and to distribute the residue equally between them. Deane J: By the time of completion of the purchase of the Picton (NSW) land in the names of Mrs Muschinski and Mr Dodds as tenants in common, the overall arrangement between them was plain enough. Mrs Muschinski would pay the whole of the purchase price. Together, they would develop and use the land. They would purchase and erect a ‘kit’ home in which they would live together. They would renovate the old cottage on the land so that it could be used as an ‘arts and crafts’ business to be run by Mrs Muschinski. They would sub-divide the land and sell part of it. Mrs Muschinski’s main financial contribution was to be, and was, made when she paid the purchase price of the land and associated costs. Mr Dodds’ financial contribution was intended to be made subsequently. He was, in the words of their solicitor, Mr Marsden, as repeated by Mr Dodds himself in his evidence, ‘to put the time, the efforts, and funds as necessary to develop the property up’. In particular, he was to pay for the proposed ‘kit’ home and repay the mortgage arranged to be taken out in the parties’ joint names to finance the project beyond Mrs Muschinski’s contributions. It was on the basis of that overall arrangement that Mr Marsden advised Mrs Muschinski that the property should be purchased in the names of herself and Mr Dodds as tenants in common in equal shares. According again to Mr Dodds, Mr Marsden commented that ‘if it is placed in Mrs Muschinski’s name only it would be unfair to Mr Dodds to have him probably put in excess of $20,000 into the property over a short period of time …’. In the event, the substratum or assumed basis of that arrangement between Mrs Muschinski and Mr Dodds was largely removed and their joint project was abandoned. It is not now suggested by either party that the blame or responsibility for that should be attributed to the other. The  Wollondilly Shire Council refused the necessary permissions to erect the ‘kit’ home and sub-divide the land except on conditions that were unacceptable to the parties, with the consequence that the sale of part of the land was precluded. An expected property settlement from which it was planned that Mr Dodds would contribute to the cost of the planned development of the land proved much smaller than had been anticipated and was further depleted, without objection from Mrs Muschinski, to enable him to join her for part of a visit to her parents in Germany in 1978. The ‘de facto’ relationship between the parties came to an end and, after ‘various vicissitudes’, they finally separated. In the meantime, some expenditure had been incurred and work carried out on improvements to the property. When the joint project was abandoned, the parties were left as equal legal owners of the project property towards the overall costs of which Mrs Muschinski had contributed approximately ten-elevenths ($25,259.45) while Mr Dodds had contributed but the remaining one-eleventh ($2,549.77). There was no express or implied agreement, arrangement or understanding between the parties that they should hold their legal interests upon trust for themselves in shares corresponding to their respective contributions. To the contrary, the evidence leads inexorably to the conclusion — expressed in concurrent findings of fact in the courts below — that it was their shared intention that, from the time of purchase, each should have a full one-half beneficial, as well as legal, interest in the property. Mrs Muschinski’s intention was that her own and Mr Dodds’ interest or, to use her word, ‘status’ in the whole venture should be equal: it should be a ‘joint venture’, a ‘partnership’. The explanation of that intention lay in her expectation of Mr Dodds’ future financial contributions and in her desire to use the arrangements in relation to the purchase and development of the property as a means of strengthening the stability of her relationship with him. As she said (under cross-examination): 568

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Mr Dodds was going to provide a home for me, no matter what. He was going to build a home and pay for it for the rest of his life … He was willing to provide whatever he had and whatever he was going to earn after; he was going to contribute to our future home and happiness and I expected the purchase of the Picton property to improve our relationship, to increase that happiness, because we had many arguments about the colour scheme of the house and it was always referred to, ‘Yes, it is your house. I have nothing to say here’ … I thought this would restore our relationship to quite a happier one. Nor, upon a proper assessment of the evidence, is there room for a finding of an express or implied contract between Mrs Muschinski and Mr Dodds to the effect that, if things fell apart in respect of both their personal relationship and their planned development of the land, they would hold the property either upon trust to repay their respective contributions and then for themselves equally or upon trust for themselves in shares according to their respective contributions. There is no suggestion at all of any express contract to that effect and no adequate foundation for the implication of one. As the learned trial judge found, it was not the intention of either of them that Mr Dodds’ equal beneficial interest should be acquired by stages as he contributed towards the planned joint endeavour. Their planned future association and joint activity provided the occasion for, and the explanation of, the arrangement between them. That arrangement was however to the effect that Mr Dodds’ beneficial interest in the property should be immediate and unconditional. It was not qualified to provide for the uncontemplated double contingency that their personal relationship would fail and that the proposed venture involving the development and joint use of the land would crumble under the yoke of inauspicious stars. In these circumstances, there is no occasion for recourse to the presumption of the law of equity that, where two or more persons advance the purchase price of property in different shares, 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 (Calverley v Green (1984) 59 ALJR 111, at p 121, 56 ALR 483, at p 500). That presumption performs much the same function as a civil onus of proof. General statements to the effect that it is not lightly to be rebutted should not, in my respectful view, now be accepted as good law (cf 59 ALJR, at pp 120, 122, 56 ALR, at pp 499, 503). That is not, of course, to deny that the facts which call the presumption into operation may, in the circumstances of a particular case, also lead to such a strong inference of an intended trust that convincing evidence would be necessary to rebut it (cf Wirth v Wirth (1956) 98 CLR 228, at pp 241–242). Even in such a case however, the presumption operates by reference to the presumed intention of the party whose contribution exceeds his or her proportionate share; it cannot prevail over the actual intention of that party as established by the overall evidence, including the evidence of the parties’ respective contributions. It follows that no relief is available to Mrs Muschinski on the grounds of breach of express or implied agreement or of express or implied trust. The question remains whether the circumstances of the case are such as to entitle her to claim relief on some other ground. In particular, the question arises whether she is entitled to claim relief by way of declaration of, or order imposing, a constructive trust. It was submitted on behalf of Mrs Muschinski that she was entitled to a declaration of constructive trust based on broad notions of fairness and unjust enrichment. The nature and function of the constructive trust have been the subject of considerable discussion throughout the common law world for several decades (see, particularly, Pound, ‘Equitable Remedies’, Harvard Law Review, vol 33 (1919–1920), 420, at pp 420–423; Scott, ‘Constructive Trusts’, Law Quarterly Review, vol 71 (1955), 39; Maudsley, ‘Proprietary Remedies for the Recovery of Money’, Law Quarterly Review, vol 75 (1959), 234; Waters, The Constructive 569

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Trust (1964); Goff and Jones, The Law of Restitution, 2nd ed (1978), esp Chs 1 and 2; Oakley, Constructive Trusts (1978); John Wade, ‘Trusts, the Matrimonial Home and De Facto Spouses’, University of Tasmania Law Review, vol 6 (1978–1980), 97; J D Davies, ‘Informal Arrangements Affecting Land’, Sydney Law Review, vol 8 (1976–1979), 578; Underhill’s Law Relating to Trusts and Trustees, 13th ed (1979: Hayton), Ch 7; John L Dewar, ‘The Development of the Remedial Constructive Trust’, Canadian Bar Review, vol  60 (1982), 265; Pettit, Equity and the Law of Trusts, 5th ed (1984), p v and Ch 10; Hanbury and Maudsley, Modern Equity, 12th ed (1985: Martin), Ch 12). At times, disputing factions have tended to polarise the discussion by reference to competing rallying points of ‘remedy’ and ‘institution’. The perceived dichotomy between those two catchwords has, however, largely been the consequence of lack of definition. In a broad sense, the constructive trust is both an institution and a remedy of the law of equity. As a remedy, it can only properly be understood in the context of the history and the persisting distinctness of the principles of equity that enlighten and control the common law. The use or trust of equity, like equity itself, was essentially remedial in its origins. In its basic form it was imposed, as a personal obligation attaching to property, to enforce the equitable principle that a legal owner should not be permitted to use his common law rights as owner to abuse or subvert the intention which underlay his acquisition and possession of those rights. This was consistent with the traditional concern of equity with substance rather than form. In time, the relationships in which the trust was recognised and enforced to protect actual or presumed intention became standardised and were accepted into conveyancing practice (particularly in relation to settlements) and property law as the equitable institutions of the express and implied (including resulting) trust. Like express and implied trusts, the constructive trust developed as a remedial relationship superimposed upon common law rights by order of the Chancery Court. It differs from those other forms of trust, however, in that it arises regardless of intention. For that reason, it was not as well suited to development as a conveyancing device or as an instrument of property law. Indeed, whereas the rationale of the institutions of express and implied trust is now usually identified by reference to intention, the rationale of the constructive trust must still be found essentially in its remedial function which it has predominantly retained (cf Waters, op cit, pp 37–39). The constructive trust shares, however, some of the institutionalised features of express and implied trust. It demands the staple ingredients of those trusts: subject matter, trustee, beneficiary (or, conceivably, purpose), and personal obligation attaching to the property (cf  Sir Frederick Jordan, Chapters on Equity in New South Wales, 6th ed (1947: Stephen), pp 17–18). When established or imposed, it is a relationship governed by a coherent body of traditional and statute law. Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) 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. There is, however, a more limited sense in which there is some superficial plausibility in the notions of ‘institution’ and ‘remedy’ as competing characterisations of the constructive trust. If ‘institution’ is understood as connoting a relationship which arises and exists under the law independently of any order of a court and ‘remedy’ is defined as referring to the actual establishment of a relationship by such an order, the catchwords of ‘institution’ and ‘remedy’ do serve the function of highlighting a conceptual problem that persists about the true nature of a constructive trust. Even in this more limited sense however, any perceived dichotomy between the two notions tends to prove ephemeral upon closer examination. Equity acts consistently and in accordance with principle. The old maxim that equity regards as done that which ought to be done is as applicable to enforce equitable obligations as it is to create them and, notwithstanding that the constructive trust is remedial in both origin and nature, there does not need to have been a curial declaration or order before equity will recognise the prior existence of a constructive trust (cf Scott, The Law of Trusts, 3rd ed (1967), vol V, par 462.4). Where an 570

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equity court would retrospectively impose a constructive trust by way of equitable remedy, its availability as such a remedy provides the basis for, and governs the content of, its existence inter partes independently of any formal order declaring or enforcing it. In this more limited sense, the constructive trust is also properly seen as both ‘remedy’ and ‘institution’. Indeed, for the student of equity, there can be no true dichotomy between the two notions. The acknowledgment of the institutional character of the constructive trust does not involve a denial of its continued flexibility as a remedy (cf Wirth v Wirth, at p 238). The institutional character of the trust has never completely obliterated its remedial origins even in the case of the more traditional forms of express and implied trust. This is a fortiori in the case of constructive trust where, as has been mentioned, the remedial character remains predominant in that the trust itself either represents, or reflects the availability of, equitable relief in the particular circumstances. Indeed, in this country at least, the constructive trust has not outgrown its formative stages as an equitable remedy and should still be seen as constituting an in personam remedy attaching to property which may be moulded and adjusted to give effect to the application and inter-play of equitable principles in the circumstances of the particular case. In particular, where competing common law or equitable claims are or may be involved, a declaration of constructive trust by way of remedy can properly be so framed that the consequences of its imposition are operative only from the date of judgment or formal court order or from some other specified date. The fact that the constructive trust remains predominantly remedial does not, however, mean that it represents a medium for the indulgence of idiosyncratic notions of fairness and justice. As an equitable remedy, it is available only when warranted by established equitable principles or by the legitimate processes of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles (cf, generally, Sir Frank Kitto’s Foreword to the 1st ed (1975) of Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, at pp v–vii of the 2nd ed (1984), and see also, eg, In re Diplock (1948) Ch 465, at pp 481–482; Pettitt v Pettitt [1970] AC 777, at pp 793, 801, 809, 825; Cowcher v Cowcher (1972) 1 WLR 425, at p 430, [1972] 1 All ER 943, at p 948; Jacobs’ Law of Trusts in Australia, 4th ed (1977); Meagher and Gummow, pars 1301–1302, 1325–1329; Allen v Snyder (1977) 2 NSWLR 685, at pp 689, 702ff; Oakley, op cit, pp 1–10; Pettit, op cit, pp 4–6). Viewed as a remedy, the function of the constructive trust is not to render superfluous, but to reflect and enforce, the principles of the law of equity. Thus it is that there is no place in the law of this country for the notion of ‘a constructive trust of a new model’ which, ‘(b)y whatever name it is described, … is … imposed by law whenever justice and good conscience’ (in the sense of ‘fairness’ or what ‘was fair’) ‘require it’ (per Lord Denning MR, Eves v Eves (1975) 1 WLR 1338, at pp 1341, 1342, [1975] 3 All ER 768, at pp 771, 772; and Hussey v Palmer (1972) 1 WLR 1286, at pp 1289–1290, [1972] 3 All ER 744, at p 747). Under the law of this country — as, I venture to think, under the present law of England (cf Burns v Burns (1984) Ch 317) — proprietary rights fall to be governed by principles of law and not by some mix of judicial discretion (cf Wirth v Wirth, at pp 232, 247), subjective views about which party ‘ought to win’ (cf Maudsley, ‘Constructive Trusts’, Northern Ireland Legal Quarterly, vol 28 (1977), 123, esp at pp 123, 137, 139–140) and ‘the formless void of individual moral opinion’ (cf Carly v Farrelly (1975) 1 NZLR 356, at p 367; Avondale Printers & Stationers Ltd v Haggie (1979) 2 NZLR 124, at p 154). Long before Lord Seldon’s anachronism identifying the Chancellor’s foot as the measure of Chancery relief, undefined notions of ‘justice’ and what was ‘fair’ had given way in the law of equity to the rule of ordered principle which is of the essence of any coherent system of rational law. The mere fact that it would be unjust or unfair in a situation of discord for the owner of a legal estate to assert his ownership against another provides, of itself, no mandate for a judicial declaration that the ownership in whole or in part lies, in equity, in that other (cf Hepworth v Hepworth (1963) 110 CLR 309, at pp 317–318). Such equitable relief by way of constructive trust will only properly be available if applicable principles of the law of equity require that the person in whom the 571

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ownership of property is vested should hold it to the use or for the benefit of another. That is not to say that general notions of fairness and justice have become irrelevant to the content and application of equity. They remain relevant to the traditional equitable notion of unconscionable conduct which persists as an operative component of some fundamental rules or principles of modern equity (cf, eg, Legione v Hateley (1983) 152 CLR 406, at p 444; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, at pp 461–464, 474–475). The principal operation of the constructive trust in the law of this country has been in the area of breach of fiduciary duty. Some text writers have expressed the view that the constructive trust is confined to cases where some pre-existing fiduciary relationship can be identified (see, eg, Lewin on Trusts, 16th ed (1964: Mowbray), p 141). Neither principle nor authority requires however that it be confined to that or any other category or categories of case (cf, generally, Professor RP Austin’s essay on ‘Constructive Trusts’ in Essays in Equity (ed Dr Paul Finn) (1985), esp at pp 196–201; Waters, op cit, pp 28ff). Once its predominantly remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law of equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another (cf Hanbury and Maudsley, op cit, p 301; Pettit, op cit, p 55). In the United States of America, a general doctrine of unjust enrichment has long been recognised as providing an acceptable basis in principle for the imposition of a constructive trust (see, eg, Scott, op cit, vol V, par 461). It may well be that the development of the law of this country on a case by case basis will eventually lead to the identification of some overall concept of unjust enrichment as an established principle constituting the basis of decision of past and future cases. Whatever may be the position in relation to the law of other common law countries (cf, as to Canada, Pettkus v Becker (1980) 117 DLR (3d) 257; and as to New Zealand, Hayward v Giordani (1983) NZLR 140, at p 148) however, no such general principle is as yet established, as a basis of decision as distinct from an informative generic label for purposes of classification, in Australian law. The most that can be said at the present time is that ‘unjust enrichment’ is a term commonly used to identify the notion underlying a variety of distinct categories of case in which the law has recognised an obligation on the part of a defendant to account for a benefit derived at the expense of a plaintiff (cf Goff & Jones, op cit, p 11). It therefore becomes necessary to consider whether there is any narrower and more specific basis on which, independently of the actual intention of the parties, Mrs Muschinski can claim to be entitled to relief by way of constructive trust in the particular circumstances of the present case. As has been said, the payments made by Mrs Muschinski on account of the price and associated costs of the property were made by her pursuant to the overall arrangement between herself and Mr Dodds. It was the common intention of the parties, at the time those particular payments were made, that the burden of them should be borne by Mrs Muschinski alone. As I presently see the matter, it follows that Mrs Muschinski had no right to claim re-imbursement from Mr Dodds in respect of an appropriate part of those payments under any doctrine of contribution (cf Coulls v Bagot’s Executor and Trustee Co Ltd (1967) 119 CLR 460, at p 488; Gadsden v Commissioner of Probate Duties (1978) VR 653, at pp 660–662). It is, however, unnecessary that I form any concluded view in that regard since I would not, in any event, consider it appropriate to act on the basis that Mrs Muschinski was entitled to relief by way of contribution in circumstances where she advanced neither claim nor argument for relief on that basis either in this Court or in the courts below and where factual material relevant to such a claim may, as a consequence, remain unexplored. Indeed, an essential basis of the argument on behalf of Mrs Muschinski before this Court was that she had assumed and discharged the burden of paying the whole of the purchase price of the Picton land under and in accordance with the overall arrangement between Mr Dodds and herself.

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Nor has it been suggested that there was a true partnership or contractual joint venture between the parties. The case has been approached and argued on the basis that they were not partners and that the overall arrangement between them, while consensual, was a noncontractual one. That does not mean, however, that particular rules applicable to regulate the rights and duties of the parties to a failed partnership or contractual joint venture might not be relevant in the search for some more general or analogous principle applicable in the circumstances of the collapse of the consensual commercial venture and personal relationship in the present case. Both common law and equity recognise that, where money or other property is paid or applied on the basis of some consensual joint relationship or endeavour which fails without attributable blame, it will often be inappropriate simply to draw a line leaving assets and liabilities to be owned and borne according to where they may prima facie lie, as a matter of law, at the time of the failure. Where there are express or implied contractual provisions specially dealing with the consequences of failure of the joint relationship or endeavour, they will ordinarily apply in law and equity to regulate the rights and duties of the parties between themselves and the prima facie legal position will accordingly prevail. Where, however, there are no applicable contractual provisions or the only applicable provisions were not framed to meet the contingency of premature failure of the enterprise or relationship, other rules or principles will commonly be called into play. If, in the last-mentioned case, the relevant relationship is merely contractual and the contract has been frustrated without fault on either side, the present tendency of the common law is that contributions made should be refunded at least if there has been a complete failure of consideration in performance (cf Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32; Denny, Mott and Dickson Ltd v James B Fraser and Co Ltd [1944] AC 265, at p 275; and, generally, Treitel, The Law of Contract, 6th ed (1983), pp 695ff). If the relevant relationship is a partnership, the prima facie rule of equity on premature dissolution is, as in the case of an ordinary dissolution, that the parties are, after the discharge of partnership debts, entitled to be repaid their respective capital contributions. More important for present purposes, if a premium has been paid by a fixed term partner who is not to be held responsible for the premature dissolution, an equity court will order a refund or partial refund of the premium to the extent that its retention by the other partner would be unconscionable (cf Atwood v Maude (1868) 3 Ch App 369). If the relevant relationship is not a partnership but takes the form of a contractual joint venture for the pursuit of some commercial advantage, a similar prima facie rule of equity applies in the event of the premature collapse of the joint venture and the consequent preclusion of the attainment of the commercial advantage, namely, that, to the extent that the joint funds allow, the joint venturers are entitled to the proportionate repayment of their capital contributions to the abortive joint venture. This is so notwithstanding that it was the common understanding or agreement that the funds advanced were to be applied for the purposes of the joint venture and that the return from them would take the form, not of a repayment of capital contributed but of a share in the proceeds of the joint venture when it was carried to fruition (cf, eg, Allen v Kent (1957) 136 A 2d 540, at p 541; Ewen v Gerofsky (1976) 382 NYS 2d 651, at p 653; Legum Furniture Corporation v Levine (1977) 232 S E 2d 782, at pp 785–786; and cf, generally, ‘Joint Ventures’, Corpus Juris Secundum, vol 48A, pp 452–453, 463). The prima facie rules respectively entitling a fixed term partner to a proportionate refund of his or her premium and a contractual joint venturer to a proportionate repayment of his or her capital contribution on the premature dissolution of the partnership or collapse of the joint venture are properly to be seen as instances of a more general principle of equity. That more general principle of equity can also be readily related to the general equitable notions which find expression in the common law count for money had and received (cf Moses v Macferlan (1760) 2 Burr 1005, at p 1012 (97 ER 676, at pp 680–681); J & S Holdings Pty Ltd v NRMA Insurance Ltd (1982) 61 FLR 108, at p 120) and to the rationale of the particular rule of contract 573

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law to which reference has been made (cf Fibrosa, at pp 61ff and esp at p 72). Like most of the traditional doctrines of equity, it operates upon legal entitlement to prevent a person from asserting or exercising a legal right in circumstances where the particular assertion or exercise of it would constitute unconscionable conduct (cf Story, Commentaries on Equity Jurisprudence, 12th ed (1877: Perry), vol 2, par 1316; Legione v Hateley, at p 444). The circumstances giving rise to the operation of the principle were broadly identified by Lord Cairns LC, speaking for the Court of Appeal in Chancery, in Atwood v Maude, at p 375: where ‘the case is one in which, using the words of Lord Cottenham in Hirst v Tolson (1850) 2 Mac and G 134 (42 ER 52), a payment has been made by anticipation of something afterwards to be enjoyed (and) where … circumstances arise so that future enjoyment is denied’. Those circumstances can be more precisely defined by saying that 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, at pp 374–375 and per Jessel MR, Lyon v Tweddell (1881) 17 Ch D 529, at p 531). The circumstances of the present case provide the necessary context for the operation of that general principle of the law of equity. Mrs Muschinski’s payment of the purchase price of the Picton property, which was transferred into the joint names of Mr Dodds and herself, was made on the basis and for the purposes of their planned venture with respect to the land. The substratum of that planned joint endeavour was removed without attributable blame. Mr Dodds is left as a half owner of the property in circumstances (ie the collapse of the joint endeavour) to which the parties did not advert and in which it was not specifically intended or specially provided that Mr Dodds should enjoy such a benefit at Mrs Muschinski’s expense. In these circumstances, the operation of the relevant principle is to preclude Mr Dodds from asserting or retaining, against Mrs Muschinski, his one-half ownership of the property to the extent that it would be unconscionable for him so to do. In assessing whether or to what extent such an assertion or retention of legal entitlement by Mr Dodds would constitute unconscionable conduct, one is not left at large to indulge random notions of what is fair and just as a matter of abstract morality. Notions of what is fair and just are relevant but only in the confined context of determining whether conduct should, by reference to legitimate processes of legal reasoning, be characterised as unconscionable for the purposes of a specific principle of equity whose rationale and operation is to prevent wrongful and undue advantage being taken by one party of a benefit derived at the expense of the other party in the special circumstances of the unforeseen and premature collapse of a joint relationship or endeavour. If the venture between Mrs Muschinski and Mr Dodds had been merely a commercial one involving the purchase, development, partial realisation and use of the Picton land, there would be little room for argument about the appropriate characterisation, for the purposes of the relevant principle of equity, of Mr Dodds’ conduct in seeking to assert and retain the full benefit derived by him from Mrs Muschinski’s contribution without making any allowance to compensate her for the disproportion between those contributions and his own. The basis upon which Mrs Muschinski made her contributions was that Mr Dodds would, in due course, contribute, both in money and by labour, to the subsequent development. Their planned endeavour collapsed at a time when Mrs Muschinski had made all or almost all of her expected contribution to the overall venture, but Mr Dodds had made almost none of his. The parties had neither adverted to nor made special provision to deal with that situation. If no more than the commercial relationship had been involved, Mr Dodds’ conduct in seeking to catch and retain the unfair advantage of unforeseen circumstances by asserting his legal entitlement of a one-half interest in the 574

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property without assenting to any adjustment to compensate Mrs Muschinski for the unintended gross disproportion between their respective contributions would plainly be unconscionable for the purposes of the relevant principle of equity. Indeed, if the relationship between the parties had been merely a commercial one, such conduct on the part of Mr Dodds would be of the very type which the relevant principle exists to preclude. As has been seen however, the relationship between the parties in the present case was not merely a commercial one. It was a mixture of the commercial and the personal. The personal relationship provided the context and explains the content of the planned commercial venture. If the personal relationship had survived for years after the collapse of the commercial venture and the property had been unmistakenly devoted to serve solely as a mutual home, any assessment of what would and would not constitute unconscionable conduct would obviously be greatly influenced by the special considerations applicable to a case where a husband and wife or persons living in a ‘de facto’ situation contribute, financially and in a variety of other ways, over a lengthy period to the establishment of a joint home. In the forefront of those special considerations there commonly lies a need to take account of a practical equation between direct contributions in money or labour and indirect contributions in other forms such as support, home-making and family care. In fact, of course, the personal relationship also failed in the present case. The Picton property was not devoted to serve as a mutual home for a lengthy period after the collapse of the planned commercial venture. There is no consideration or combination of considerations arising from the personal relationship between the parties which could properly be seen as negating or overriding the unconscionable character of Mr Dodds’ conduct in seeking, in the circumstances, to assert and retain the benefit of a full one-half interest in the property without making any allowance for the fact that Mrs Muschinski has contributed approximately ten-elevenths of the cost of its purchase and actual improvement. Nor does the fact that Mr Dodds is seeking to take advantage of the overall arrangement which the parties framed to meet the exigencies of their personal relationship deprive his conduct of its unconscionable character. In circumstances where the parties neither foresaw nor attempted to provide for the double contingency of the premature collapse of both their personal relationship and their commercial venture, it is simply not to the point to say that the parties had framed that overall arrangement without attaching any condition or providing any safeguard specifically to meet the occurrence of that double contingency. As has been seen, the relevant principle operates upon legal entitlement. It is the assertion by Mr Dodds of his legal entitlement in the unforeseen circumstances which arose on the collapse of their relationship and planned venture which lies at the heart of the characterisation of his conduct as unconscionable. Indeed, it is the very absence of any provision for legal defeasance or other specific and effective legal device to meet the particular circumstances which gives rise to the need to call in aid the principle of equity applicable to preclude the unconscionable assertion of legal rights in the particular class of case. It follows that equity requires that the rights and obligations of the parties be adjusted to compensate for the disproportion between their contributions to the purchase and improvement of the Picton property. In the absence of any suggestion of direct payment by Mr Dodds to Mrs Muschinski to achieve a like result, that adjustment requires, at the least, that the parties be proportionately repaid their respective contributions to the extent allowed by the proceeds of any sale. It becomes necessary to consider their entitlement in equity to share in any surplus after the discharge of any debts incurred in their joint undertaking and the repayment to them of their respective contributions. As has been seen, the extent to which the relevant principle of equity operates to qualify legal entitlement is only that to which it positively appears that it would be unconscionable for one party to assert or retain the benefit of property contributed by the other party. There could well be circumstances in which equity and good conscience would require that the party who has made the major contribution to a failed joint endeavour should obtain a correspondingly greater share of any surplus remaining after repayment of 575

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the respective contributions. The conclusion which I have reached in all the circumstances of the present case is, however, that Mrs Muschinski has failed to establish that it would be unconscionable conduct on the part of Mr Dodds to assert and retain the one-half share in the residue of the proceeds of sale of the Picton property to which his legal entitlement and the consensual arrangement between them otherwise entitles him. There remains the question whether there should be a declaration that the Picton property is held by the parties upon constructive trust. In my view, there should. That property was acquired, in pursuance of the consensual arrangement between the parties, to be held and developed in accordance with that arrangement. The contributions which each party is entitled to have repaid to her or him were made for, or in connection with, its purchase or development. The collapse of the commercial venture and the failure of the personal relationship jointly combined to lead to a situation in which each party is entitled to insist upon realisation of the asset, repayment of her or his contribution and distribution of any surplus. In these circumstances, the appropriate order to give effect to the rights and obligations of the parties is an order declaring that the Picton property is held by them upon constructive trust. Lest the legitimate claims of third parties be adversely affected, the constructive trust should be imposed only from the date of publication of reasons for judgment of this Court. I would allow the appeal. I would make orders having the effect that there will be substituted for the order of the learned trial judge an order declaring a constructive trust of the Picton property to the effect that, on and after the day on which the reasons for judgment of this Court are published, Mrs Muschinski and Mr Dodds hold their respective legal interests as tenants in common upon trust (after payment of any joint debts incurred in improvement of the property) to repay to each her or his respective contribution and as to the residue for them both in equal shares. Since Mrs Muschinski has substantially succeeded in the case, I would make orders that Mr Dodds, who has wrongly asserted and sought to retain a beneficial interest in the Picton property to which he was not entitled, should be ordered to pay her costs at first instance, in the Court of Appeal and in this Court. In the particular circumstances of the present case where Mrs Muschinski has claimed the whole beneficial ownership of the property and no doubt contributed thereby to any delays in realisation of the property and distribution of the proceeds of sale, I would make no order allowing interest upon her or his respective contributions in favour of either party. The questions whether the financial contributions of one or both of the parties should be increased to make provision for labour or whether any other adjustments to them are necessary were neither investigated nor argued on the appeal. The sensible approach may well be, in view of the entitlement of the parties to share in any surplus upon sale, that no such adjustments should be made. In order to give the parties the opportunity of considering the question however and of avoiding the costs and delays which would be involved in remitting the matter to the Supreme Court for inquiry, I would stand the matter over at this stage so that the parties may have the opportunity to agree upon orders which would finally dispose of the case.

Commentary 9.27 In Muschinski v Dodds (1985) 160 CLR 583 Mason and Deane JJ made it clear that the court could impose a constructive trust consequent upon the failure of a joint venture between the parties because it was unconscionable for the man to assert his legal entitlement without recognising the considerable financial input from the woman. As outlined by Deane J at 622: In circumstances where the parties neither foresaw nor attempted to provide for the double contingency of the premature collapse of both their personal relationship and their 576

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commercial venture, it is simply not to the point to say that the parties had framed that overall arrangement without attaching any condition or providing any safeguard specifically to meet the occurrence of that double contingency. As has been seen, the relevant principle operates upon legal entitlement. It is the assertion by Mr Dodds of his legal entitlement in the unforeseen circumstances which arose on the collapse of their relationship and planned venture which lies at the heart of the characterisation of his conduct as unconscionable. Indeed, it is the very absence of any provision for legal defeasance or other specific and effective legal device to meet the particular circumstances which gives rise to the need to call in aid the principle of equity applicable to preclude the unconscionable assertion of legal rights in the particular class of case.

Deane J also spent considerable time evaluating the remedial and institutional features of the constructive trust in Muschinski v Dodds, concluding that in its modern context, the constructive trust: … can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) 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.

This reflects the fact that the remedial constructive trust is a direct consequence of judicial order rather than any manifest intention by the parties involved. The remedial constructive trust has been utilised in a range of different situations where it would be unconscientious for a court to deny the existence of equitable proprietary title. The approach was subsequently affirmed by all the members of the High Court in Baumgartner v Baumgartner (1987) 164 CLR 137. In their joint judgment Mason CJ, Wilson and Deane JJ based their decision on the proposition that after the relationship had failed in circumstances where the property had been financed in part through the pooled funds of the parties, the man’s assertion of entitlement to the exclusion of any interest in the woman was unconscionable conduct that attracted the intervention of equity and the imposition of a constructive trust. Subsequently, in West v Mead [2003] NSWSC 161, Campbell J considered the necessary elements of the constructive trust in this context concluding that what was needed was: first, that there be both a joint relationship or endeavour, in which expenditure is shared for the common benefit in the course of and for the purposes of which an asset is acquired; second, that the substratum of that joint relationship or endeavour, must have been removed or the joint endeavour prematurely terminated ‘without attributable blame’; and third, that there must be the requisite element of unconscionability, that is, that it would be unconscionable for the benefit of those monetary and non-monetary contributions to be retained by the other party to the joint endeavour. See also Swettenham v Wild [2005] QCA 264 per Williams JA at [8]–[10]; Waterhouse v Power [2003] QCA 155; Barker v Linklater [2008] 1 Qd R 405; Piatek v Piatek (2010) 245 FLR 137. One interesting issue is whether or not a remedial constructive trust can arise in circumstances where a presumed resulting trust exists. In Anson v Anson [2004] NSWSC 766, Campbell J at [37] concluded that ‘if the factual circumstances are such as to give rise to both a presumption of a resulting trust, and the imposition of a constructive trust on Baumgartner principles, and the application of these two different sets of principles leads to different results, then it is the result arising from the Baumgartner principles which prevails’. In Baumgartner v Baumgartner (1987) 164 CLR 137 the High Court noted the judgment of Deane J in Muschinski v Dodds and imposed a remedial constructive trust where a de facto couple had pooled their earnings for the purposes of acquiring land for 577

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themselves and their child. The court concluded that it would be unconscionable for the legal titleholder to assert sole ownership to the exclusion of any interest on the part of the respondent. Such conduct would, the court argued, attract the intervention of equity through the imposition of a remedial constructive trust. Mason CJ, Wilson and Deane JJ made the following comments at [37]: Equity favours equality and, in circumstances 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.

9.28  An extract of the High Court decision in Baumgartner v Baumgartner follows. The decision further develops the remedial constructive trust outlined in Muschinski v Dodds and concludes that remedial constructive trusts should be imposed to avoid the injustice that would flow if no property interest were recognised in circumstances where both parties have contributed to the repayment of a mortgage through pooled resources.

—Baumgartner v Baumgartner— (1987) 164 CLR 137 Facts: The appellant bought the land at Leumeah in his own name in October 1979 following a decision between the appellant and the respondent that the home unit they had was too small for themselves and their son. The appellant took the initiative in deciding to buy the land at Leumeah; although he did consult with the respondent. The respondent asked the appellant whether the house could be in her name as well and the appellant replied: ‘We’re not married and the loan is in my name and is coming from the sale of the unit’. Other conversations indicated that the property was being built for ‘all of them’ and that the appellant had several times indicated that the property belonged to both the appellant and the respondent. In September 1980 the appellant sold his home unit at Cabramatta and the parties began living in rented accommodation pending completion of the house at Leumeah. The net proceeds of the sale of the unit, after discharge of the mortgage, was $12,883.41. The evidence revealed that the appellant banked the salary of the respondent each week and that the pooled income was for the purpose of paying joint expenses. 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. There was, however, no agreed division in relation to the respondent’s contributions to the family finances. Nonetheless it is probable that the pooling of resources had the effect of reducing the mortgage debt on the home unit more quickly than if they had not been pooling their resources. The parties agreed that the total earnings of the parties available for contribution to the common pool during the period of cohabitation was $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 their son and cared for him. If an income of $3,000 is credited for this period, the aggregate earnings of the parties were contributed by the appellant as to 55 per cent and the respondent as to 45 per cent approximately. Subsequently the respondent left the appellant, deciding that he would never marry her. 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. 578

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The furniture which the respondent took with her is said to have a value of $7,000 to $10,000. The furniture was bought with the appellant’s money or money from the pooled resources. Mason CJ, Wilson and Deane JJ: The appellant’s case in this Court is that the Court of Appeal was not justified in interfering with the primary judge’s conclusion that the respondent had failed to make out her case, a conclusion which was based on a refusal or an unwillingness to make such findings as were necessary to the success of the respondent’s case. The appellant points out that the issue presented by the respondent at the trial was whether there was an oral agreement between the parties relating to the beneficial ownership of the land or alternatively whether there should have been inferred from the conduct of the parties an actual intention on the part of the appellant as registered proprietor to hold his interest upon trust for the respondent as to one half share. As a consequence the issues were issues of fact. Those issues necessarily involved matters of credibility, the evidence consisting mainly of affidavits by the parties and cross-examination on such affidavits. The appellant challenges the correctness of the approach taken by the Court of Appeal in looking to the common ground in the evidence given by the parties and drawing inferences exclusively from that material. The submission is that inferences must be drawn from the totality of the facts so that it was necessary to resolve the disputed issues of fact and take them into account in the process of drawing inferences. … It is apparent that the learned trial judge was not disposed to accept the respondent as a credible witness where her evidence was in conflict with that of the appellant. And those conflicts, though comparatively few, were central to the respondent’s case, that there was a common actual subjective intention to create a trust. In this situation it was not a legitimate exercise for an appeal court to ignore those conflicts and the way in which the primary judge resolved them and to draw inferences from the surrounding area of common ground between the parties, when the primary judge’s resolution of the central issues was adverse to the existence of such an intention. Consequently the finding made by the majority in the Court of Appeal that there was a common subjective intention to create a trust cannot be sustained. However, this conclusion does not dispose of the appeal. The question remains whether in the circumstances the respondent is entitled to relief by way of constructive trust. The answer to this question calls for some consideration of Allen v Snyder, which was thought by the Court of Appeal to be an obstacle to relief on this footing, and of Muschinski v Dodds, where the circumstances in which a constructive trust would be imposed were discussed. In Allen v Snyder a man and a woman lived together for many years, intending at first to marry, but not doing so. They lived in a house, of which the man was the legal owner, which was furnished by the woman out of her own funds. The house was purchased by the man during the period of cohabitation with the assistance of a loan. The Court of Appeal held that in the absence of a common intention to create a trust, there was no basis for holding that the man was a trustee of the house for the two of them in equal shares. The members of the Court of Appeal arrived at this conclusion for different reasons. Glass JA (with whom Samuels JA agreed), when referring to cases in which a trust, not evidenced in writing, of a home has been recognised, said (at p 693): But when it is called a constructive trust, it should not be forgotten that the courts are giving effect to an arrangement based upon the actual intentions of the parties, not a rearrangement in accordance with considerations of justice, independent of their intentions and founded upon their respective behaviour in relation to the matrimonial home. Later his Honour observed (at p 695): The doctrine that a trust of the matrimonial home may arise in favour of a spouse as a result of her contribution to the acquisition or maintenance of the home, in the absence of any actual understanding or reciprocal intention, is also wholly inconsistent with the line of reasoning in the High Court cases referred to in Hepworth v Hepworth [1963] HCA 49; (1963) 110 CLR 309, at p 318.

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On the other hand Mahoney JA correctly acknowledged (at p 704), as did Samuels JA (at  p  699), that a constructive trust may be imposed, even though the person on whom the trust is imposed had no intention to create a trust or to hold the property on trust. His Honour observed that in such situations an intention may be imputed in circumstances where the imputation is necessary ‘in good faith and in conscience’, though he added that this expression was of such generality that it did not provide an acceptable test for decision-making. In the ultimate analysis his Honour rejected (at p 707) the argument that the Court would impose a constructive trust by reference to what was ‘fair’ in the ordinary sense of that term. But in the course of reasoning to that result Mahoney JA indicated some situations in which it might be appropriate to impose a constructive trust. Thus, he said (at p 706): A husband may pay for the matrimonial home and cause the legal title to be vested in the wife. The wife may earn money and use it in defraying household expenses, thus relieving the family budget and allowing the husband to pay mortgage instalments on the home. It will be necessary, from time to time, to determine whether, in such situations, the failure to recognise that the one or the other has a proprietary interest in the home is so contrary to justice and good conscience that a trust or other equitable obligation should be imposed. His Honour’s reference to ‘contrary to justice and good conscience’ is to be understood as ‘unconscionable’. The significance of this statement so understood is that it asserts that the foundation for the imposition of a constructive trust in situations of the kind mentioned is that a refusal to recognise the existence of the equitable interest amounts to unconscionable conduct and that the trust is imposed as a remedy to circumvent that unconscionable conduct. 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 p 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 pp 374–375; and per Jessel MR, Lyon v Tweddell (1881) 17 ChD 529, at p 531. His Honour pointed out (at p 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 p 617. In rejecting the notion that 580

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a constructive trust will be imposed in accordance with idiosyncratic notions of what is just and fair his Honour acknowledged (at p 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 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 circumstances 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. 581

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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 per cent as to the appellant and 45 per cent 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 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 per cent to the appellant and 45 per cent 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 J: The story of the relationship between these parties and its disintegration is told in the reasons for judgment of Mason CJ, Wilson and Deane JJ. 582

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I adopt their Honours’ analysis of the evidence led at the hearing. Also, I agree with their conclusion that the circumstances of the case give rise to a constructive trust. However I wish to say something of the way in which such a trust may arise and as to the terms of the trust in the present case. A convenient starting point is the decision of this Court in Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583. After an examination of the authorities, Deane J (with whom Mason J agreed) concluded, at p 614: Viewed in its modern context, the constructive trust can properly be described as a remedial institution which equity imposes regardless of actual or presumed agreement or intention (and subsequently protects) 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. His Honour continued, at pp 616–617: Once its predominantly remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law of equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another. I agree with Mason CJ, Wilson and Deane JJ that in the present case, having regard to the way in which the parties pooled their earnings for the purposes of their joint relationship together with their contributions to the acquisition of land, the building of a house and the making of a home as part of that relationship, the appellant’s assertion (after the relationship failed) that the Leumeah property was his alone attracted the intervention of equity and the imposition of a constructive trust. In their Honours’ view, the unconscionable conduct of the respondent warranted these consequences. I accept that conclusion. Nevertheless the question may still be asked — is the imposition of a constructive trust as a remedy for unconscionable conduct any more ‘principled’ than the imposition of such a trust in order to prevent unjust enrichment? Each approach rejects Lord Denning MR’s notion of ‘a constructive trust of a new model’ (Eves v Eves [1975] EWCA Civ 3; (1975) 1 WLR 1338, at p 1341; 3 All ER 768, at p 771), imposed ‘whenever justice and good conscience require it’ (Hussey v Palmer (1972) 1 WLR 1286, at p 1290; 3 All ER 744, at p 747). Each looks to and builds upon particular situations. Each must come to grips with a variety of situations in which a person unconscionably retains property or is unjustly enriched by the retention of property. It may be, as Lord Diplock said in Orakpo v Manson Investments Ltd (1978) AC 95, at p 104 that ‘there is no general doctrine of unjust enrichment recognised in English law’. Or it may be, as the learned authors of Goff and Jones, The Law of Restitution, 3rd ed (1986) suggest, at p 15, that ‘… the case law is now sufficiently mature for the courts to recognise a generalised right to restitution’. Certainly the courts of the United States have no difficulty with the proposition just stated, as the Restatement of the Law of Restitution, originally published in 1937, evidences. This is an issue that does not need to be debated in order to resolve the present appeal. Unjust enrichment is at the very least ‘a unifying legal concept’, as Deane J noted in Pavey & Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221, at p 256. And the development of a general doctrine is as important for the notion of unconscionable conduct as it is for unjust enrichment. In Canada the opinion of Dickson J in Rathwell v Rathwell (1978) 83 DLR (3d) 289 became the basis of the decision in Pettkus v Becker (1980) 117 DLR (3d) 257. In the latter case Dickson J commented, at pp 273–274: How then does one approach the question of unjust enrichment in matrimonial causes? In Rathwell I ventured to suggest there are three requirements to be satisfied before an unjust enrichment can be said to exist: an enrichment, a corresponding deprivation 583

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and absence of any juristic reason for the enrichment. This approach, it seems to me, is supported by general principles of equity that have been fashioned by the Courts for centuries, though, admittedly, not in the context of matrimonial property controversies. Put this way, it is not enough that one spouse has benefited from the contributions of another. What is required is that the contributions of one spouse have enabled or assisted in enabling the other to acquire the asset in dispute: see Dickson J at p 277. Professor Scott (Scott on Trusts, 3rd ed (1967), vol V, par 462 has said of the person thus unjustly enriched: He is not compelled to convey the property because he is a constructive trustee; it is because he can be compelled to convey it that he is a constructive trustee. The notion of unjust enrichment, qualified in this way, is as much at ease with the authorities and is as capable of ready and certain application as is the notion of unconscionable conduct. No doubt, as Professor Waters suggested in ‘The Constructive Trust’, Paper 1 in Where is Equity Going? Remedying Unconscionable Conduct, lectures delivered at the Law School of the University of Western Australia this year, the task of the courts is ‘to continue sharpening the edges of the criteria which must be satisfied before the claimant can obtain constructive trust relief’. But that exercise is necessary, whichever approach is adopted. The existence of a de facto relationship between the parties constitutes no barrier in either case. The object of a constructive trust is to redress a position which otherwise leaves untouched a situation of unconscionable conduct or unjust enrichment. It is equally applicable to persons in a de facto relationship as it is to spouses. In a situation such as the present one, where two people have lived together for a time and made contributions towards the purchase of land or the building of a home on it, an approach based on unconscionable conduct or one based on unjust enrichment will inevitably bring about the same result. Neither approach necessarily calls for a precise accounting of the contributions of the parties. Equally, the Court cannot ignore disproportionate contributions, especially where one of the parties makes available the proceeds of the sale of a property which he or she had acquired before the relationship began. Both Muschinski v Dodds and the earlier decision of this Court in Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 had the result that each party received back basically what he or she had put into the venture: see Evans, ‘De Facto Property Disputes: The Drama Continues’, Australian Journal of Family Law, vol 1 (1987) 234, at p 247. The result proposed by Mason CJ, Wilson and Deane JJ is consonant with an approach based on unconscionable conduct or one based on unjust enrichment. It takes as a starting point that the Leumeah land was bought and a house was built on it, as a home for the appellant and the respondent. When it is seen that the parties pooled their earnings to that end, a tenancy in common is the appropriate recognition to avoid an unjust enrichment of the appellant or the unconscionable conduct implicit in him retaining the property in his own name. There is something to be said for declaring an equality of interests even though the earnings of the parties were not equal. But, in all the circumstances, I do not dissent from the proposal that the constructive trust declare the beneficial interests of the parties in the proportions 55 per cent to the appellant and 45 per cent to the respondent. Due regard must also be had to the appellant’s particular contributions from the sale of his unit at Cabramatta and the mortgage payments made by him since the parties’ relationship came to an end. Then there is the matter of the furniture taken by the respondent. I agree generally with the approach taken by their Honours. It is eminently desirable that the assets of the parties be not further dissipated by any more steps in this litigation. But I see no alternative to the course proposed by their Honours, that the matter stand over to give the parties an opportunity to agree upon the precise orders to be made. [Gaudron J agreed]

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Commentary 9.29  The requirements underlying a Baumgartner remedial constructive trust were

explained by Campbell J in West v Mead [2003] NSWSC 161 at [52]–[64], where his Honour said at [59]: … a plaintiff needs to establish that there is indeed a joint endeavour between the parties, in which expenditure is shared for the common benefit. It is also necessary to identify what the scope of that joint endeavour is. It is a question of fact, for any couple, what the scope of the joint endeavour they are engaging in is. Further, for any couple, the scope of the joint endeavour they are engaged in might change from time to time. If, within the scope of a joint endeavour which lasts for years, an asset is acquired, as a result of contributions both parties have made, and for a purpose of the ongoing joint endeavour of the parties, this gives rise to a presumption that the beneficial interest ought to be shared equally. That presumption can be displaced if one party is able to show that the contributions, both financial and non-financial, to that asset should be regarded as unequal.

Subsequently, in Hill v Hill [2005] NSWSC 863 at [45], Campbell J noted that the fundamental question in determining whether a Baumgartner  kind of trust exists is ‘whether it would be unconscionable that the rights of the parties, on determination of the relationship, should be simply what the bare legal right of the parties to the assets is’. Often parties within a relationship will have formed no intention as to the division of property should the relationship break down. In this situation, the constructive trust has utility because it is used to prevent unfairness. As outlined by McCallum J in O’Neill v Roberton-Statum [2015] NSWSC 149 at [45]–[47], ‘The instability and malleability of human memory is perhaps nowhere more problematic than in litigation arising out of close relationships that have deteriorated. Where the deterioration occurs gradually over time, the risk of inadvertent revision (transmuting affection to ill-will) is high people in close relationships.’ A constructive trust will only be imposed in circumstances where it prevents an unconscionable assertion of legal title. The remedial constructive trust will not arise until a court imposes it. In Re Goldcorp Exchange Ltd (in receivership) [1995] 1 AC 74, Lord Mustill concluded that the remedial constructive trust is imposed by the court as a ‘measure of justice after the event’ and is therefore reflective of the ‘remedial capacity of the equitable jurisdiction’: see also C Rickett, ‘The Classification of Trusts’ (1999) 18 NZULR 305. Ordinarily, a remedial constructive trust will arise from the date of the court order rather than retrospectively from an earlier date. However, courts have shown a preparedness to backdate the trust where individual circumstances require it. In Re Sabri (1996) 21 Fam LR 213, Chisholm J held that a remedial constructive trust in favour of a wife could be backdated to pre-date a bankruptcy order over the property. His Honour concluded that such an approach was consistent with the flexible nature of the equitable jurisdiction. Similarly, in Parsons v McBain (2001) 109 FCR 120, the Full Federal Court backdated a constructive trust to pre-date a bankruptcy order; however, the trust was rationalised as a ‘common intention’ constructive trust, based upon the date when intention was manifested rather than the remedial discretion of the court. In Jabbour v Sherwood [2003] FCA 529 at [73], the court concluded that Parsons v McBain stood for the proposition that a claim to an equitable interest based upon a common intention constructive trust may be good against a trustee in bankruptcy. See also Powell v in de Braekt [2005] WASC 8 at [13]–[14], where it was suggested that while a court can modify the prima facie date on which a trust takes effect, in the absence of any reason, such as third parties in need 585

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of protection, it was appropriate to adopt the view of A J Oakley that ‘in the absence of any judicial order to the contrary, a constructive trust will take effect from the moment at which the conduct which has given rise to its imposition occurs’: Compare Re Sabri; Ex parte Brien v Australia & New Zealand Banking Group Ltd (1996) 21 Fam LR 213 at 223–9. See also Imobilari Pty Ltd v Opes Prime Stockbroking Ltd (2008) 252 ALR 41 per Finkelstein J at [18]. A remedial constructive trust may also be imposed by a court where the circumstances raise a proprietary estoppel. This may occur where a party has relied upon a representation concerning land or property to their detriment. A remedial constructive trust may be imposed at the court’s discretion to validate the expectations of the person relying upon the representation and remedy the detriment flowing from the denial. 9.30 In Giumelli v Giumelli (1999) 196 CLR 101, the High Court considered the

appropriateness of the constructive trust in circumstances where a son had relied upon promises that his parents had made concerning property they owned. The case is extracted below.

— Giumelli v Giumelli — (1999) 196 CLR 101 Facts: Robert Giumelli was the son of the appellants, Mr and Mrs Giumelli. Robert was one of five children. The family lived on a property at Pickering Brook which comprised about 16 acres. The title was held in the name of Mr Giumelli. Mr and Mrs Giumelli developed the property as an orchard and they conducted a business there under the name ‘G Giumelli & Co’ by means of a partnership between them. In 1966, Mr and Mrs Giumelli purchased the Dwellingup property and they retained the registered title to it. The Dwellingup property was about 338 acres, of which only 10 acres were completely cleared when it was purchased. Mr Giumelli commenced development of the property by planting trees on the 10 acres and installing irrigation. Robert left school in 1971 and commenced full-time work for the partnership. Up to that time, he had worked at the Pickering Brook and Dwellingup properties, along with other members of his family, in a manner and to a degree consistent with the capabilities of his age. Mr and Mrs Giumelli promised Robert a portion of the Dwellingup property in 1974, when he was 18 years old, in compensation for him having worked without wages. Subsequently, in 1980, when Robert wanted to marry, they agreed that he should build a house on the Dwellingup property. Robert engaged a builder and worked to construct a three-bedroom home on the land. After his marriage in 1981, a further promise was made to Robert that the Dwellingup property would be subdivided to create a lot on the northern section of the property to include the house and orchard if he agreed to stay on the property and not accept an offer to work for his father-in-law. Subsequently, Robert separated from his wife and decided to remarry, but to a woman of whom his parents disapproved. In May 1985, his parents told him to choose between his proposed new wife and the Dwellingup property. Robert chose to go ahead with the marriage and left the Dwellingup property. Robert’s brother, Steven, had been living at the Dwellingup property since 1985 in a transportable house; he had made various improvements including the building of coolrooms and the planting of 1000 new trees. The High Court considered whether estoppel action was available for Robert against his parents and whether this would be a sufficient ground for the imposition of a constructive trust over the Dwellingup property. Gleeson CJ, McHugh, Gummow and Callinan JJ: This is an appeal from the Full Court of the Supreme Court of Western Australia. The Full Court (Rowland, Franklyn and Ipp JJ) allowed an appeal by the present respondent from a judgment entered by a judge of that Court 586

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(R D Nicholson  J) and dismissed a cross-appeal by the present appellants. The Full Court granted a declaration that the appellants hold the whole of the land comprised in Certificate of Title Vol 1400 Folio 628 (‘the Dwellingup property’) upon trust and that, since May 1986, they have held the Dwellingup property upon trust to convey to the respondent what is presently an unsubdivided portion thereof, identified as ‘the Promised Lot’. The appellants were ordered to do all things reasonably necessary to subdivide the Dwellingup property so as to create the Promised Lot, including the obtaining of State Planning Commission approval. The order of the Full Court further provided: … that in the event that subdivision cannot be effected or State Planning Commission approval cannot be obtained or in the event that for some other reason the Promised Lot cannot be conveyed to [the respondent, he] be at liberty to apply to a single Judge of this Honourable Court.

Constructive trust and estoppel In submissions to this Court, the term ‘constructive trust’ was used to identify the nature of the equitable remedy granted by the Full Court. Care is required in the use of the term ‘constructive’ in this context. Professor Scott has pointed out: It is sometimes said that when there are sufficient grounds for imposing a constructive trust, the court ‘constructs a trust.’ The expression is, of course, absurd. The word ‘constructive’ is derived from the verb ‘construe,’ not from the verb ‘construct’. … The court construes the circumstances in the sense that it explains or interprets them; it does not construct them. The relief granted by the Full Court involved a trust that was ‘constructive’ in that way. The Full Court so interpreted the circumstances as obliging the appellants, in good conscience, not to retain their beneficial interest in the whole of the Dwellingup property and as requiring them to answer the respondent’s equity by bringing about a subdivision of the Promised Lot and conveying the title to it. The equity of the respondent was seen by the Full Court as sufficiently strong as not only to prevent the appellants from insisting upon their strict legal rights but also, in respect of the Promised Lot, to convey it to the respondent. A constructive trust of this nature is a remedial response to the claim to equitable intervention made out by the plaintiff. It obliges the holder of the legal title to surrender the  property in question, thereby bringing about a determination of the rights and titles of the parties. The term ‘constructive trust’ is used in various senses when identifying a remedy provided by a court of equity. The trust institution usually involves both the holding of property by the trustee and a personal liability to account in a suit for breach of trust for the discharge of the trustee’s duties. However, some constructive trusts create or recognise no proprietary interest. Rather there is the imposition of a personal liability to account in the same manner as that of an express trustee. An example of a constructive trust in this sense is the imposition of personal liability upon one ‘who dishonestly procures or assists in a breach of trust or fiduciary obligation’ by a trustee or other fiduciary. In the present case, the constructive trust is proprietary in nature. It attaches to the Dwellingup property. Such a trust does not necessarily impose upon the holder of the legal title the various administrative duties and fiduciary obligations which attend the settlement of property to be held by a trustee upon an express trust for successive interests. Rather, the order made by the Full Court is akin to orders for conveyance made by Lord Westbury LC in Dillwyn v Llewelyn and, more recently, by McPherson J in Riches v Hogben. In these cases, the equity which founded the relief obtained was found in an assumption as to the future acquisition of ownership of property which had been induced by representations upon which there had been detrimental reliance by the plaintiff. This is a well-recognised variety 587

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of estoppel as understood in equity and may found relief which requires the taking of active steps by the defendant. There is no occasion in this appeal to consider whether the various doctrines and remedies in the field of estoppel are to be brought under what Mason CJ called ‘a single overarching doctrine’ or what Deane J identified as a ‘general doctrine of estoppel by conduct’. These theses were advanced by their Honours in The Commonwealth v Verwayen but not accepted by Dawson J [or McHugh J. Brennan J approached the subject on the footing that ‘equitable estoppel yields a remedy in order to prevent unconscionable conduct on the part of the party who, having made a promise to another who acts on it to his detriment, seeks to resile from the promise’. Subsequently, in the joint judgment of Mason CJ, Brennan, Dawson, Toohey and Gaudron JJ in Australian Securities Commission v Marlborough Gold Mines Ltd, reference was made to ‘an equitable estoppel of the kind upheld in Verwayen’]. Nor does the present case itself turn upon what was identified by Mason CJ, Wilson and Deane JJ in Baumgartner v Baumgartner as: … 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. There was a joint endeavour which included the parties to this litigation and others. This was in the form of a partnership, the affairs of which have given rise to other litigation. As will appear, the delay in resolving the partnership dispute does have a significance for the determination of the relief which the respondent should be granted with respect to the Promised Lot. The relief granted by the Full Court indicates that the equity of the respondent was more than a ‘defensive equity’. This phrase was used by Deane J in The Commonwealth v Verwayen to denote laches, acquiescence or delay or a mere set-off. Further, by obliging the appellants to execute a conveyance, the equity established by the respondent did more than prevent the appellants from insisting upon their strict legal rights as present owners. On the other hand, the respondent did not establish an immediate right to positive equitable relief as understood in the same sense that a right to recover damages may be seen as consequent upon a breach of contract. The present case fell within the category identified by the Privy Council in Plimmer v Mayor, & c, of Wellington where ‘the Court must look at the circumstances in each case to decide in what way the equity can be satisfied’. Before a constructive trust is imposed, the court should first decide whether, having regard to the issues in the litigation, there is an appropriate equitable remedy which falls short of the imposition of a trust. At the heart of this appeal is the question whether the relief granted by the Full Court was appropriate and whether sufficient weight was given by the Full Court to the various factors to be taken into account, including the impact upon relevant third parties, in determining the nature and quantum of the equitable relief to be granted. In their Notice of Appeal, the appellants seek the dismissal of the respondent’s claim. However, in their written and oral submissions, they accept that, at least in respect of what was identified as the second promise, the respondent had an equity to some relief. They submit that this fell short of an order for a subdivision and the conveyance of the Promised Lot.

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, 588

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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 RD Nicholson J when giving relief in respect of the second promise.

Conclusion Whilst the holding of the Full Court with respect to the third promise should be upheld, the Full Court erred in the measure of relief which it granted in respect of the Promised Lot. This is a case for the fixing of a money sum to represent the value of the equitable claim of the respondent to the Promised Lot. It will be necessary for the matter to be remitted to a judge of the Supreme Court to take that step. The amount so ascertained, with interest, should be charged upon the whole of the Dwellingup property. There will be no requirement of a subdivision of the Promised Lot as part of the remedy.

Commentary 9.31  The decision in Giumelli sets out that the remedial constructive trust is a discretionary

remedy that will not be available where it would have an unconscientious impact upon the rights of third parties. Hence, on the facts of Giumelli, a monetary award in lieu of a constructive trust was appropriate. While the court acknowledged the availability of the constructive trust in circumstances where a proprietary estoppel may arise, it concluded that a constructive trust imposed in these circumstances is a remedial response founded upon good conscience that may be replaced by alternative orders where the circumstances require it. The desirability of ordering the most appropriate equitable remedy to suit the circumstances was further emphasised by Barrett J in Americana Leadership College v Coll [2005] NSWCA 15 at [85]–[86] where he approved of the majority judgment in Giumelli noting that a ‘lesser relief ’ to the remedial constructive trust will always ‘be appropriate if it avoids going beyond what is required for conscientious conduct of the defendant and also avoids injustice to the plaintiff ’. His Honour went on to state that a person: … who spends money on the property of another prima facie does not thereby acquire a proprietary interest in the property. But where the payments preserve the property by avoiding or forestalling consequences that would otherwise see the owner deprived of that property, the situation is one where, in a real sense, the owner’s continuation of ownership has been preserved by the person making the payment so that there has been a tangible contribution by that person to maintenance of title to the property. In line with the approach in Giumelli v  Giumelli, it is appropriate that the paying party be recognised as entitled to recover accordingly out of the preserved property the amount outlaid and that the property itself be the source of security for that amount. As in Giumelli v Giumelli, it is appropriate that the paying party be recognised as entitled to recover accordingly out of the preserved property the amount outlaid and that the property itself be the source of security for that amount. In words used in Giumelli v Giumelli, the result in this case ‘points inexorably to relief expressed not in terms of acquisition of title to land but in a money sum’.6

6. See also Repatriation Commission v Tsourounakis (2007) 239 ALR 491; Harbour Port Consulting v  NSW Maritime [2011] NSWSC 813 at [45] reinforcing the conclusions of the High Court in Giumelli noting that in some circumstances, to grant relief giving effect to the expectation would exceed what could be justified by the requirements of good conscience, and would be unjust to the estopped party. 589

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Subsequently, in Sidhu v Van Dyke (2014) 251 CLR 505, a case that involved proprietary estoppel, the plurality in the High Court (French CJ, Kiefel, Bell and Keane JJ) concluded that the appropriate measure of relief for proprietary estoppel will generally be to hold the respondent to their promise. This may or may not take the form of a remedial constructive trust depending upon the particular facts. If a constructive trust cannot be imposed, equitable compensation should be awarded in lieu. French CJ, Kiefel, Bell and Keane JJ stated: There may be cases where ‘[i]t would be wholly inequitable and unjust to insist upon a disproportionate making good of the relevant assumption’; but in the circumstances of the present case, as in Giumelli v Giumelli, justice between the parties will not be done by a remedy the value of which falls short of holding the appellant to his promises. While it is true to say that ‘the court, as a court of conscience, goes no further than is necessary to prevent unconscionable conduct’ where the unconscionable conduct consists of resiling from a promise or assurance which has induced conduct to the other party’s detriment, the relief which is necessary in this sense is usually that which reflects the value of the promise. In the circumstances of the present case, no reason has been identified by the appellant to conclude that good conscience does not require that the appellant be held to his promises.7

However, their Honours acknowledged that in some cases the requirements of good conscience mean that the value of the promise is not the just measure of relief. Much will depend upon the circumstances including the nature of the representation, the extent to which the parties were encouraged to rely upon it and the consequences of not upholding the promise. In McNab v Graham (2017) 53 VR 31, Tate, Santamaria JJA and Keogh AJA in the Victorian Court of Appeal held that a constructive trust arose to support a promise to leave property to carers and that the remainder interest, held by a third party volunteer hospital, did not preclude this. Tate JA held that proprietary estoppel was based upon the encouragement of an acquisition of an interest in property and that the interest created by the estoppel was ‘an interest in the land itself ’ and, in the circumstances, the constructive trust merely provided protection to that interest (at [101]). The property was impressed with the constructive trust from the time when there was reasonable reliance upon the promise, rendering it unconscionable for the owner of the land to resile from the promise. In Chan v Chan [2020] VSCA 40, Maxwell P at [85] came to a similar conclusion. See also: J Hudson, ‘The Price of Coherence in Estoppel’ (2017) 39(1) Sydney Law Review 1; Y K Liew, ‘Proprietary Estoppel in Australia: Two Options for Exercising Remedial Discretion’ (2020) 43(1) UNSW Law Journal 281 (where the author questions the validity of the remedial discretion for the application of a constructive trust in support of proprietary estoppel); F Burns, ‘Giumelli v Giumelli Revisited: Equitable Estoppel, the Constructive Trust and Discretionary Remedialism’ (2001) 22 Adelaide Law Rev 123; A Silink, ‘Equitable Estoppel in “Subject to Contract” Negotiations’ (2011) 5 Journal of Equity 252.

7. See also: G Dal Pont, ‘The High Court’s Constructive Trust Tricenarian: Its Legacy from 1985–2015’ (2015) 36(2) Adelaide Law Review 459; D Reynolds, ‘What Are The Duties Of Constructive Trustees?’ (2018) 41(4) UNSW Law Journal 1297; D Jensen ‘Reining in the Constructive Trust’ (2010) 32(1) Sydney Law Review 87. 590

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9.32  Revision Questions 1. Why did the High Court in Giumelli refuse to grant a remedial constructive trust? 2. Why was the constructive trust deemed inappropriate in circumstances involving proprietary estoppel? 3. Was the constructive trust in Giumelli rejected on discretionary grounds? 4. What is the relevance of third party interests in the assessment of this type of trust? See also J Edelman, ‘Remedial Certainty or Remedial Discretion in Estoppel after Giumelli’ (1999) 15 JCL 179; F Burns, ‘Giumelli v Giumelli Revisited: Equitable Estoppel, the Constructive Trust and Discretionary Remedialism’ (2001) 22 Adel L Rev 123. 5. What is the usual date for the imposition of a remedial constructive trust: the date of the court order or the date when the inequitable conduct occurred?

The Institutional Constructive Trust 9.33  Some constructive trusts are more institutional than remedial in nature. Unlike the

remedial constructive trust, the institutional constructive trust will arise in accordance with ordinary trust principles from the date when the circumstances creating it occur. In such a situation, the court will declare the prior existence of the trust: Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] 2 All ER 961 at 997. The most common example of an institutional-type constructive trust is where one person breaches obligations assumed under a pre-existing duty (eg, a fiduciary duty) and the trust is imposed to protect property or profit flowing from the breach. In such a situation, while the constructive trust is said to be imposed as a consequence of the breach, the court retains a discretion to determine whether or not the imposition should occur.8

9.34  A well-established example of an institutional-type constructive trust is that which has been held to arise in favour of a purchaser under a contract for the sale of land. Where a vendor has entered into a specifically enforceable contract for the sale of land, it has been held that the vendor will hold his or her legal title as trustee for the benefit of the purchaser up until the point where the purchaser is registered as legal titleholder. Once it is clearly established that an enforceable contract for the sale of land has been entered, the traditional position is that equity confers a beneficial title upon the purchaser and the vendor becomes constructive trustee subject to an equitable lien for the balance of the unpaid purchase price. This type of institutional constructive trust will arise at the date that the contract is entered into. The basic principle was set out in Lysaght v Edwards (1876) 2 Ch D 499 extracted below.

— Lysaght v Edwards — (1876) 2 Ch D 499 Facts: Edwards agreed to sell his land and Lysaght agreed to buy it. Lysaght paid a deposit, the abstract of title was delivered and requisitions were made concerning it. Lysaght accepted the vendor’s title. Settlement was arranged to take place; however, Edwards died before settlement

8. See Warman International Ltd v Dwyer (1995) 182 CLR 544, esp at 557; see also D Ong, ‘Breach of Fiduciary Duty: The Alternative Remedies’ (1999) 11 Bond LR 336. 591

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could occur. One of the issues in the case was what rights did Lysaght, as purchaser, have against the estate of Edwards for the land he had contracted to purchase. Jessell MR: 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 the 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 purchasemoney, 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 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 purchasemoney. Their positions are analogous in another way. The unpaid mortgagee has a right to foreclose, that is to say, he has the right to say to the mortgagor, ‘Either pay me within a limited time, or you lose your estate,’ and in default of payment he becomes absolute owner of it. So, although there has been a valid contract of sale, the vendor has a similar right in a Court of Equity; he has a right to say to the purchaser, ‘Either pay me the purchase-money, or lose the estate.’ … Now what is the meaning of the term ‘valid contract’? ‘Valid contract’ means in every case a contract sufficient in form and in substance, so that there is no ground whatever for setting it aside as between the vendor and purchaser — a contract binding on both parties. As regards real estate, however, another element of validity is required. The vendor must be in a position to make a title according to the contract, and the contract will not be a valid contract unless he has either made out his title according to the contract or the purchaser has accepted the title, for however bad the title may be the purchaser has a right to accept it, and the moment he has accepted title, the contract is fully binding upon the vendor. Consequently, if the title is accepted in the lifetime of the vendor, and there is no reason for setting aside the contract, then, although the purchase-money is unpaid, the contract is valid and binding; and being a valid contract, it has this remarkable effect, that it converts the estate, so to say, in equity; it makes the purchase-money a part of the personal estate of the vendor, and it makes the land a part of the real estate of the vendee; and therefore all those cases on the doctrine of constructive conversion are founded simply on this, that a valid contract actually changes the ownership of the estate in equity. That being so, is the vendor less a trustee because he has the rights which I have mentioned? I do not see how it is possible to say so. If anything happens to the estate between the time of the 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. … He is not entitled to treat the estate as his own. If he wilfully damages or injures it, he is liable to the purchaser; and more than that, he is liable if he does not take reasonable care of it. So far he is treated in all respects as a trustee, subject of course to his right to being paid the purchasemoney and his right to enforce his security against the estate. With those exceptions and his right to rents till the day for completion, he appears to me to have no other rights.

Commentary 9.35  This decision has come to be known as the rule in Lysaght v Edwards. In accordance

with the fundamental equitable maxim that equity deems that to be done which ought to be done, equity has held that a contract for the sale of land confers a beneficial title upon the purchaser, conditional upon the payment of the balance of the purchase price, at the

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point when the contract becomes enforceable. This transforms the vendor’s title into that of a constructive trustee and confers an enforceable beneficial title upon the purchaser. This type of constructive trust can only arise in circumstances where it is clear that the contract is valid and would be enforceable in a court of equity. Traditionally, courts have argued that the purchaser’s beneficial title can only arise where a court of equity will award a decree of specific performance: Brown v Heffer (1967) 116 CLR 344 at 349–50. However, more recently, the courts have suggested that the protection that equity will give to a purchaser is not restricted to specific performance and will include a range of other forms of relief appropriate to the circumstances: Stern v McArthur (1988) 165 CLR 489. (See also S Worthington, ‘Proprietary Remedies: The Nexus Between Specific Performance and Constructive Trusts’ (1996–97) 11 JCL 1.) In Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164, Deane J at 191 said: … it is both inaccurate and misleading to speak of the unpaid vendor under an uncompleted contract as a trustee for the purchaser … [T]he ordinary unpaid vendor of land is not a trustee of the land for the purchaser. Nor is it accurate to refer to such a vendor as a ‘trustee sub modo’ unless the disarming mystique of the added Latin is treated as a warrant for essential misdescription.

Subsequently in Tanwar Enterprises Pty Ltd v Cauchi (2004) 217 CLR 315 (extracted below), the High Court suggested that the interest of a purchaser under a contract for the sale of land is more akin to an equitable lien over the deposit and that reliance in such situations upon a beneficial title under a constructive trust is ‘bedevilled by circularity’. The court argued that it was inappropriate to analogise a purchaser’s equitable title under a contract of sale with a mortgagee’s equity of redemption because it overlooked the contractual stipulation specifying a date for completion as essential. In Engelwood Properties Ltd v Patel [2005] 1 WLR 1961, Lawrence-Collins J at [42] summarised the variety of different trustee descriptions given to a vendor in a contract of sale in the following way: (1) ‘something between what has been 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’: Lysaght v Edwards (1876) 2 Ch D 499, at 506, per Sir George Jessel; (2) ‘a constructive trustee’: Lysaght v Edwards (1876) 2 Ch D 499, at 510, per Sir George Jessel; or ‘constructively a trustee’: Shaw v Foster (1872) LR 5 HL 321, 349, per Lord O’Hagan; (3) ‘a trustee, no doubt, with peculiar duties and liabilities’: Egmont v Smith (1877) 6 Ch D 469, at 475, per Sir George Jessel; (4) ‘a trustee in a qualified sense only, and is so only because he has made a contract which a Court of Equity will give effect to by transferring the property sold to the purchaser, and so far as he is a trustee he is so only in respect of the  property contracted to be sold’: Rayner v Preston (1881) 18 Ch D 1, 6, per Cotton LJ; (5) having duties ‘not exactly the same as in the case of other trustees’: Clarke v Ramuz [1891] 2 QB 456, 459, per Lord Coleridge CJ; and (6) ‘a quasi-trustee’: Cumberland Consolidated Holdings Ltd v Ireland [1946] KB 264, at 269, per Lord Greene MR.

9.36  The decision of the High Court in Tanwar Enterprises Pty Ltd v Cauchi (2004) 217

CLR 315 is extracted below.

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— Tanwar Enterprises Pty Ltd v Cauchi — (2004) 217 CLR 315 Facts: Contracts for the sale of land were entered into by Tanwar Enterprises Pty Ltd with members of the Cauchi family for a total of over $4 million. The contract stipulated a date for completion. Tanwar’s sources of finance included foreign sourced funds to be provided by second mortgagees. The second mortgagees informed the vendor and purchaser that they were unable to proceed with the finance and have it available by the settlement date because of additional checks being carried out but that finances should be available the following day. When the funds arrived, Tanwar’s solicitor informed the vendors’ solicitor of this and informed them that settlement could proceed. However, the vendors had already given instructions to terminate the contracts and confirmed those instructions when informed that the second mortgagees were now in a position to proceed to settlement. Notices of termination were issued. One of the dicta issues considered by the High Court was whether a vendor acts as a constructive trustee for the purchaser in the sale of land. 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). 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) dismissing an application by Tanwar for specific performance of three contracts dated 19 October 1999 under which Tanwar was the purchaser. The subjectmatter 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. 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. In Stern v McArthur, Gaudron J left that matter open, and it is unnecessary to say any more here respecting it. The case did not proceed on pleadings. Had there been pleadings, the issues of legal principle with which the Court of Appeal was, and now this Court is, concerned may have more readily appeared. To plead its suit as purchaser for specific performance (and for related declaratory relief), Tanwar would allege the making of each contract and the relevant terms, its performance and its readiness and willingness to perform the terms of the contract then to be performed, and its readiness and willingness to do all matters and things on its part thereafter to be done. To that, the respondents as vendors no doubt would respond that, in the events that had happened, and before the institution of the suit, the contracts had been brought to an end by the giving of the notices of termination on 26 June, there being contractual stipulations that time was of the essence.

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It then would be for Tanwar to reply that, in the events that had happened, in equity time had not been of the essence on 26 June or, more precisely, that it was unconscientious of the vendors to plead the essential time stipulation and its breach as founding the purported termination on 26 June. That would focus attention upon what, as a matter of law and fact, was involved in the alleged unconscientious use by the vendors of their legal rights, given in terms by the contracts, to terminate upon failure by Tanwar to complete by 4.00 pm on 25 June. That is the essential issue in the case as it stands in this Court. The leading judgment in the Court of Appeal was delivered by Handley JA. His Honour gave detailed consideration to the decisions of this Court in Legione v Hateley and Stern and concluded that those two cases ‘lack a clear ratio which is binding on this Court’. Handley JA also observed, with reference to the decision of the Privy Council in the Hong Kong appeal Union Eagle Ltd v Golden Achievement Ltd, that it was ‘also clear that equitable relief will be available in Australia in circumstances where it would be refused in England’. In this Court, each side sought support from one or more of the judgments in Legione and Stern. Neither side sought leave to re-open those cases, but there was a measure of disagreement as to the propositions of law for which they are authority. Before returning to those matters, it is necessary to say something more respecting the facts in this appeal. One commences by identifying the ‘interest’ of a purchaser in the land the subject of an uncompleted contract. In Lysaght v Edwards, 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. Later, Kitto J and Brennan J 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 in equity 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 or a foreclosure suit in equity, 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. 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, to give it that quality, his view was doubted by Lord Eldon in Seton v Slade and rejected by Sir Lloyd Kenyon MR in Mackreth v Marlar. 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, with reference to In re Dagenham (Thames) Dock Co, Ex parte Hulse, 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. What the Court of Appeal in Chancery decided in Dagenham, and on what facts and grounds, is not fully apparent from the abbreviated report. 595

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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. 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. It has been held in this Court that the lien may be enforceable even though there may be a good defence to a claim to specific performance of the contract It is the payment and retention of the moneys, not the availability of specific performance, which is critical. 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. At all events, the analogies drawn over a century ago in Lysaght with the trust and the mortgage are no longer accepted. Jacobs J observed in Chang v Registrar of Titles 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: [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 [64], consistently with authority in this Court, 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 wellestablished 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. The five ‘subsidiary questions’ stated by Mason and Deane JJ in Legione, and set out above, reflect the treatment by Lord Wilberforce in Shiloh Spinners Ltd v Harding (a lease case) of the ‘appropriate’ considerations guiding the exercise of equity’s jurisdiction to relieve against forfeiture for breach of covenants added by way of security for the production of a stated result. His Lordship said: The word ‘appropriate’ involves consideration of the conduct of the applicant for relief, in particular whether his default was wilful, of the gravity of the breaches, and of the disparity between the value of the property of which forfeiture is claimed as compared with the damage caused by the breach. However, the end sought to be protected, on the analysis by Mason and Deane JJ in Legione, was the interest of the purchaser in the land. That ‘interest’, being for its existence dependent upon the administration of the very remedy in issue, does not suffice. Perhaps aware of the difficulty involved, Mason and Deane JJ went on in Legione, as later did Deane and Dawson JJ in Stern, to say there was much to commend what they said was a competing 596

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view of Sir Frederick Jordan. In Ch V of his Chapters on Equity in New South Wales, and in the course of dealing with equitable assignments for valuable consideration, and the transfer of the equitable title to the assignee, Sir Frederick Jordan said: This result is to be ascribed to the maxim that equity considers that done which ought to be done; and the principle is effective only in so far as the Court of Equity would, in all the circumstances of the case, grant specific performance of the agreement. He added, somewhat obscurely, in a footnote: 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. In the New South Wales Court of Appeal, doubt since has been cast upon the support for any such general principle by the authorities cited by Sir Frederick Jordan, beginning with Tailby v Official Receiver. It is sufficient for present purposes to observe that, where the issue, as in Tanwar’s appeal, concerns alleged unconscientious reliance by vendors upon their contractual right to terminate; it does not assist to found the equity of the purchaser upon the protection of rights to injunctive relief acquired under a contract the termination of which has taken place. Whilst the contracts here were on foot, breach thereof by the vendors would have been restrained. But there was no relevant breach of contract by the vendors, and the contracts were terminated in exercise of a contractual right to do so.

Commentary 9.37  The conclusions of the High Court in Tanwar make it clear that the constructive

trust under the Lysaght v Edwards doctrine is no longer appropriate. The court suggested that the analogy this traditional view drew with the equity of redemption under a mortgage contract was ‘no longer accepted’ by the High Court. Their Honours argued that the description of a vendor as a constructive trustee had the effect of concealing the underlying contractual relationship between the parties and it is this relationship that must be regarded as the primary governing relationship rather than any imposed trust relationship. Indeed, the High Court concluded that reliance by a purchaser upon his or her interest in the property arising from the contract of sale was ‘bedevilled by circularity’ because the  interest itself is dependent upon the availability of specific performance. Thus, while the High Court did not preclude the possibility of a purchaser’s interest in a contract for the sale of land being recognised as beneficial ownership, the basic right must primarily be a protective one whose scope and nature is dependent upon the character of the contractual relationship. Ordinarily, where a purchaser has paid a deposit, the purchaser will retain the right to complete the contract and an equitable lien will support this right. It is not clear whether this lien will arise over the deposit money or whether it attaches to the land itself but is likely to constitute a right for the recovery of payment made. Kirby J in a separate but concurring judgment noted that the issue underlying the enforcement of rights under the contract for the sale of land is one of proportionality. Courts should aim to achieve an effective adjustment between ‘enforcement of the legal rights of the parties, derived from the terms of the contract in which those parties have agreed upon their respective rights and duties, and the perceived substantial merits of the respective positions of the parties …’ (at 341–2). The ‘inaccuracy’ of applying a trust relationship to this situation was recently confirmed by Bell, Keane, Nettle and Edelman JJ in Commissioner of State Revenue v Rojoda Pty Ltd [2020] HCA 7 at [30]. See also Carter 597

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Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 368 ALR 390 at [35] per Kiefel CJ, Keane and Edelman JJ noting that ‘a purchaser’s proprietary rights to, and ability to benefit from, land under a contract of sale of land are commensurate with the purchaser’s power to obtain specific performance of the contract of sale. However, see M Campbell, ‘The Case Against the Eqiutable Lien’ (2019) 42(3) Melbourne University Law Review 813 at 816, which argues that the application of the equitable lien in this context is ‘not so much an argument in favour of the lien as one against the perpetuation of the fiction that the specific enforceability of a contract for the sale of land makes the vendor a ‘trustee’ for his purchaser’. The importance of the primary contractual relationship between the parties was further emphasised in Romanos v Pentagold Investments Pty Limited (2003) 217 CLR 367, where the High Court examined the issue of whether purchasers were entitled to relief against forfeiture and specific performance when they failed to pay the balance of moneys owing on the due date and the vendors, without prior notice, had issued notices of termination. Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ said at 375–76: The decision in Tanwar indicates that equity does not intervene in such a case to reshape contractual relations in a form the Court thinks more reasonable or fair where subsequent events have rendered the situation of one side more favourable than that of the other side. Rather, as Giles JA emphasised in his dissenting judgment in the Court of Appeal, one asks in the present case whether the conduct of the vendors caused or contributed to a circumstance rendering it unconscientious for them to insist upon their legal rights to terminate the contracts.9

The weight of contemporary authority indicates that the relief that equity will afford to a purchaser or vendor at the point when the parties enter into a contract for the sale of land will be different from the relief available at the point at which all conditions precedent have been established and all of a party’s obligations have been performed. Once the purchaser has satisfied all of their obligations, including payment in full of the purchase price, and any other conditions precedent, the purchaser may be treated as the beneficial owner of the land because in this situation, the only remaining step to perform is the vendor’s transfer of the title. Hence, at this stage, equity will grant relief in the nature of specific performance (such as an order compelling the vendor to transfer the title, or an injunction to restrain conduct contrary to that obligation) to ensure that the purchaser’s contractual right to the transfer of the title, and acquisition of legal ownership of the land, is vindicated. In Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd (2015) 105 ACSR 605, Emmett JA made the following comments at [99]: While a vendor of real property under a valid contract of sale may become a trustee of the property for the purchaser, there is a question as to the time when such a trust relationship arises and as to the precise character of that relationship. Until it is known whether the contract will be performed, the vendor is not in the position of a constructive trustee, although the vendor may be described as a trustee sub modo. That is to say, the vendor under an unconditional contract may be regarded as a trustee, conditionally upon nothing happening to prevent performance of the contract. The vendor may be regarded unconditionally as a trustee for the purchaser when the contract is performed by the purchaser by payment of the purchase price. When title is made out and the purchaser has paid the purchase price under a contract

9. See also ING Bank Australia Ltd v O’Shea [2010] NSWCA 71 at [88], where Young CJ considered the scope of the Tanwar decision; and Hoon v Westpoint Management [2011] WASC 239 at [42] per Corboy J. 598

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in respect of which the remedy of specific performance is available, the vendor becomes a constructive trustee of the property sold.10

9.38  Revision Questions 1. Why did the High Court in Tanwar suggest that the right of the purchaser prior to the completion of a contract for the sale of land should not be classified as an equitable beneficial title? What is the problem, if any, with suggesting that the equitable title of a purchaser is capable of being protected by specific performance and that a ‘failure to complete the contract on the due date did not bar the intervention of equity to order specific performance’? 2. What level of discretion does the court have concerning the imposition of an institutional constructive trust? (See further G Dal Pont, ‘Equity’s Chameleon — Unmasking the Constructive Trust’ (1997) 16 Australian Bar Review 46.) 3. Describe the difference between a presumed resulting trust and an imposed institutional-type constructive trust. 4. What did Deane J mean in Muschinski v Dodds when he said: ‘In a broad sense, the constructive trust is both an institution and a remedy of the law of equity’?

The Personal (Mere) Equity 9.39  The nature and enforceability of personal rights was discussed in National Provincial

Bank Ltd v Ainsworth [1965] AC 1175; [1965] 2 All ER 472, where the House of Lords considered the enforceability of an equitable personal right, known as the ‘deserted wife’s equity’ and concluded that this right, despite being directed at the marital home, could not be enforceable against the holder of a full proprietary interest in the home. The reason for this, in the words of Lord Upjohn, was because an ‘equity naked and alone is, … incapable of binding successors in title even with notice; it is personal to the parties’. The personal or mere equity is, therefore, a lesser form of right to a full, beneficial equitable title. It has been described as a right that is ‘logically antecedent’ to an equitable interest: per Kitto J in Latec v Terrigal (1965) 113 CLR 265 at 272. The interesting question is whether this equitable right, which can have proprietary consequences, is in itself proprietary as distinct from merely a personal right to seek equitable relief.11 A mere equity confers upon the holder a right to bring an action to enforce a remedy against land. In a strict sense it is purely personal in nature because it is only enforceable against the person who has committed the inequity and not in rem against the rest of the world: see generally: M Neave and M Weinberg, ‘The Nature and Function of Equities’ (1978) 6 Univ Tas L  Rev  24. Significantly, it is also an ancillary right that may evolve into full equitable ownership where appropriate relief is granted. In this way, the mere equity is a quasi proprietary right that protects the right of the holder to seek relief and that may mature into full equitable ownership. The status of the mere equity has been succinctly described by Professor Butt: 10. See also PSAL Pty Ltd v Raja [2016] WASC 295 at [68] per Pritchard J. 11. See also J D Heydon, M J Leeming and P G Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies, 5th ed, LexisNexis, Sydney, 2015, at [4-205]. 599

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Because ‘mere equities’ are ancillary to interests in land, they are themselves treated as proprietary, but nevertheless as something less than full equitable interests: Land Law, 4th ed, LBC, 2001, para [1938].

From a hierarchical point of view, the mere equity ranks below the full equitable interest because of it auxiliary character. It is, ‘the first stage in a proprietary continuum which, if successful, results in the reinstatement of the full equitable title’: see further: P D White, ‘The Illusion of the Mere Equity: Latec Investments Pty Ltd v Hotel Terrigal Pty Ltd’ (1967) 5 Sydney Law Review 499. See also S Hepburn, ‘Reconsidering the Benefits of Equitable Classification’ (2005) 12 APLJ 157 at 159. It can be difficult to determine what form of equitable right the inequitable conduct raises: a purely personal right to seek equitable relief, a mere equity ancillary to a full equitable right, or full equitable ownership. To reiterate the words of Kearney J in Burns Philp Trustee Co Limited v Viney [1981] 2 NSWLR 216 at 223: … there is some circuity involved in finding the starting point for the existence of … an equitable interest, the problem being to isolate as the initiating factor the proprietary interest or the right to enforce the interest. This problem is almost of jurisprudential mystery.

The classic form of mere equity is the right to set aside or rectify a transaction on the basis of fraud. This was the source of some discussion in the High Court decision of Latec v Terrigal (1965) 113 CLR 265. In that case, an equitable right to seek rectification arose in favour of a mortgagor because of the improper exercise of a power of sale by the mortgagee. The judges took fundamentally different approaches to the proprietary status of the right. Kitto J held that the right to rectification constituted a right that ‘generates an equitable estate’ but that, in itself, must be ‘distinguished from the “consequential” equitable estate’: at 280. Significantly, Kitto J argued that the proprietary status of the mere equity is limited. It must be enforced to generate the equitable estate before a bona fide third party purchaser acquires a full equitable estate in the land. If this does not occur, the earlier equitable interest is unprovable against the third party. See also Re S & D International Pty Ltd (No 4) (2010) 79 ACSR 595 at [173] where the approach of Kitto J to the determination of the mere equity was approved. Taylor J, on the other hand, argued that the equitable right to seek rectification resulted in the mortgagor retaining a full equity of redemption with one qualification. The full equity required the assistance of the court to ‘remove an impediment’ to its enforceability. Thus, the right was a contingent full equity rather than an independent mere equity. The impediment in the enforceability of the full equity meant that it was not enforceable against a third party until the improper sale was rectified. Menzies J argued that equitable rights acquired different qualities in different situations. He, rather ambiguously, suggested that the right to set aside the improper power of sale was a full equity in terms of its ability to be assigned but a mere equity in terms of its positioning in a priority analysis. Brooking J in Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672 at 676–7, noted that the approach of Menzies J in Latec ‘did enable two lines of authority to be reconciled but it does seem to me to lead to uncertainty.’ 9.40  An extract from the decision in Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq)

(Kitto J) is set out below. (The judgment of Menzies J is extracted at 10.28.)

600

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— Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) — (1965) 113 CLR 265 Facts: Latec Investments improperly exercised its power of sale over mortgaged property to Hotel Terrigal by not providing an adequate public advertisement of the sale and, when the property was passed in at auction, selling the property to its wholly owned subsidiary — Southern Hotels — for a price significantly under the market valuation. The exercise of the mortgagee sale in this way was improper because it was not in good faith and it was not at arm’s length. Hotel Terrigal acquired a right to rectify the improper sale which enabled them to apply to court to have it set aside. However, Hotel Terrigal waited for five years to exercise the right and in the meantime Southern Hotels charged the property to MLC Nominees. MLC Nominees gave this charge in good faith without any notice of the rights of Hotel Terrigal. The High Court concluded that the right to rectify held by Hotel Terrigal was not enforceable against the full equitable charge held by MLC Nominees because MLC Nominees acquired the charge in good faith without notice. Each judge approached this issue with a different perspective on the proprietary consequences of the right to rectify. Kitto J: This is an appeal from a decree of the Supreme Court of New South Wales in its equitable jurisdiction setting aside a contract of sale and a memorandum of transfer of certain land under the provisions of the Real Property Act 1900 (NSW) by which the first appellant purported to exercise its power of sale under a memorandum of mortgage given to it by the first respondent as security for a loan. The decree went on to declare the memorandum of mortgage unenforceable and to restrain the first appellant from exercising any power, right or remedy thereunder, the ground for this relief being, as appears from the reasons for judgment, that in respect of the contract of loan and the securities therefore the provisions of the Money-lenders and Infants Loans Act 1941 (NSW) had not been complied with. Since the making of the decree this Court has given a decision, in Motel Marine Pty Ltd v IAC (Finance) Pty Ltd (1964) 110 CLR 9, which shows that the Money-lenders and Infants Loans Act has no application to the present case. So much of the decree as is based upon the provisions of that Act must therefore be vacated. The order setting aside the contract of sale and transfer, however, was based upon a conclusion of fact that the mortgagee’s power of sale had been exercised not in good faith but in fraud of the mortgagor. Whether relief should have been granted upon this ground is the question to be decided now. (at p 271) The second appellant is the purchaser from the mortgagee, and the third is the trustee of a debenture deed who claims a charge over the assets of the purchaser. The second and third respondents do not need to be considered on this appeal. (at p 271) The mortgagee lent the mortgagor £36,365 on 10 March 1958, taking as security a memorandum of mortgage over the subject land (subject to an earlier mortgage) and an equitable mortgage over its undertaking and assets generally. On the subject land was a hotel called the Hotel Terrigal and a guest house. The mortgagee appointed a receiver under its equitable mortgage in June 1958, and on 23 July 1958 the mortgagor went into voluntary liquidation. The mortgagee took no steps to effect a sale until late in September 1958, and not until after its directors had learned that a stranger might be interested to purchase the property. It made no endeavour to sell to the stranger or to find any other purchaser by private contract. Instead, its board determined at some stage to sell the property to the second appellant, which was one of several subsidiaries of the mortgagee. They had identically composed boards of directors, and the mortgagee held all the shares in the second appellant. Before any sale was made, a firm of estate agents was instructed to put the property up for auction on Friday, 3 October 1958. A Friday was generally recognised as not a good day for such a sale, and the interval of time available for advertisements was significantly less than usual. Nevertheless the auctioneers made efforts to attract potential buyers and some thirty-five people attended the auction. The highest bid received was £58,000. Although the mortgagee’s directors knew 601

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that an experienced valuer had valued the property six months before at £54,000 for the hotel and £2,500 for the guest house, a reserve of £85,000 had been fixed and the property was accordingly passed in. The auctioneers then advised the mortgagee to accept the offer of £58,000 if a better should not be forthcoming. The mortgagee, however, made no attempt to negotiate with any of the bidders or to obtain any higher offer. Its directors determined — indeed it is a reasonable inference from the unusual features of the submission to auction that for some time they had had it in mind — that to have the Hotel Terrigal owned by one of their group of companies would be better for them than selling it to a stranger. One of the group owned a competing hotel in the same district, and the benefits to be derived from peaceful co-existence had attractions too obvious to be overlooked. The fact that an exercise of the power of sale so as to bring about this result would amount to a virtual foreclosure did not deter them. Without any further attempt having been made to find an outside purchaser, the mortgagee entered into a contract with its subsidiary, the second appellant, to sell the mortgaged property to the latter at the price of £60,000. There was, of course, no bargaining between them. The common board of directors simply fixed the figure and had a contract prepared and executed by both companies. The contract, dated 26 March 1958, provided for payment of £6,000 as a deposit, but fixed no time for payment either of that amount or of the balance of £54,000. The memorandum of transfer, acknowledging receipt by the mortgagee of £19,675, was registered on 25 February 1959. In fact nothing had been paid at that stage. The first mortgage over the property was paid off by the purchaser in the following July, but it was not until a year after the date of the contract that any of the purchase money was paid to the mortgagee. Then the whole outstanding amount was paid in one sum (at p 272). The amount owing under the mortgage at the time of the sale was of the order of £86,000. It may be that by no means could a purchaser have been found to buy the property at so high a price, but the course that was followed in respect of the auction was not calculated to test the question. Vis-à-vis the mortgagor, the mortgagee was not bound to use its best endeavour to obtain the highest price procurable; but what it in fact did points pretty clearly to the conclusion that its intention was not really to sell the property but was to ascertain what kind of figure, being put into a contract of sale to the subsidiary, would look like a genuine sale price. As between the mortgagee and the subsidiary it did not matter much what the figure was; but there was an obvious advantage, in case of a possible impeachment of the sale, in selecting a price a little higher than the best bid obtained at an auction. The only danger in holding the auction was that a bid might be obtained which exceeded the amount owing under the mortgage. If that should happen, there could be no excuse for not accepting it, and the hotel would have to pass into a stranger’s hands; but, by fixing a short date for the auction and choosing an unpropitious day of the week, as much was done to obviate this unfortunate result as was possible consistently with employing an auctioneer who was no party to the scheme and creating an appearance of a genuine attempt to sell at a proper price. (at p 273) The onus clearly lay upon the purchaser, being a subsidiary of the mortgagee, to satisfy the court that the power of sale was exercised in good faith, and that reasonable steps were taken to obtain a fair price: Farrar v Farrars Ltd (1888) 40 Ch D 395, at p 398. That onus it signally failed to discharge. The learned trial judge concluded that there was a lack of that kind of good faith which in the eyes of a court of equity is essential to the validity of a mortgagee’s sale on the principles discussed in such cases as Kennedy v De Trafford (1897) AC 180; Barns v Queensland National Bank Ltd (1906) 3 CLR 925 and Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676; and he also concluded that the collaboration of the mortgagee and the purchaser through their common directors amounted to fraud in the sense of ss 42 and 43 of the Real Property Act 1900 (NSW), so that the mortgagor’s claim to have the sale set aside is not defeated by the indefeasibility which those sections accord to a registered title. I have already said enough to show that in the first of these conclusions I agree. As to the second, we were invited to hold that nothing is fraud in the sense which is 602

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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: cf Waimiha Sawmilling Co v Waione Timber Co Ltd (1926) AC 101, at p 106. In the present case it is all very well to say that the directors had reason to think that on a genuine sale they would not have got more than £60,000 for the property. The fact remains — I see no escape from concluding that it is a fact — that the reason why there was only a pretence of attempting to get a better price was simply that the object in view was not really to effect a sale, but was to destroy the mortgagor’s interest and get the hotel for the mortgagee’s group of companies, without allowing the mortgagor the opportunities to pay off the mortgage which the procedure for foreclosure would have afforded. It is impossible to regard the case as only one of constructive or equitable fraud — there was much more in it than a mere fraud upon the power, as it is sometimes called. There was pretence and collusion in the conscious misuse of a power. It may be that those concerned salved their consciences by telling themselves that the mortgagor company, being already in liquidation, was in so parlous a financial condition that the course they were taking was unlikely in the long run to do anyone any harm. But it was a dishonest course none the less, and the proper name for it is fraud. (at p 274) If the mortgagor had sought the intervention of the court without delay, the findings of fact with which so far I have dealt would necessarily have led to a decree setting aside the sale as against the mortgagee and the purchaser and granting consequential relief. But nearly five years went by before proceedings were commenced, and it is necessary to consider whether the mortgagor’s right to relief is affected by what occurred in that time. First let me be clear about the nature of the right which the mortgagor might have asserted. To say that the court would have set the sale aside as against the mortgagee and its purchaser is not to say that either the contract or the ensuing transfer would or could have been rendered void at law. It means only that the purchaser would (in effect) have been declared compellable to act in relation to the mortgagor as if the mortgagee had sold and transferred not the mortgaged property but only the mortgage and the moneys thereby secured: see Selwyn v Garfit (1888) 38 Ch D 273, at p 280; Stump v Gaby (1852) 2 De GM & G 623, at p 630 (42 ER 1015, at p 1018). The appropriate consequential relief would not have been granted, as in the case of a mortgage of land under common title, on the footing that the sale and transfer had been ineffectual to extinguish an equity of redemption and that the mortgagor was therefore entitled to redeem as against the purchaser: cf Bailey v Barnes (1894) 1 Ch 25, at p 27; Parkinson v Hanbury (1860) 1 Dr & Sm 143 (62 ER 332); Sewell v Agricultural Bank of Western Australia (1930) 44 CLR 104, at p 114; Coroneo v Australian Provincial Assurance Association Ltd (1935) 35 SR (NSW) 391, at p 394, for the mortgagor had the legal title, not an equity of redemption, and the transfer had operated to deprive him of the legal title by virtue only of special statutory provisions: see ss 58 and 59 of the Real Property Act and ss 109, 110 and 111 of the Conveyancing Act 1919– 1954 (NSW). The right which the mortgagor had immediately before the sale was a right to have the mortgagee ordered (notwithstanding that the contractual date for payment had passed) to receive what should be found on a taking of accounts to be owing under the mortgage and thereupon to execute a discharge of the mortgage: Greig v Watson (1881) 7 VLR (Eq) 79; Perry v Rolfe (1948) VLR 297; see also Re Forrest Trust (1953) VLR 246. After the sale, however, the reasoning which would have led a court of equity, if the land had been under common law title, to refuse to recognize the sale as having destroyed the equity of redemption would have led necessarily to the conclusion that equity would treat the purchaser as if it had taken a transfer of the mortgage only, though with this difference, that since the purchaser, unlike the mortgagee, had acquired the legal estate in the land the mortgagor must be accorded a true equity of redemption. Against the assertion of this equity of redemption, s 112(3)(a) of the Conveyancing 603

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Act, 1919–1961 (NSW) would have afforded no protection, because the purchaser had had the clearest notice of the invalidity of the mortgagee’s exercise of its power of sale: see Bailey v Barnes (1894) 1 Ch 25. (at p 275) 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 p 243. But an important change in the situation occurred a little more than a year after the sale. On 18 March 1960, the first appellant 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. (at p 276) 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 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 p 78 (61 ER 646, at p 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. (at p 276) 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 GF & J 208, at p 218 (45 ER 1164, at p 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 GF & J, at p 218 (45 ER at p 1167). In such a case, his Lordship said, 604

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if the purchaser under the instrument maintains the plea of purchase for value without notice ‘the Court will not interfere’ (1861) 4 De GF & J, at p 218 (45 ER, at p 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 decisions of most eminent judges, at least twice in the ten years before his Lordship spoke: see Stump v Gaby (1852) 2 De GM & 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 p 13 (26 ER 402, at p 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 GF & J 208, at p 215 (45 ER 1164, at p 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. (at p 278) 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’, ie 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 605

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andthe 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 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. (at p 279) On the views I have stated, the appeal should be allowed, the greater part of the decree of the Supreme Court should be set aside, and a declaration should be made establishing the rights of the purchaser in respect of the first mortgage and of the trustee for the debenture holders. Perhaps any further relief might be left to be given by the Supreme Court under a general liberty to apply. Probably, though I express no final opinion at the moment, the costs both here and in the Supreme Court should be paid by the first and second appellants so far as they relate exclusively to the question whether the mortgagee’s sale and transfer were impeachable for lack of good faith, but otherwise the costs in both courts (except those of the counterclaim by the defendant Idlewise Pty Ltd) should be paid by the plaintiff, the first respondent here, in view of the fact that it fails both on its claim under the Money-lenders Act and on its claim to priority over the trustee for the debenture holders. The proper course is, I think, to direct that short minutes of the order to be made be brought in by the appellants, preferably after consultation between counsel for all parties. The appeal may then be restored to the list and the appropriate order may be made. Taylor J: The relevant facts are set out in the reasons of the learned judge and in my view his conclusions on the matters which arose as between Hotel Terrigal and the first and secondnamed appellants were soundly based. I think that upon the proved facts it is undeniable that the sale to Southern Hotels was not made bona fide in the exercise of Latec’s power of sale as mortgagee and that his Honour’s assessment of the conduct of the parties was completely justified. I should add that I entirely agree with the observations of Kitto J on this branch of the case and, having passed over the argument in so far as it was based on ss 58 and 59 of the Real Property Act as being without substance, content myself with dealing with the contention advanced on behalf of The MLC Nominees that its claim should prevail over that of Hotel Terrigal. This contention was based upon an observation of Lord Westbury in Phillips v Phillips (1861) 4 De GF & 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 GF & J, at p 215 (45 ER, at p 1166). His Lordship was ‘struck with the novelty’ of the proposition and for the purpose of dealing with it found it ‘necessary to revert to first principles’ (1861) 4 De GF & J, at p 215 (45 ER, at p 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 GF & J, at p 215 (45 ER, at p 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 GF & J, at p 218 606

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(45 ER, at p 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. (at p 281) 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. Before doing so, however, it should be observed that this is not a case of a common law mortgage; it is a case where the registered mortgage created a statutory charge over the mortgagor’s land leaving the whole of the legal and beneficial ownership thereof in the mortgagor. No doubt the registration of the transfer operated to transfer the legal title in the land to Southern Hotels but I find it difficult to see why it should be thought that a sale and transfer made and given by a mortgagee not bona fide ‘within the limits of the power’ (Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676) can operate to strip the mortgagor of the whole of his equitable interest in the land: cf Cloutte v Storey (1911) 1 Ch 18. However this may be, there is, as I have said, abundant authority for the proposition that the owner of land a transfer of which has been obtained by fraud retains an equitable interest therein. Uppington v Bullen (1842) 2 Dr & War 184 was such a case as also were Stump v Gaby (1852) 2 De GM & G 623 (42 ER 1015) and Gresley v Mousley (1859) 4 De G & J 78 (45 ER 31). In Stump v Gaby (1852) 2 De GM & G 623 (42 ER 1015) Lord St Leonards said: 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 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 GM & G, at p 630 (42 ER, at p 1018). In Gresley v Mousley (1859) 4 De G & J 78 (45 ER 31) the earlier cases were cited and Knight Bruce LJ said: ‘The questions accordingly are, first, whether if Sir Roger Gresley had a title in equity to be relieved against the sale’ (on the ground of fraud), ‘he had after the sale a devisable interest in the property sold …’ (1859) 4 De G & J, at p 89 (45 ER, at p 35). His Lordship then formulated the other questions which arose and added: ‘The first is concluded by the cases decided by Lord St Leonards that were mentioned in the argument, if we are bound by those authorities. But if we are not, I still think that the decisions were correct and ought to be followed’ (1859) 4 De G & J, at p 90 (45 ER, at p 35). Turner LJ was of the same opinion. However these cases were, as was pointed out to us, decided before Phillips v Phillips (1861) 4 De GF &  J 208 (45 ER 1164) and it was urged upon us that we should in this case treat 607

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Lord Westbury’s observation as conclusive on the point. But the point has received attention since then and I refer first of all to Dickinson v Burrell (1866) LR 1 Eq 337 where Lord Romilly held that the right to institute a suit to set aside a conveyance of property upon equitable grounds passed by the grantor’s subsequent conveyance of the same property though he pointed out that it would be otherwise in a case where the subsequent conveyance was not a conveyance of the property itself but merely of the right to sue. In re Garnett; Robinson v Gandy (1886) 33 Ch D 300 is another case which illustrates the proposition that the execution of a release voidable in equity for fraud does not deprive the releasor of his equitable title to the subject fund. The contention raised in this case was that upon the setting aside of a release given by a wife before marriage she and her husband then acquired a new title so that it could be said, in accordance with the provisions of a marriage settlement made after the release was executed, that they had become entitled to the subject fund during coverture. The contention was rejected, Cotton LJ observing: ‘The setting aside of the release did not give them any new right, but merely had the effect of removing that which, if it had stood, would have been a bar, and have prevented their previously existing right to assert their title to the residuary personal estate of their uncle … a right which they had at the time the settlements were executed, and a right which was not obtained by them in consequence of the release having been set aside’ (1886) 33 Ch D, at p 303. (at p 283) In the same case Lindley LJ said: ‘Then Mr Justice Kay, taking that view of the settlement, decided in favour of the trustees upon the ground that the husband in her right did acquire, or become entitled to, or possessed of, the property in question by reason of the circumstance that the release which had been given prior to the marriage was set aside by this Court, and that the setting aside of the release was the acquisition of some fresh title. With great deference to the learned Judge I cannot take that view. Setting aside a release confers no new title. It removes an impediment to the enjoyment of a pre-existing title. The lady did not acquire a title when the release was set aside. She always was entitled notwithstanding the release’ (1886) 33 Ch D, at p 306. (at p 284) 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 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. (at p 285) 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 GM & 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. (at p 285) 608

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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 GF & J 208 (45 ER 1164); (The Law of Vendors and Purchasers, Sugden, 1862). He maintained that the defence was always available to the bona fide purchaser of an equitable interest and observed (at p 798) that: ‘Till the case of Phillips v Phillips (1861) 4 De GF & 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 GF & 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. (at p 286) 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.

Commentary 9.41  The mere equity is an important component in a transaction involving the exercise of an improper power of sale. Where a mortgagee improperly exercises a power of sale and enters into a contract for sale of land, the mortgagor can, prior to completion (and whether or not the purchaser had knowledge of the facts establishing the impropriety) restrain the mortgagee and the purchaser under the contract from completing the sale. In such circumstances, and putting to one side the mortgagor’s registered legal interest, the competition would be between the mortgagor’s interest, the equity of redemption, on the one hand, and the purchaser’s interest under the contract, on the other hand. On the ordinary rules as to priority (qui prior est tempore potior est iure), the mortgagor’s interest would prevail, subject to any postponing conduct on the part of the mortgagor. The position may be different where completion has already taken place: in that situation, the mortgagor’s interest may be a ‘mere equity’, which, as outlined in Latec v Terrigal, may not prevail over the equitable interest of the purchaser. This issue was raised by the New  South Wales Supreme Court of Appeal in Golden Mile Property Investments Pty Ltd (in liq) v  Cudgegong Australia Pty Ltd (2015) 319 ALR 151. In that case, the mortgagor company, Golden Mile Property Investments Pty Ltd (Golden Mile) was deregistered under the 609

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terms of the  Corporations Act 2001  (Cth) (Corporations Act). Subsequent to that deregistration, Stacks Managed Investments Ltd (Stacks) exercised its mortgagee’s power of sale. It then purported to rescind the exercise of that power and entered into a second contract to transfer the property to Cudgegong. The New South Wales Court of Appeal considered whether a mortgagee owed a duty to a mortgagor under s 420A of the Corporations Act in circumstances when the mortgagor no longer legally existed and further, what rights the mortgagor would have if the exercise of the power was improper. Emmett JA concluded: The fact that a deregistered mortgagor cannot bring proceedings to restrain the mortgagee’s exercise of its power of sale does not mean that there is no duty owed by the mortgagee to the deregistered mortgagor under section 420A and whether section 420A was breached was relevant to the determination of the nature of the proprietary interest held by the mortgagor. Emmett JA held at [84] that the primary question was whether the mortgagee in this case had breached the power of sale. If the exercise of sale was improper, then whether or not the purchaser, Cudgegong, was aware of the breach, the interest of the mortgagor, Golden Mile, to redeem, continued and would prevail over any interest subsequently acquired by Cudgegong under the second contract.

9.42  Revision Questions 1. What is the difference between the right held by a mortgagor where the power of sale is exercised improperly and the sale is not completed and the right held by a mortgagor where the power of sale is exercised improperly and the power of sale is completed? 2. Do you think that the auxiliary ‘mere’ equity should be classified as a remedial possibility, or a proprietary interest contingent upon the holder seeking its enforcement within a limited time frame? 3. Explain why the equity of rectification is ‘logically antecedent’ to a full equity?

Overview of Equitable Proprietary Interests 9.43  The following is an overview, summarising the different forms of equitable interests

that may arise, whether expressly, presumptively or as a consequence of judicial imposition. It sets out four primary questions to examine: 1. Was the interest intended to be created and what level of formality compliance has been satisfied? For an express trust, has the settlor transferred legal title to the trust property over to the trustee and provided a clear and manifest written intention that the trust property is to be held for identifiable beneficiaries? Alternatively, has the settlor declared himself or herself trustee and, where the trust property is land or equitable title, evidenced that intention in writing? 2. If there is an express intention to create a title, but the formalities have not been complied with, is there an agreement to create an interest that may be supported by unequivocal acts of part performance. 3. In the absence of an express intention to create a title or any acts of part performance, are the circumstances such that an intention to create a trust can be inferred? Was there an attempt to create an express trust that failed? Should the presumption of equitable title be raised in the circumstances to give effect to the

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natural consequences of contribution to a purchase price? Is it possible to infer an equitable interest to give effect to an enduring intention to protect the property interest in issue? 4. Alternatively, do the circumstances make it clear that it would be unconscionable for a court to deny an equitable title? In this context, should equitable title be imposed as a protective device, irrespective of the intention of the parties, to protect a pre-existing equitable relationship or contractual responsibility? Or, should the equitable interest be imposed as a remedial response to particular circumstances where the conferral of beneficial title is the most appropriate remedy in the circumstances? For example, is it unfair to allow a legal titleholder to assert full ownership over a domestic residence when ‘pooled’ resources have been utilised to pay for it? Further, is it unfair to allow a person to deny a proprietary representation that another has relied upon to their detriment? Finally, in creating such interests, should it be held to arise from the date of the court order or would circumstances, such as the need to protect against third party intervention, make it equitable to backdate the interest? 5. Is the interest a full equitable interest or is it more in the nature of a personal right to seek equitable relief? If the interest is antecedent to a remedial order that would result in full equitable title, does the scope of enforceability of this antecedent right give it a quasi-proprietary status? Has a bona fide third party purchaser acquired title prior to the enforcement of the antecedent right resulting in postponement?

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Chapter 10

Priority Rules Relevance of Priority 10.1 Legal Interests 10.2 Formalities 10.2 Extract: Property Law Act 1958 (Vic) — ss 51 and 52 10.2 Extract: Conveyancing Act 1919 (NSW) — s 23D 10.2 Commentary 10.3 Case: Manton v Parabolic Pty Ltd 10.4 Commentary 10.5 Digital Signatures 10.6 Extract: Electronic Conveyancing (Adoption of National Law) Act 2012 (NSW) — ss 9 and 12 10.6 Chain of Title 10.7 Nemo Dat Principle 10.8 Equitable Interests 10.9 Multiplicity 10.10 Priority Rules 10.11 Prior legal and subsequent equitable 10.11 Case: Northern Counties of England Fire Insurance Co v Whipp 10.12 Commentary 10.13 Revision Questions 10.14 Prior Equitable Title and Subsequent Legal Title 10.15 Case: Pilcher v Rawlins 10.16 Commentary 10.17 The Doctrine of Notice 10.18 Extract: Property Law Act 1958 (Vic) — s 199 10.18 Revision Questions 10.19 Tacking: Tabula in Naufragio 10.20 Wilkes v Spooner Rule 10.21 Competing Equitable Interests 10.22 Case: Rice v Rice 10.23 Commentary 10.24 Estoppel 10.25 Revision Questions 10.26 Prior Mere Equity and Subsequent Equitable Interest 10.27 612

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Case: Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) 10.28 Case: Ruthol v Mills 10.28 Commentary 10.29 Revision Questions 10.30

Relevance of Priority 10.1  One of the consequences of the jurisdictional fragmentation of land ownership is

that multiple interests may arise over a single land title. Where this occurs a priority dispute may arise and it becomes necessary to determine which interest is entitled to priority or, put another way, which interest gains precedence. Priority disputes are, therefore, disputes that arise in circumstances where two or more interests in land are recognised and those interests are either directly or partially in conflict. The priority rules that have evolved to deal with such conflicts are well established and provide a framework for resolving disputes between legal and equitable interests in land or between prior and subsequent equitable interests in land. This chapter examines the nature and scope of these rules. The general law (legal and equitable) priority rules only apply to disputes involving old title land or unregistered land interests. The Torrens statutory system has been superimposed upon the underlying priority framework, and modifies the general law so that where an interest is registered it will acquire indefeasible title and will not be subject to general law priority principles. A registered interest holder will only be subject to other registered interests as well as established statutory and non-statutory exceptions. A prospective purchaser of registered Torrens title land will be entitled to rely upon the accuracy of the register. Any priority dispute that may arise between unregistered Torrens title land will continue to be subject to the general law priority rules outlined in this chapter, with some consideration given, under a merit review, of the extent to which the parties have or have not utilised the caveat framework set up under the Torrens system for the protection of unregistered interests. This is discussed extensively in Chapter 13).

Legal Interests Formalities 10.2  A legal interest in land must be created in accordance with the requisite legal

formalities. The formality requirements for the creation of legal interests in land are set out in specific statutes in each state. In every state, legal interests can only be conveyed by way of a grant or conveyance that has been executed by way of a deed: Property Law Act 1958 (Vic) ss 51 and 52 (extracted below); Conveyancing Act 1919 (NSW) s 23B; Property Law Act 1969 (WA) s 33; Property Law Act 1974 (Qld) s 10; Law of Property Act 1936 (SA) s 28; Conveyancing and Law of Property Act 1884 (Tas) s 60. Further, specific exceptions exist with respect to the creation of parol interests in land: Property Law Act 1958 (Vic) s 54; Conveyancing Act 1919 (NSW) s 23D (extracted below); Property Law Act 1969 (WA) s 35; Property Law Act 1974 (Qld) s 12; Law of Property Act 1936 (SA) s 30; Conveyancing and Law of Property Act 1884 (Tas) s 60(3); Civil Law (Property Act) 2006 (ACT) s 202; Law of Property Act (NT) s 11.

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EXTRACT Property Law Act 1958 (Vic) — ss 51 and 52 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.

EXTRACT Conveyancing Act 1919 (NSW) — s 23D 23D  Creation of interests in land by parol (1) All interests in land created by parol and not put in writing and signed by the person so creating the same, or by the person’s agent thereunto lawfully authorised 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 this section or in sections 23B or 23C shall affect the creation by parol of a lease at the best rent which can reasonably be obtained without taking a fine taking effect in possession for a term not exceeding three years, with or without a right for the lessee  to extend the term at  the best rent which can reasonably be obtained without taking a fine for any period which with the term would not exceed three years.

Commentary 10.3  In some states, where land is registered under the Torrens system, registration is

deemed to have the same effect as a deed. For example, s 176 of the Land Titles Act 1994

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(Qld) sets out that a registered instrument takes effect as a deed. Similarly, the Real Property Act 1886 (SA) s 57(3) sets out that every instrument when registered will be deemed to be a deed duly executed between the parties. The Transfer of Land Act 1893 (WA) s 85 sets out that every transfer or other instrument shall, when duly signed by the registered proprietor and registered, ‘be as valid and effectual to all intents and purposes for conveying, passing or conferring the estates interests or rights expressed to be thereby transferred leased or created respectively as a deed duly executed and acknowledged by the same person would have been under any law heretofore or now in force in Western Australia or as any other form of document would have been either at law or in equity’. A deed has been described as ‘a document whereby a person performs solemn acts with respect to subject matters having particular legal consequences’: MYT Engineering Pty Ltd v Mulcon Pty Ltd (1999) 195 CLR 636 at [66]. See also R v Morton (1873) LR 2 CCR 22; Re A & K Holdings Pty Ltd [1964] VR 257; cf Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361 at 366–9. Under common law a deed must be in writing and the document must be signed, sealed and delivered. Historically, deeds did not need to be signed and witnessed and only needed to be sealed; this occurred by placing red wax at the bottom of the written document and pressing an imprint into the wax. Modern law no longer requires the document to be actually sealed in order to constitute a deed, and legislative provisions in each state and territory indicate that it will be sufficient if a document is expressed to be sealed: Property Law Act 1958 (Vic) s 73A; Conveyancing Act 1919 (NSW) s 38(3); Property Law Act 1974 (Qld) s 45(2); Conveyancing and Law of Property Act 1884 (Tas) s 63(5)(b); Law of Property Act 1936 (SA) s 41(5)(b); Property Law Act 1969 (WA) s 9(4); Civil Law (Property) Act 2006 (ACT) s 219(3); Law of Property Act (NT) s 47(2)(b). 10.4  The common law requirements for the effective execution of a deed were discussed

by the New South Wales Supreme Court in Manton v Parabolic Pty Ltd (1985) 2 NSWLR 361, where Young J outlined the historical rationale underlying the deed as a serious document and explained the fundamental elements of the deed. This case is extracted below.

  Manton v Parabolic Pty Ltd  (1985) 2 NSWLR 361 (SC) Facts: The issue for the court was whether a document took effect as a valid deed. 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 stipulation. Sir Henry Main in his Ancient Law (Everyman 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 tradition or as it is usually put, by livery of seisin. It would seem (see Pollock and Maitland, 2nd ed at 82 and following) that 615

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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 want 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 prepared a memorial of what had happened which was substituted for the knife of 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 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 …

Commentary 10.5  The conclusions of Young J in Manton v Parabolic highlight the solemn nature of the

deed and the importance of ensuring that the formality requirements have been complied with. Historically, the intention to create a deed was manifest through the serious act of sealing the document. As outlined above, this requirement is no longer imperative under modern law, and the important requirements are to make sure that the document has been signed and that this signature has been properly attested by at least one witness who is not a party to the deed: Property Law Act 1958 (Vic) s 73; Conveyancing Act 1919 (NSW) s 38(1); Property Law Act 1974 (Qld) s 45(2); Conveyancing and Law of Property Act 1884 (Tas) s 63(2); Law of Property Act 1936 (SA) s 41(2); Property Law Act 1969 (WA) s 9(1); Civil Law (Property) Act 2006 (ACT) s 219(1); Law of Property Act (NT) s 47(1).

616

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Digital Signatures 10.6  Following the implementation of electronic conveyancing in each state and territory,

the Electronic Conveyancing National Law now makes it clear that the application of a digital signature by a party authorised to do so shall have the same effect as if a paper document is signed and attested by the parties privy to the transaction. Sections 9 and 12 of the Electronic Conveyancing National Law (as set out in the Appendix to the Electronic Conveyancing (Adoption of National Law) Act 2012 (NSW) are extracted below: EXTRACT Electronic Conveyancing (Adoption of National Law) Act 2012 (NSW) — ss 9 and 12 9  Status of electronic registry instruments (1) A registry instruments that is in a form in which it can be lodged electronically under section  7 has the same effect as if that instrument were in the form of a paper document. (2) A registry instrument that is digitally signed by a subscriber in accordance with the participation rules applicable to that instrument has the same effect as if a paper document having the equivalent effect had been executed by: (a) if the subscriber signs under a client authorisation, each person for whom the subscriber signs in accordance with the client authorisation, or (b) the subscriber in any other case. (3) If a registry instrument is digitally signed in accordance with the participation rules applicable to that instrument: (a) the instrument is to be taken to be in writing for the purposes of every other law of this jurisdiction, and (b) the requirements of any other law of this jurisdiction relating to the execution, signing, witnessing, attestation or sealing of documents must be regarded as having been fully satisfied. Subdivision 2 — Digital signatures 12  Reliance on, and repudiation of, digital signatures (1) If a subscriber’s digital signature is created for a registry instrument or other document in connection with a conveyancing transaction, then: (a) unless that subscriber repudiates that digital signature, that registry instrument or other document is to be taken to be signed by that subscriber, and (b) unless that subscriber repudiates that digital signature, that digital signature is binding, in relation to that registry instrument or other document, on: (i) that subscriber, and (ii) all other persons (if any) for whom that subscriber acts under a client authorisation with respect to that conveyancing transaction, and (c) unless that subscriber repudiates that digital signature, that digital signature is binding, in relation to that registry instrument or other document, for the benefit of: (i) each of the parties to that conveyancing transaction, and (ii) each subscriber who acts under a client authorisation with respect to that conveyancing transaction, and 617

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(iii) any person claiming through or under any person to whom subparagraph (i) applies, and (iv) the  Registrar, once that  registry instrument  or other document is lodged electronically in accordance with section 7, and (d) that subscriber cannot repudiate that digital signature except in the circumstances set out in subsection (4). (2) Subsection (1) applies regardless of: (a) who created the subscriber’s digital signature, and (b) the circumstances (including fraud) in which the subscriber’s digital signature was created. (3) Subsection  (1) does not prevent the unsigning of a  registry instrument  or other document. (4) Despite subsections (1) and (2), a subscriber can repudiate the subscriber’s digital signature with respect to a registry instrument or other document if the subscriber establishes: (a) that the digital signature was not created by the subscriber, and (b) that the digital signature was not created by a person who, at the time the subscriber’s digital signature was created for the  registry instrument  or other document: (i) was an employee, agent, contractor or officer (however described) of the subscriber, and (ii) had the subscriber’s express or implied authority to create the subscriber’s digital signature for any document or documents, and (c) that neither of the following enabled the subscriber’s digital signature to be created for the registry instrument or other document: (i) a failure by the subscriber, or any of the subscriber’s employees, agents, contractors or officers, to fully comply with the requirements of the participation rules, (ii) a failure by the subscriber, or any of the subscriber’s employees, agents, contractors or officers, to take reasonable care. (5) For the purposes of subsection (4) (b) (ii), it does not matter whether the authority was: (a) general, or (b) limited or restricted to documents of a particular class or to a particular document or in any other way.

These provisions change the concept of a deed and its fundamental requirement, the signature. Signature law has evolved with the advancement of technology. The purpose of the written signature has always been grounded in protocols connected to intention, identification and evidence. The written signature provides evidence of the intention of the parties with respect to the contents of the document. A written signature requires attestation by a witness. This is achieved where a witness affixes their own signature to the deed. The intention of the witness is to attest to the authenticity of the original signature and, by parity of reasoning, the intention of the original signor regarding the contents of the document. A witness signs with the intention of verifying not only the original signor, but the fact that they have witnessed the original signor making this signature. The aim is to reduce the prospect of fraud and affirm the solemnity of the act. In this regard, attestation has been described as ‘evidentiary, cautionary and protective’. (See D Weber, ‘Tech-Neutrality in Australian Signature Law’ (2015) 24 Journal of Law, Information 618

Priority Rules

10.6

and Science 101, 105.) Unlike individuals, a corporation may execute a deed where the common seal of the corporation is affixed to the document. The Corporations Act 2001 (Cth) s 127(2) requires all documents executed with a common seal of a corporation to also be countersigned by two directors of that company or, alternatively, a director and a company secretary. Alternatively, s 127(1) allows a corporation to execute a document in the absence of a corporate seal where the document is signed by two directors or a director and a company secretary. A signature may be also be given effect in a range of online electronic contexts. Signature technology, that signs the document, verifies the authenticity of the signor and ensures the integrity of the document, can have the same effect as a written signature. Digital signature technology is known as public, key cryptography. It involves trusted third parties maintaining a database of public keys, known as public key infrastructure (PKI). PKI contains both public and private corresponding keys. The keys are digital files, created by an algorithm. Hence, once a document is encrypted with a public key, it can only be decrypted with a private key. Digital signatures are different to electronic signatures. An electronic signature is a digitised copy of a physical signature that may be attached to a document. It is not possible to utilise the electronic signature for the creation of legal interests. This is because the electronic signature cannot verify that the person attaching the signature actually is the person stated in the document, or that the person attaching the signature approves the terms and conditions included within the document or that the signature was not forged and simply placed on the document. On the other hand, the digital signature is that which is effected through the PKI framework. The digital signature can verify that the person attaching the signature is the person stated in the document and not somebody else (because the person stated in the document is the only person holding the private key enabling decryption) and that they do, upon decrypting the document, agree to its terms and conditions. For this reason, PKI technology is the method utilised to execute an electronic registry instrument. Section 7 of the Electronic Conveyancing National Law (ECNL) allows an electronic conveyancing document, which transfers a legal estate, to be lodged electronically, in an approved form, by means of an electronic lodgement network (ELN). The ELN involves a PKI system of digital signatures that is used by a subscriber. Section 3(1) defines a subscriber as a person who is authorised under a participation agreement to use an ELN to complete conveyancing transactions on behalf of another person or on their own behalf. This will usually be a conveyancing or legal firm. Section  12 of the ECNL sets out that a digital signature of a subscriber is binding irrespective of fraud. Section  12(4) sets out that a digital signature can only be repudiated if it was created by someone who is not authorised. It cannot be repudiated purely on the basis that there has been a failure to comply with the participation rules or a lack of reasonable care. Once a digital signature has been applied, s 9 of the ECNL makes it clear that a digitally signed electronic document in approved form satisfies all requirements for execution, signing, witnessing, attestation or sealing. This means that the digital signature has the same effect as a paper document that had been physically signed, sealed and executed. It does not mean that the digital signature is the same as a written signature.1 See a more detailed discussion in Chapter 12.) 1. See D Loxton, ‘Not Worth the Paper They’re not Written on? Executing Documents (Including Deeds) Under Electronic Documentation Platforms: Part A’ (2017) 91 Australian Law Journal 133; L Rouhshi and E Foo, ‘The Susceptibility of Digital Signatures to Fraud in the National Electronic Conveyancing System: An Analysis’ (2009) 17(3) Australian Property Law Journal 303–25; R Thomas, L Griggs and L Rouhshi, ‘Electronic Conveyancing in Australia — Is Anyone Concerned About Security?’ (2014) 23(1) Australian Property Law Journal 1; B Whittaker, Bruce, ‘Remote Signings 619

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Australian Property Law

Chain of Title 10.7  General law or old title land is land that does not come under the application of the

Torrens system because the grant was issued by the Crown prior to the introduction of the Torrens system and it has not been subsequently converted to Torrens title in accordance with the conversion provisions in each state. Unlike Torrens title land interests, general law title comprises a series of transactions that trace the history of the title. This ‘chain of title’ represents the entire transactional history of the land grant and therefore may include such transactions as mortgages, leases or deeds of conveyance. A purchaser of general law or old title land must search each document in the chain to check the transactional history for any errors or defects. The purchaser should check back until they reach an acceptable documentary starting point, known as a ‘good root of title’. Where such a starting point can be found, the title can be traced in an unbroken chain to the present day, making it more likely that the title will be sound. There can, however, be no guarantee of a good title when dealing with an old title chain because it is always possible that a defect or error has been overlooked. The onerous nature of the search for a good root of title over old title land has been modified by legislation in some states, where the ‘search’ period has been reduced to 30 years. For example, in Victoria, s 44(1) of the Property Law Act 1958 sets out that a purchaser of land is only required to search the title back for 30  years, rather than the original date of the Crown grant, provided good evidence of documentary title can be discovered during this period. Section 44(6) of the Property Law Act 1958 sets out that a purchaser shall not be deemed to be affected with notice of any interest or matter prior to this 30-year statutory period. See also Conveyancing Act 1919 (NSW) s 53(1), where the period is also 30 years; Property Law Act 1974 (Qld) s 237(1), where the period is 30 years; Sale of Land Act 1970 (WA) s 22, where the period is 30 years and Conveyancing and Law of Property Act 1884 (Tas) s 35(1), where the period is only 20 years. In South Australia, there is no statutory provision reducing the search period so the 60-year common law rule will apply.

Nemo Dat Principle 10.8  It is not possible to grant an estate that the grantor does not have. Once a grantor

has issued a legal estate, the grantor has no estate left to grant and this means that it is not possible for that grantor to issue a second, identical estate because the grantor has nothing left. Any attempt to create a second or further identical legal estate over the same piece of land will offend the nemo dat quod non habet principle, which sets out that a grantor cannot grant an estate which they do not have. It is, of course, possible to create non-identical legal estates in the same piece of land. For example, a grantor may confer a life estate to one person and a remainder interest to another. These interests operate chronologically and do not offend the nemo dat principle because they are not identical and do not conflict.

under Australian Law’ (2016) 44(1) Australian Business Law Review 229; R Angyal and B Edgeworth, ‘Conveyancing and Property: E-Conveyancing: Legal Underpinning and Some Practical Aspects’ (2018) 92(1) Australian Law Journal 582; J Beckman, ‘Changes in Property Transactions: Out with PAMDA, in with E-Conveyancing’ (2016) 36(1) The Queensland Lawyer 18. 620

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EXAMPLE If Robert owns a fee simple estate in old title land and agrees to sell it to Felix, the legal transfer of that land will be effective upon the execution of the deed of conveyance. Once the deed is executed, Robert no longer retains any title to the land. The execution of the deed of conveyance functions to convey the fee simple to Felix, leaving Robert with no estate. If Robert subsequently attempted to transfer the fee simple to Marjorie, Marjorie would receive no legal title because Robert cannot transfer what he does not have: nemo dat quod non habet. In this situation, Felix and Marjorie are not in conflict because only Felix has a title. Marjorie has received no legal title at all.

The nemo dat quod non habet principle is fundamental to a full understanding of the nature of legal interests in land. It has two basic aspects: • A person cannot transfer a title that they no longer have. • A person can only transfer the title that they actually have. The principle will be infringed where a person transfers an estate they no longer have or, where a person transfers a greater estate than that which they have. For example, if a title is encumbered by an easement, when the title is transferred, that is the title which will pass unless the easement is properly extinguished.

Equitable Interests 10.9  As outlined in Chapter 9, an equitable interest in land may be expressly created or it may be imposed by a court where fairness requires it and established equitable principles uphold the recognition of such title. In this respect, the equitable estate in land has a broader scope and is, in the words of Hope JA in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510 at 518–19, ‘significantly different’ to a legal estate. His Honour stated: 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]lthough 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 obligation 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.2

2. See also Commissioner of Stamp Duties (Qld) v Hopkins (1945) 71 CLR 351 at 360; Re Transphere Pty Ltd (1986) 5 NSWLR 309 per McLelland J at 311. 621

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The formality requirements for the creation and enforcement of equitable interests in land have been discussed in detail at 9.9.

Multiplicity 10.10  Unlike legal estates in land, numerous equitable interests may be enforced against a single piece of land. This is a consequence of the right-based focus of the equitable interest that is essentially comprised of in personam rights that are enforceable against the legal titleholder of the land. In the words of Hope JA in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1980] 1 NSWLR 510 at 519, an equitable interest 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’. Where a number of different equitable interests are recognised in land, it may be necessary to determine which interest takes priority in the land because the interests are in conflict. Priority rules have developed to deal with disputes involving different equitable interests as well as disputes involving legal and equitable interests. The priority rules function as institutional edicts for the resolution of conflict between competing interests. The existence of the priority rules is a direct consequence of the capacity of the equitable jurisdiction to validate different equitable entitlements with enforceable rights against the same piece of land. To this extent, the priority rules are steeped in equitable precepts, having at their core the principles of fairness, balance and proportionality.

Priority Rules Prior legal and subsequent equitable 10.11  A priority dispute will arise where there is a direct conflict between two or more interests in land and there is a need to determine which interest has first right of preference over the land. Priority will only be conferred to the extent of the interest. Once an interest has been satisfied, any surplus interest in the land will pass to remaining interest holders. EXAMPLE A holds a legal mortgage over land securing $50,000 and B holds an equitable mortgage over the land securing $100,000. If the mortgagor defaults, the land is sold for $120,000 and A has priority and will take $50,000 from the sale to extinguish the mortgage debt and B will take the remaining money as the ‘subsequent’ interest holder. A will only have priority to the extent of her mortgage interest.

Where a prior legal interest is in conflict with a subsequent equitable interest, the general principle is that the legal estate holder will always take priority if it can be proven that the legal estate holder is bona fide and has not contributed to the subsequent creation of the equitable title. This rule has its origins in the Chancery jurisdiction. The courts of equity traditionally felt that equitable rights should be enforceable against legal estates only in circumstances where it would be unfair of the legal estate holder to deny knowledge of their existence because their inequitable behaviour has contributed to the creation of the equitable title. 622

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10.12  This rule was examined in the classic decision of Northern Counties of England Fire Insurance Co v Whipp (1884) 26 Ch D 482 (extracted below) where the basic issue was whether the prior legal title of a mortgagee could be set aside against a subsequently created equitable mortgage in circumstances where the carelessness of the prior legal mortgagee contributed to the creation of the subsequent equitable mortgage.

  Northern Counties of England Fire Insurance Co v Whipp  (1884) 26 Ch D 482 Facts: Crabtree was the manager of Northern Counties of England Fire Insurance Co. He borrowed money from the company in exchange for a legal mortgage over his fee simple estate. The title documents, including the legal mortgage, were given to the company and subsequently put in a safe. Crabtree held duplicate keys to the safe as manager of the company. Crabtree subsequently opened the safe and removed the title documents, and then removed the mortgage deed from the chain of title. He then handed this amended chain of title over to Whipp in exchange for another loan, with security over the same fee simple. The consequence of this transaction was that Whipp acquired an equitable mortgage. Whipp had no knowledge of the existence of the legal mortgage in favour of the company. The issue was whether the legal mortgage of the company should take priority over the subsequent equitable mortgage of Whipp in circumstances where their carelessness in letting Crabtree have access to the safe contributed to the creation of that subsequent title. Fry LJ: 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 mortgagee? 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. … when the legal mortgagee has obtained the possession of the title deeds and subsequently gives them up, no question can arise between him and a prior equitable owner, and no suspicion of the particular fraud which we have referred to can arise; the estate of the legal mortgagee can never be improved by any subsequent dealings with the deeds, and therefore, before the court can find a fraudulent intent in the legal mortgagee, it must be shewn that he concurred in some project to enable the mortgagor to defraud a subsequent mortgagee, or that he was a party or privy to some other fraud in fact. The kind of fraud most to be looked for in this class of cases is such as was described by the Lord Chancellor, Lord Cowper, in the case of the Thatched House (1716) 1 Eq Cas Abr 322; 21 ER 1075, when he said: ‘If a man makes a mortgage and afterwards mortgages the same estate to another, and the first mortgagee is in combination to induct the second mortgagee to lend his money, this fraud will without doubt in equity postpone his own mortgage. So if such mortgagee stands by and sees another lending money on the same estate without giving him notice of his first mortgage, this is such a misprision as shall forfeit his priority.’ 623

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Australian Property Law

On the head of law now under consideration the observations of Lord Eldon in giving judgment in the case of Evans v Bicknell (1801) 6 Ves 174; 31 ER 998 are without doubt the leading authority … ‘The doctrine at last is, that the mere circumstance of parting with the title deeds unless there is fraud, concealment, or some such purpose, or some concurrence in such purpose, or that gross negligence, that amounts to evidence of fraudulent intention, is not of itself a sufficient ground to postpone the first mortgage.’ The expression ‘gross negligence that amounts to evidence of a fraudulent intention’ is certainly embarrassing, for negligence is the not doing of something from carelessness and want of thought or attention, whereas a fraudulent intention is a design to commit some fraud, and leads men to do or omit doing a thing not carelessly but for a purpose. But Lord Eldon seems to have meant by his words to describe the not doing of something, so ordinarily done by honest men under the given circumstances, as to be really attributable not to negligence or carelessness, but to a fraudulent intention. In short, it appears to us that in the mouth of Lord Eldon the word ‘negligence’ was used simply to express non-feasance … 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 deed 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 (1874) LR 7 HL 135 at 157 … 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 deed 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 arise in the present case, and we therefore give no opinion on 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 or 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 624

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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 circumstances 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.

Commentary 10.13  Fry LJ concluded that on the facts, while there was great carelessness on the part of the plaintiff company, the carelessness did not amount to a fraud that was sufficient to set aside the priority they retained under their prior legal mortgage. The conclusions of LJ Fry were subsequently modified by the decisions of Parker J in Walker v Linom [1907] 2 Ch 104 who stated at 108: 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.

In the Australian High Court decision of Barry v Heider (1914) 19 CLR 197, it was held that arming someone with the power to represent that they hold good and clear legal title can mean that the legal titleholder is estopped from denying the enforceability of the subsequent equitable title. In this respect, Griffith CJ referred to the comments of Lord  Hatherley LC in Vickers v  Hearst LR 2 HL (Sc) 113 at  115: ‘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’. This suggests an estoppel foundation for this priority principle although courts in the past have been reluctant to endorse this. In Ettershank v Zeal (1882) 8 VLR 333, the court concluded that estoppel could not be applied in a priority dispute between a prior legal estate and a subsequent equitable interest in circumstances where the prior legal holder was unaware of the existence of the subsequent interest. As noted by Holroyd J at 343: ‘A man is not bound to disclose his rights to all the world, lest somebody should be injured by ignorance of them, nor liable if anybody is injured by such ignorance without his knowledge’. The categories where a subsequent equitable titleholder may take priority over a prior legal estate holder were summarised by Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 4th ed, pp 336–77, as follows: • when the owner of the legal estate has him or herself created the subsequent equity by some assurance, declaration of trust or agreement; 625

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• where the legal owner fraudulently connives at the creation of the subsequent equity; • where the legal owner fraudulently (as opposed to carelessly) failed to get in his or her title deeds from his or her conveyor and thereby enables the vendor to hold himself or herself out to a third party as the legal owner (similar to the facts in Northern Counties of England Fire Insurance Co v Whipp); and • where the legal owner has given authority to another to deal with a third party and such authority has been exceeded (as in the circumstances of Barry v Heider). It is this last category where estoppel-based arguments may be raised. However, if the legal owner does nothing more than vest the property in the name of a nominee or trustee, mere possession of the title documents will, in itself, be insufficient to base an estoppel argument: Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1995] 3 All ER 747 at 781.

10.14  Revision Questions 1. Why did Fry LJ in Northern Counties of England Fire Insurance Company v Whipp conclude that carelessness did not constitute fraud? 2. Do you think the fact that Northern Counties of England Fire Insurance Company was not directly involved in the fraud of its director, Crabtree, should prevent their conduct from being classified as inequitable and therefore postponing? 3. While title deeds may not be ‘fierce dogs’ or ‘destructive elements’, is it arguable that their amenability to fraud, particularly old title deeds, makes it necessary to impose a duty of safekeeping? 4. Why is it not accurate to talk of a priority dispute between two identical legal estates which purport to exist over a single piece of land?

Prior Equitable Title and Subsequent Legal Title 10.15  Where a priority dispute arises between a prior equitable title and a subsequent legal title, the general principle is that the legal titleholder is entitled to claim priority where it is established that the legal titleholder is a bona fide purchaser of the estate, for good consideration and that the estate has been taken without any actual or constructive notice of the existence of any prior equitable interest. This classic equitable rule may be stated as follows: priority will be given to a bona fide purchaser of the legal estate taken for value and without notice. In the words of Sir Frederick Jordan: If a person has acquired a legal title to property, a Court of Equity will not compel him to hold it for the benefit of another who in fact had a prior equitable interest in it, unless the person who acquired the legal title did so in such circumstances that he cannot in good conscience hold it, except subject to the equitable interest. Hence a purchaser who acquires the legal title for value, and without notice of any equitable interests, is entitled to hold it free from any such interests, if they in fact exist. Chapters in Equity, 6th edn, 1945, at p 65.

See also F W Maitland, Lectures on Equity, at p 119, who stated: ‘Against a person who acquires a legal right bona fide, for value, without notice express or constructive of the existence of equitable rights those rights are of no avail’. 10.16  The classic case exploring this principle is Pilcher v  Rawlins (1872) 7 Ch  App 259 (extracted below). The case examined whether the prior beneficial entitlement of 626

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beneficiaries under a trust was enforceable against the subsequent legal interest of second mortgagees over the land. During the course of the judgment, the court took into account issues such as who should bear the burden of the conflict and why, in the circumstances, prior equitable titleholders should be penalised by the behaviour of a ‘rogue’ trustee.

  Pilcher v Rawlins  (1872) 7 Ch App 259 Facts: Trustees advanced trust money pursuant to a mortgage. They took security over real property and the legal title was conveyed to them by the mortgagor. When only a part of the mortgage moneys had been repaid, the surviving trustee reconveyed the title to the mortgagor. The trustee then appropriated the mortgage moneys received and connived with the mortgagor to fraudulently convey the title to new mortgagees, concealing the existence of the prior mortgage and its reconveyance. A priority dispute arose between the prior equitable beneficiaries under the trust who claimed title pursuant to the original mortgage and the subsequent legal mortgagees. Sir G Mellish LJ: … 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 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 627

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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 cestui 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 cestui 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 WM 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. 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 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 just tertii which you will not dispose of; the estate is in the 628

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hands of a legal tenant to whom I have left 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 someone 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 similar judgment.]

Commentary 10.17 In Pilcher v  Rawlins the prior equitable beneficiaries were defeated by the subsequent legal mortgagees because the court found that those mortgagees were bona fides and that they had taken without notice of the existence of equitable beneficiaries. Mellish LJ rationalised this conclusion by holding that where beneficiaries have trusted their property to a trustee ‘… who turns out to be a rogue, it stands to reason that you may lose it!’ The beneficiaries bore the loss because in evaluating the circumstances and, in particular, where the loss should lie, the beneficiaries were less merit-worthy than the bona fide legal mortgagees. In some ways, the unscrupulous behaviour of the trustee had tainted the entitlement of the beneficiary so that, as Mellish LJ stated, awarding priority to the subsequent legal mortgagees was ‘in accordance with the ordinary feelings of the justice of mankind’. There are three fundamental elements to the bona fide purchaser for value without notice rule set out in Pilcher v Rawlins. They may be summarised as follows: • Is the subsequent legal titleholder bona fides? This requires an examination of the overall circumstances in which the legal title was acquired and whether any equitable fraud was involved. If any unconscionable behaviour is involved, then the subsequent legal titleholder may not be characterised as bona fide. 629

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• Is the subsequent legal titleholder a purchaser? The priority principle does not apply to volunteers so it must be established that the legal estate holder has given a recognised and acceptable consideration. This effectively means money or something of equivalent value that amounts to value. Natural love and affection does not amount to value for the purposes of this rule. • Has the subsequent legal titleholder taken title without notice of the existence of the prior equitable interest? Notice in this context will encompass both actual notice of the existence of the prior equitable title and constructive notice, where the subsequent legal titleholder is aware of circumstances that should have put him or her on notice of the existence of the prior equity.

The Doctrine of Notice 10.18  The doctrine of notice binds a subsequent legal titleholder to any equity that he or she actually knew of or that he or she should have known about as a result of carrying out all of the usual inspections and inquiries. The importance of the doctrine of notice as an equitable concept was outlined by Lord Browne-Wilkinson in Barclays Bank Plc v O’Brien [1994] 1 AC 180 at 195 where his Lordship explained: 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). 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.

In considering whether or not a subsequent legal titleholder is affected by notice, timing is very important. It must be established that the legal titleholder has received notice of the previous equity prior to the acquisition of that title and not afterwards. Further, where the legal titleholder acquires a pre-emptive equitable title — for example, the equitable interest that is conferred under a contract for the sale of land — it must be established that the notice was acquired prior to the acquisition of that pre-emptive equitable title. If notice is acquired after the acquisition of a pre-emptive equitable title, for example after a contract for the sale has been entered into but prior to the acquisition of full legal title, the purchaser will not be affected by notice unless it can be established that the acquisition of the legal estate amounts to a breach of trust: see generally Blackwood v London Chartered Bank of Australia (1871) 10 (SCR) NSW Eq 20; Stuart v Kingston (1923) 32 CLR 309 at 314; Newcastle City Council v Kern Land Pty Ltd (1997) 42 NSWLR 273 at 282 per Windeyer J. It is, however, now the case that the interest a purchaser acquires upon entering a contract of sale and paying the deposit is an equitable lien. As outlined in Tanwar Enterprises Pty Ltd v Cauchi (2004) 217 CLR 315 per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ, no interest in the actual land is acquired until settlement.3 In Hewett v Court (1983) 149 CLR 639 at 663, Deane J described the equitable lien as follows: 3. See also Romanos v Pentegold Investments Pty Ltd (2003) 217 CLR 367. See also the discussion on this in Chapter 9 and the conclusions of Emmett JA in Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong (2015) 319 ALR 151 at [84]–[88] who noted that a trust relationship may arise once the contract is completed and becomes specifically enforceable. 630

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… a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness. Though called a lien, it is, in truth, a form of equitable charge over the subject property in that it does not depend upon possession and may, in general, be enforced in the same way as any other equitable charge, namely, by sale in pursuance of court order or, where the lien is over a fund, by an order for payment thereout. Equitable lien differs from traditional mortgage in that it does not transfer any title to the property and therefore cannot be enforced by foreclosure. While it arises by implication of some equitable doctrine applicable to the circumstances, its implication can be precluded or qualified by express or implied agreement of the parties. It can exist over land or personalty or both.

The distinction between a constructive trust and an equitable lien is an important one in this context. In essence, this is a distinction grounded in ownership. As outlined by M Crawford, ‘The Case Against the Equitable Lien’ (2019) 42(3) Melbourne University Law Review 813 at 814: The crucial distinction between the constructive trust and the lien is that between ownership and security. Though trusts can be used as security devices, the interest of a beneficiary under a constructive trust, like the beneficiary of any bare trust, is ownership. A beneficiary is entitled to the income generated from the trust asset and will benefit from any increase in its value. This is not true of a lienee. Because the lien is a pure security right, the lienee’s interest in the encumbered asset is limited to the proceeds of sale equal to the value of the outstanding debt.

This suggests that the doctrine of notice may continue to apply to purchasers of land until the point when they acquire titles to the land rather than security rights over the deposit. The obligations of a purchaser of land include checking the title documents for the existence of any prior title and physically inspecting the land to determine whether, in light of the character of the land, any equitable interests exist. A purchaser will be deemed to have notice of any interests apparent from such inspections. The scope of this obligation was outlined in Smith v Jones [1954] 1 WLR 1089. In that case, Upjohn J, in considering whether the purchaser of a farm had notice of a tenant’s equitable right to seek rectification of a tenancy agreement, made the following comments at [1094]: 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 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 …

It is clear from the comments of Upjohn J that there are reasonable limits to the obligation of a purchaser to investigate title. For example, a purchaser will not be taken to have received notification of disputes not immediately apparent from the express terms of the tenancy agreement. However, a purchaser will be taken to have notice where the circumstances indicate that the purchaser has reason to know. A person has reason to know the fact if the person has been notified of it or other facts known to the person would 631

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make it reasonable to infer the existence of the fact, or prudent to conduct further inquiry that would reveal it: Great Investments Ltd v Warner [2016] FCAFC 85 at [131] per Jagot, Edelman and Moshinsky JJ. See also Commonwealth of Australia v Davis Samuel Pty Ltd (No 7) [2013] ACTSC 146. Statutory provisions now confirm that the doctrine of notice includes both actual and constructive notice: see, for example, s 199 of the Property Law Act 1958 (Vic). Similar provisions exist in other states: Conveyancing Act  1919 (NSW) s  164; Property Law Act 1974 (Qld) s 256; Law of Property Act 1936 (SA) s 117; Conveyancing and Law of Property Act 1884 (Tas) ss 5 and 35A. EXTRACT Property Law Act 1958 (Vic) — s 199 199  Restrictions on constructive notice (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. (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.

Actual notice will arise where a purchaser receives actual confirmation that the existence of a prior equitable title exists. In Eagle Trust Plc v SBC Securities Ltd [1993] 1 WLR 484; [1992] 4 All ER 488, Vinelott J (at 494) held that a person would be regarded as having actual notice of a fact if that person had been supplied in the course of a conveyancing transaction with a document that he or she had not read, or that he or she had read some time ago and forgotten. Notice should be distinguished from knowledge because knowledge has a positive connotation of awareness that is not necessary for notice: In Re Montagu’s Settlement Trusts [1987] 2 WLR 1192 at 1199. Hence, when assessing whether a person has knowledge, in the absence of an admission, a court must review the facts, consider the proof and assess the credibility of any denial. This will always be a matter of inference: RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123 at 125–126. In some cases, knowledge may be acquired but then forgotten, however this is rare: In Re Montagu’s Settlement Trusts at 1211; Beach Petroleum NL v Johnson (1993) 43 FCR 1 at 32, [22.36] per von Doussa J; In the matter of NL Mercantile Group Pty Ltd [2018] NSWSC 1337 at [78]–[80]. 632

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Notice does not require awareness and it may be deemed where it has not actually occurred. Hence, a person may be found be subject to constructive notice in circumstances where it is clear that had they conducted the usual investigations, that any reasonable person would have conducted with respect to a similar transaction, they would have discovered the information. The focus is upon an assessment of what would have been discovered if the requisite inquiries had been made. As outlined by Lord Nicholls in Royal Bank of Scotland v Etridge [2001] 4 All ER 449 at [41]: Traditionally, a person is deemed to have notice (that is, he has ‘constructive’ notice) of a prior right when he does not actually know of it but would have learned of it had he made the requisite inquiries. A purchaser will be treated as having constructive notice of all that a reasonably prudent purchaser would have discovered.

Constructive notice should be distinguished from imputed notice. Imputed notice is notice of that which is brought home to a principal in circumstances where an agent has received actual or constructive notice of a prior equitable interest. This has been modified in some jurisdictions so that imputed notice is restricted to information that relates to the relevant transaction in issue and will only refer to information that has come to the attention of the agent, or, that would have come to the attention of the agent had all reasonable inspections and inquiries been made: Conveyancing Act 1919 (NSW) s  164(1)(b); Property Law Act  1958 (Vic) s  199(1)(b); Property Law Act  1974 (Qld) s 346(1)(b); Conveyancing and Law of Property Act 1884 (Tas) s 5(1)(b). Imputed notice will arise whether or not it is communicated to the principal: Sargent v ASL Developments Ltd (1974) 131 CLR 634; Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234; Vane v Vane (1873) 8 Ch App 383, esp at pp 398–400; In the matter of NL Mercantile Group Pty Ltd [2018] NSWSC 1337 at [81]. Imputed notice will arise between a lawyer and client where the lawyer receives knowledge of information in the course of the usual aspects of the transaction, and that transaction has been authorised by the client: Great Investment Ltd v Warner [2016] FCAFC 85 at [122] per Jagot, Edelman and Moshinsky JJ. In order for notice to be imputed it is, however, necessary for the notice to come to the agent’s attention in the course of the agency: In Schultz v Corwill Properties Pty Ltd [1969] 2 NSWR 576, Street J concluded that the ordinary principles relevant to the imputation of notice were well outlined by Williams on Vendor and Purchaser (4th ed) at p 306 where it was stated: 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.

On the facts of Schultz v Corwill, Street J concluded that a mortgagee was not affected by the notice of his solicitor because the notice had been acquired outside the scope of the agency in the course of the solicitor committing a forgery. This ‘fraud exception’ to imputed notice will only apply where it can be established that the information to which 633

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the notice relates has been acquired either through the agent’s own fraud or through his conduct in being a party to a fraudulent scheme. See Beach Petroleum NL v Abbott Tout Russell Kennedy (1999) 48 NSWLR 1 at  474; Beach Petroleum NL v  Johnson (1993) 115 ALR 411 at 574; Permanent Mortgages Pty Ltd v Vandenburgh [2010] WASC 10 at [325]; P Watts, ‘Imputed Knowledge in Agency Law: Excising the Fraud Exception’ (2001) 117 Law Quarterly Review 300. What constitutes a reasonable inquiry for constructive notice will depend upon the circumstances. In most transactions, including a contract for the sale of land, a purchaser must check the title documents and physically inspect the land: Bailey v  Barnes [1894] 1 Ch 25. In IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440 at [224]–[228], Nettle J made the following comments concerning the scope and nature of constructive notice under s 199 of the Property Law Act 1958 (Vic): The question of constructive or imputed knowledge is more complex. The concept of constructive knowledge is now controlled by Section  199 of the Property Law Act  1958 and although it has been said that the section should not have any application to registered land, the law is that it does. Under the section a purchaser is not to be affected prejudicially by constructive notice of any instrument, fact or thing unless it would have come to his knowledge if such inquiries and inspections had been made as ought reasonably to have been made by him or unless it has come to the knowledge of his counsel or of his solicitor or other agent as such or would have come to the knowledge of his solicitor or other agent as such if such inquiries and inspections had been made as ought reasonably to have been made by the solicitor to the other agent. The inquiries which ought reasonably to be made are those which a prudent man of business would make in the circumstances which obtain. … The words ‘as such’ in section 199 appear to mean no more than ‘in the capacity of ’ and they include a solicitor who acts for both parties to a transaction. Information gained in acting for one party to the transaction is imputed to the other.

In order to be affected by constructive notice it must be clear that, if reasonable inquiries were made, those inquiries would have brought some knowledge of the existence of a prior title to the interest holder. The fact that enquiries were not actually carried out by the subsequent legal interest holder is irrelevant because the interest holder is assumed to have conducted all inquiries that are reasonable in the circumstances. The position was further explained in Kakavas v The Crown (2013) 250 CLR 392 at [152], where French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ outlined the scope of the doctrine of constructive trust in its application to estates and interests in land: The rules of  constructive notice  were developed for the purpose of deciding whether the holder of a later legal estate should prevail over the holder of a prior equitable estate as a bona fide purchaser of the legal estate without notice. As to what is notice for the purpose of this rule, the purchaser is deemed to have constructive notice of all matters of which he or she would have received notice if he or she had made the investigations usually made in similar transactions, and of which he or she would have received notice had he or she investigated a relevant fact which has come to his or her notice and into which a reasonable person ought to have inquired.

The doctrine of constructive notice has a different application when dealing with the assessment of the recipient liability of third parties who have taken property from breaching trustees or corporate directors. As outlined by Bryson J in Maronis Holdings Ltd v Nippon Credit Australia Pty Ltd [2001] NSWSC 448 at [468]: There is a great distance between constructive notice in carrying on dealings in real property, in which the concept of constructive notice and the inquiries which reasonably ought to 634

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be made can be applied fairly clearly, and the introduction of constructive notice into the operations of the directors of companies.

In Macmillan Inc v Bishopsgate Trust plc (No 3) [1995] 1 WLR 978, 1014, a case dealing with the recipient liability of a bank upon the receipt of funds improperly obtained, Millett J made it clear that in order to hold the bank liable under the doctrine of constructive notice it must be established that the impropriety of the receipt was clear and obvious to the defendant in light of the facts known to the defendant. His Honour made the following comments: In order to establish constructive notice it is necessary to prove that the facts known to the defendant made it imperative for him to seek an explanation, because in the absence of an explanation it was obvious that the transaction was probably improper.

Similarly, in Kakavas v  The Crown (2013) 250 CLR 392, the High  Court clearly distinguished between the doctrines of constructive notice relevant to dealings with land and estates, and its application in other transactions. On the facts, the court refused to expand the doctrine into broader commercial transactions involving unconscionable dealing, arguing that it had no relevance to a transaction impeachable by equitable fraud. When applied to a priority dispute between title holders, a subsequent legal interest holder will only be taken to have constructive notice of a prior interest where the existence of the title is directly apparent from reasonable inquiries a party would be expected to undertake in the circumstances. It is not necessary for a legal interest holder, in the absence of trustee or fiduciary responsibilities, to make additional enquiries concerning the propriety of the transaction in which the title was acquired. The legal titleholder should make sure that, in the process of obtaining title, they have carefully checked the title documents and, further, they have physically checked the land. This level of inspection is reasonable to expect with the acquisition of a land interest. Checking the title documents of old title land involves searching all of the documents in the chain of title. A purchaser will have constructive notice over any interest that is apparent from such a search: Carter v Carter (1857) 3 K & J 617; 69 ER 1256. A purchaser may also acquire constructive notice of the rights of any equitable title that a possessor of that land may hold where such rights would be reasonably apparent from a physical inspection: Smith v Jones [1954] 1 WLR 1089. As outlined by Moore and Stone JJ in Perpetual Trustee Co Ltd v  Smith [2010] FCAFC 91 at  [78], ‘The fact of occupation is constructive notice of an interest which would thus prevail even against a bona fide purchaser of the legal interest’. See also Barnhart v Greenshields [1853] EngR 1060; (1853) 9 Moo PCC 18; 14 ER 2004; Hunt v Luck [1902] 1 Ch 428. In Caunce v  Caunce [1969] 1 WLR 286, it was held that a purchaser of land did not acquire constructive notice of the equitable rights of a wife when she occupied the property jointly with her husband who held the legal title. However, in the subsequent House of Lords decision in Williams and Glyn’s Bank Ltd v Boland [1981] AC 487, it was held that the equitable title of a co-occupier constituted an ‘overriding interest’ for the purposes of the Land Registration Act 1925 (Eng). Lord Wilberforce stated at [492]: The house was a matrimonial home, intended to be occupied, and in fact occupied by both spouses, both of which have an interest in it; it would require some special doctrine of law to avoid the result that each is in occupation … the presence of the vendor, with occupation, does not exclude the possibility of occupation of others. There are observations which suggest the contrary in the unregistered land case of Caunce v Caunce [1969] 1 W.L.R. 286, but I agree with the disapproval of these, … I have no difficulty in concluding that a spouse, living in a 635

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house, has an actual occupation capable of conferring protection, as an overriding interest, upon rights of that spouse.

In Kingsnorth Finance Ltd v Tizard [1986] 2 All ER 54, Mr Tizard, a husband separated from his wife, received £66,000 pursuant to a mortgage from Kingsnorth Trust Ltd that was secured over land known as Willowdown. Willowdown was the matrimonial home of Mr Tizard and his estranged wife. Mrs Tizard lived in the spare room and sometimes slept at her sister’s home. When the mortgagee visited the property for a physical inspection, Mr Tizard attempted to conceal the presence of his wife’s occupation. Judge John Finlay QC held that the purchaser or mortgagee must carry out such inspections as ought reasonably be made and, where they do not find anyone in occupation other than those who the mortgagor has referred to, they should not be fixed with notice of the claimant’s rights. His Honour noted, however, that it is imperative that a reasonable physical inspection be carried out. On the facts, the bank employee, Mr Marshall, inspected the property on a Sunday afternoon at a time that Mr Tizard had arranged. Further, Mr Marshall had received notice of the existence of Mr Tizard’s children who also lived at the property. The court concluded that such an inspection was not, in the circumstances, reasonable and therefore the subsequent legal mortgagee took the interest with constructive notice of the equitable title of the wife arising from her ‘substantial’ occupation at the property. The court noted that the mortgagee should have been more diligent in physically inspecting the property, particularly given the fact that the husband had, when applying for the mortgage, described himself as a spouse and that children lived in the home. Both of these factors raised the possibility of another occupier holding equitable title. It may be possible to be subject to constructive notice on the basis of occupation even where the person does not actually live in the property. In Lloyds Bank v Rosset [1988] 3 WLR 1301, Mr Rosset purchased a house in November 1982 in his name. He bought the property with money provided by a trust fund of which he was a beneficiary and the property became the matrimonial home. Mr  Rosset charged the property to secure a £15,000 overdraft that he arranged for the purpose of carrying out some renovation works. He and his wife were let into possession before completion of the purchase. Mr  Rosset subsequently failed to make the loan repayments and the bank sought possession. Mrs Rosset resisted the claim. She had made no financial contribution to the purchase, but claimed that she and her husband had agreed that it was to be jointly owned. Mrs Rosset also claimed that, in reliance on that agreement, she had made a sufficiently significant contribution to the acquisition of the house by the work she had done to it to give rise to a constructive trust under which she could assert a beneficial interest in the house. The trial judge rejected Mrs Rosset’s case that there was any agreement, arrangement or understanding between the spouses that she was to have an interest in the house. He did, however, find that her part in the renovation works was sufficient to give her a beneficial interest, the extent of which he referred to an inquiry. He arrived at that conclusion by a finding that the renovation works were agreed to be a joint venture between the spouses, and that Mrs Rosset had acted to her detriment in doing what she did in reliance on that agreement. This conclusion was rejected by the House of Lords. The English Court of Appeal, however, in upholding the finding of a beneficial entitlement, went on to consider whether the bank had received ‘constructive notice’ of the beneficial entitlement of the wife because of the fact that she had visited the premises every day during the renovation. The court refused to give ‘occupation’ a rigid definition and concluded that, while it may be usual to equate ‘occupation’ with ‘living in a property’, that does not mean that occupation of a house can never exist short of residence. 636

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In Abbey National Building Society v Cann [1991] 1 AC 56, a loan was applied for by a son who intended his mother and a man who she subsequently married to live in the property. One of the issues in the case was whether or not the mother and the man were in occupation. The mother had been on holiday, but on the day of completion the son and his future father in law, with the vendors’ consent, had been permitted to have their carpet layers attend at the property to lay the mother’s carpets and her furniture began to be unloaded and taken in. Lord Oliver concluded that actual occupation could follow once furniture and goods had been moved and the fact that the person claiming title was not physically present was irrelevant, although some degree of factual permanence was necessary. His Lordship stated at  93F that actual occupation ‘does not necessarily, I think, involve the personal presence of the person claiming to occupy. A caretaker or the representative of a company can occupy, I should have thought, on behalf of the employer. On the other hand, it does in my judgment, involve some degree of permanence and continuity which would rule out mere fleeting presence.’ The concept of actual occupation is not a static one and courts are naturally reluctant to provide a single definition. As outlined by Mummery LJ in Link Lending Limited v Susan Bustard [2010] EWCA Civ 424 at [27]: ... trend of the cases shows that the courts are reluctant to lay down, or even suggest, a single test for determining whether a person is in actual occupation. The decisions on statutory construction identify the factors that have to be weighed by the judge on this issue. The degree of permanence and continuity of the person concerned, the intentions and wishes of that person, the length of absence from the property and the reason for it and the nature of the property and personal circumstances of the person are among the relevant factors.4

Once a bona fide purchaser takes notice of the existence of a prior equitable title, the effect of that notice cannot be removed. Thus, in Jared v  Clements [1903] 1 Ch  428, a buyer who had discovered the existence of a prior equitable mortgage could not escape the consequences of that notice, despite the fact that his solicitor had promised him that the mortgage would be paid off prior to settlement. Byrne J concluded (at 403) that if the purchaser had not been so assiduous in his title search the prior equitable mortgage may never have been discovered and ‘the purchaser could then have claimed to be a purchaser for value without notice’. This principle was subsequently upheld in Barry v Heider (1914) 19 CLR 197 where the holder of an equitable mortgage had notice of a prior equitable mortgage. Sir Samuel Griffith observed at 210: The case is, therefore, as if a person proposing to advance money on equitable mortgage were told by the solicitor for the proposed borrower, purporting also to act as solicitor for the prior equitable mortgagee, that the prior equitable mortgage had been satisfied. Can he safely act on such an assurance without further inquiry? After full consideration I have come to the conclusion that he cannot. In one sense it is not unreasonable in such a case, in the absence of any ground for suspecting fraud, to accept the assurance of the solicitor, but it would be more reasonable for the lender to ask for confirmation of the assurance of the prior equitable mortgagee himself or an independent agent.

The conclusions of the High Court in Barry v Heider were also approved in Overseas Chinese Banking Corporation v Malaysian Kuwaiti Investment Co Sdn Bhd (MKIC) [2003] VSC 495, where Redlich J held at [175] that ‘where there is a failure by reasonable inquiry to obtain verification of the discharge of the earlier equitable interests the actual knowledge of the interest holder will not have been negated’. 4. See also Thomas v Clydesdale Bank Plc [2010] EWHC 2755 (QB). 637

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There has been some statutory intervention to reduce the scope of the doctrine of constructive notice in specific instances. For example, s  300 of the Personal Property Securities Act 2009 (Cth) states, for the purpose of transactions coming within the ambit of the Act, that a person does not have notice, or actual or constructive knowledge, about the existence or contents of a registration merely because data in the registration is available for search in the register. Similarly, s  130 of the Corporations Act 2001 (Cth) makes it clear that a person is not taken to have information about a company merely because the information is available to the public from ASIC.

10.19  Revision Questions 1. Rob purchases old title land from Felix and receives full legal title upon settlement. Prior to purchasing the land, Rob inspects the title documents and discovers no equitable interests. He also makes a physical inspection of the property and, in the process, discovers a woman living in the property. Rob assumes that she is a friend of the vendor and will be gone following settlement. If it turns out that the woman holds an equitable title in the land, will any legal interest that Rob acquires be subject to this interest? 2. Consider the approach of the English authorities on this issue. 3. Julie holds legal title to land. In order to obtain extra cash, she enters into a mortgage with LendIt Pty Ltd who requires Julie to transfer legal title as security for the mortgage. A loan officer from LendIt Pty Ltd inspects the property during the middle of the day. The loan officer notices that two cars are parked in the driveway but does not find anyone else in the home other than Julie. He assumes that Julie either has or is looking after two cars and fails to inspect the bedrooms. He does not ask Julie whether anybody else is residing with her. It turns out that Julie’s de facto partner, Malcolm, has just moved his furniture to the property and plans to help Julie repay the mortgage. Have LendIt Pty Ltd taken with notice of Malcolm’s interest?

Tacking: Tabula in Naufragio 10.20  The doctrine of notice is subject to the principle of tabula in naufragio (translated literally to mean ‘a plank in a shipwreck’): Brace v Duchess of Marlborough [1728] EngR 100; 34 ER 829 (Hale CJ). The principle developed in relation to mortgages over general law land and one of its basic principles is that the holder of an equitable mortgage who acquires that interest without notice of the existence of an earlier equitable mortgage can take priority where the subsequent mortgagee acquires the legal estate from the first mortgagee, provided the acquisition of the legal title is not a consequence of any breach of trust: Marsh v Lee [1726] EngR 573; 86 ER 473; Assaf v Fuwa [1955] AC 215. Tabula in naufragio basically means that where two equitable mortgages are in conflict, the latter can gain priority against the prior ‘shipwreck’ security by acquiring the legal estate, the ‘plank’. This is essentially a tacking principle that is aimed at consolidating the position of the subsequent equitable interest holder who has obtained the legal estate. A further application of the principle is that a legal mortgagee will retain priority over a subsequent mortgagee in respect of further advances, subject to the legal mortgagee having no notice of the subsequent mortgagee at  the time of the further advance. Finally, a mortgagee who makes provision for further advances and makes such an advance with no notice of 638

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subsequent charges will not be bound by those charges: Hopkinson v Rolt (1861) 11 ER 829. The basis of this rule was outlined by Redlich J in OSBC v MKIC [2003] VSC 495, who noted that ‘the source of the rule is to be found in equitable principles based on notice affecting the conscience, so that the person with notice takes subject to it. The rule does not depend upon the doctrine of estates. It is the equities derived from the contractual relationship which make it unconscionable for the mortgagor to further charge the property and then claim a subsequent advance made by the mortgagee.’ Given the doctrine of tacking originally developed for general law mortgages, it is unclear whether or not it applies to the Torrens system where, subject to the specified exceptions to indefeasibility, priority of mortgages ranks according to the order of registration. In Olympic Holdings Pty Ltd v  Windslow Corporation Pty Ltd (in liq) [2008] WASCA  80, Hasluck J noted that: ... the doctrine of tacking developed in relation to mortgages over general law land and as has been noted, there exists some variety of opinion as to whether or not it applies, either at all or without modification, to the system of land ownership involving indefeasible registered title such as the Torrens system where, subject to the specified exceptions to indefeasibility, priority of mortgages ranks according to the order of registration.

Courts have generally assumed that the tacking principle is applicable to Torrens mortgages: Burke v Dawes (1938) 59 CLR 1. In Matzner v Clyde Securities Ltd [1975] 2 NSWLR 293, Holland J held that all aspects of the tabula in naufragio principle have an application to Torrens title mortgages.5 A possible problem, however, lies in the fact that a second Torrens mortgages is often registered, meaning it is legal from the outset. Such a situation would appear to be beyond the scope of the tacking principles: see E I Sykes and S Walker, The Law of Securities, 5th ed, 1993, at [462]. The general law principles have no application to mortgages of land in Queensland, Tasmania and Victoria: Property Law Act  1974 (Qld) s  82; Conveyancing and Law of Property Act 1884 (Tas) s 38; and Property Law Act 1958 (Vic) s 94.

Wilkes v Spooner Rule 10.21  The doctrine of notice is also subject to the exception derived from the decision in Wilkes v Spooner [1911] 2 KB 472 at 486 per Farwell LJ. According to this exception, when a legal interest holder takes without notice of the existence of a pre-existing equitable title, then passes that legal title on to a bona fide purchaser who does have notice of the prior equitable interest, the latter can take a good title. The rationale for this principle is that a legal estate holder who takes without notice should not be restricted in his or her attempts to sell the interest and obtain the best possible price. The exceptions to this rule are: (1) where a trustee sells legal title in breach of trust to a purchaser who acquires without notice of a prior equity and the trustee subsequently purchases title from the purchaser with notice of the prior equity, the rule will not apply. In such a situation, the trustee will hold the property on trust; and (2) if the property is acquired from a bona fide purchaser for value who has taken title without notice of a prior equitable title, by a subsequent purchaser who takes with notice of the existence of the equity and the acquisition is a consequence

5. See also Philos Pty Ltd v National Bank of Australasia (1976) 5 BPR 11810 (Bowen CJ in eq); Bank of New Zealand v Development Finance Corp of New Zealand [1988] 1 NZLR 495; Mercantile Credits Ltd v Australian & New Zealand Banking Group Ltd (1988) 48 SASR 407. 639

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of actual fraud, the Wilkes v Spooner exception cannot apply and the subsequent purchaser will be affected by notice: Kettlewell v Watson (1882) 21 Ch D 685.

Competing Equitable Interests 10.22  The basic rule for determining priority between two competing equitable interests stems from the maxim: qui prior est tempore potior est jure (meaning literally prior in time if both are equal). This maxim depends, however, upon an initial evaluation of the merits of both interests and this, in turn, depends upon what is described as the ‘better equity’ evaluation. This issue was explored in the classic decision of Rice v Rice (1853) 2 Drew 73; 61 ER 646. In that case, a competition arose between a prior equitable interest in the form of a lien that a vendor retained to claim unpaid purchase moneys for the sale of leasehold property, and a subsequent equitable interest held by a mortgagee. The vendor transferred legal title to the purchaser without insisting upon the full payment of the purchase price. This allowed the purchaser to use the title documents as security for a subsequent equitable mortgage. The issue on the facts was which equitable title should, in such circumstances be given priority. The court found in favour of the subsequent equity and in, resolving the dispute, established the fundamental basis for the resolution of disputes between competing equitable land interests. 10.23  Following the decision in Rice v  Rice, the priority rule for competing equitable interests may be stated as follows: the interest that is prior in time will take priority if both interests can be proven on the facts to be equal in merit. The rule anticipates an overall examination of the ‘better’ equity in the circumstances. The decision in Rice v Rice is extracted below.

  Rice v Rice  (1853) 2 Drew 73; 161 ER 646 Facts: Michael Rice, the defendant, purchased leasehold property from George and Lydia Rice. Once the transfer was executed, Michael Rice transferred a portion of the purchase-money but the balance remained owing to George and Lydia Rice. George and Lydia Rice allowed the money to stand over for a few days upon the promise by Michael Rice to pay. However, the transfer recited the fact that the whole of the purchase-moneys had already been paid and receipts were endorsed upon it. Following the transfer, Michael Rice deposited the transfer with Ede and Knight for the purpose of securing an advance. Michael Rice then absconded without paying the balance to the vendor or the equitable mortgagees. The issue was which equitable title, the equitable lien for the unpaid purchase price or the equitable mortgage should, on the facts, take priority. Sir R T Kindersley (Vice Chancellor): … The question to be decided in this case is whether the equitable interest of the Plaintiffs in respect of the vendor’s lien for unpaid purchase-money is to be preferred to the equitable interest of the Defendant Ede as equitable mortgagee. What is the rule of a Court of Equity for determining the preference as between persons having adverse equitable interests? The rule is sometimes expressed in this form: — ‘As between persons having only equitable interests, qui prior est tempore potior est jure.’ This is an incorrect statement of the rule; for that proposition is far from being universally true. In fact, not only is it not universally true as between persons having only equitable interests, but it is not universally true where their equitable interests are of precisely the same nature, and in that respect precisely equal; as in the common case of two successive assignments for valuable 640

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consideration of a reversionary interest in stock standing in the names of trustees, where the second assignee has given notice, and the first has omitted it. Another form of stating the rule is this: — ‘As between persons having only equitable interests, if their equities are equal, qui prior est tempore potior est jure.’ This form of stating the rule, is not so obviously incorrect as the former. And yet even this enunciation of the rule (when accurately considered) seems to me to involve a contradiction. For when we talk of two persons having equal or unequal equities, in what sense do we use the term ‘equity’? For example, when we say that A has a better equity than B, what is meant by that? It means only that, according to those principles of right and justice which a Court of Equity recognises and acts upon, it will prefer A to B, and will interfere to enforce the rights of A as against B. And therefore it is impossible (strictly speaking) that two persons should have equal equities, except in a case in which a Court of Equity would altogether refuse to lend its assistance to either party as against the other. If the Court will interfere to enforce the right of one against the other on any ground whatever, say on the ground of priority of time, how can it be said that the equities of the two are equal; that is, in other words, how can it be said that the one has no better right to call for the interference of a Court of Equity than the other? To lay down the rule therefore with perfect accuracy, I think it should be stated in some such form as this: ‘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.’ I have made these observations, not of course for the purpose of a mere verbal criticism on enunciation of a rule, but in order to ascertain and illustrate the real meaning of the rule itself. 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; that is, 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 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 one is better, or more worthy, or more entitled to protection than the other? Each of the two equitable interests arises out of the forbearance by the party of money due to him. There is, however, this difference between them, that the vendor’s lien for the right of the equitable mortgagee is created by the special contract of the parties. I cannot say that in my opinion this constitutes any sufficient ground of preference; though, if it makes any difference at all, I should say it is rather in favour of the equitable mortgagee, inasmuch as there is no constat of the right of the vendor to his lien for unpaid purchase-money until it has been declared by a decree of a Court of Equity; whereas there is a clear constat of the equitable mortgagee’s title immediately on the contract being made. But I do not see in this any sufficient ground for holding that the equitable mortgagee has the better equity. So far, then, as relates to the nature and quality of the two equitable interests abstractedly considered, they 641

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seem to me to stand on an equal footing; and this I conceive to have been the ground of Lord Eldon’s decision in Mackreth v Symmons ((1808) 15 Ves 329), where, in a contest between the vendor’s lien for unpaid purchase-money and the right of a person who had subsequently obtained from the purchasers a mere contract for a mortgage, and nothing more, he decided in favour of the former as being prior in point of time. If, then, the vendor’s lien for unpaid purchase-money and the right of an equitable mortgagee by mere contract for a mortgage are equitable interests of equal worth in respect of their abstract nature and quality, is there anything in the special circumstances of the present case to give to the one a better equity than the other? One special circumstance that occurs is this, that the equitable mortgagee has the possession of the title-deeds. The question therefore arises — between two persons having equitable interests of equal worth, does the possession of the title-deeds by one of them give him the better equity? In Foxter v Blackstone (I Myl & K 307) Sir John Leach, MR says: ‘A declaration of trust of an outstanding term, accompanied by a delivery of the deeds creating and continuing the term gives a better equity than a mere declaration of trust to a prior incumbrancer.’ That is a case in which the two parties have equitable interests in the term of precisely the same nature, viz, a declaration of trust of the term without an actual assignment; and there the delivery of the deeds to the subsequent incumbrancer gives him the better equity. To the same effect is the decision in Stanhope v  Lord Verney, according to Lord St Leonards’ view of it, as reported in Butler’s Co LItt (290 b, note (1), sec 15) (which seems a more satisfactory report than that in 2 Eden (81)). Lord St  Leonards (3 Sugd Vend 218) states it thus:— ‘In Stanhope v Lord Verney Lord Northington held that a declaration of trust of a term in favour of a person was tantamount to an actual assignment, unless a subsequent incumbrancer, bona fide and without notice, procured an assignment; and that the custody of the deeds respecting the term, with the declaration of trust of it in favour of a second incumbrancer, was equivalent to an actual assignment of it, and therefore gave him an advantage over the first incumbrancer which equity could not take from him.’ The same doctrine appears to be recognised by Lord Eldon in Maundrell v M ([1834] 10 Ves 271), where he says, ‘It is clear, with regard to mortgagees and incumbrancers, that if they do not get in the satisfied term in some sense, either taking an assignment, making the trustee a party to the instrument, or taking possession of the deed creating the term, that term cannot be used to protect them against any person having mesne charges or incumbrances;’ implying that taking possession of the deed creating the term, would confer on a subsequent incumbrancer such right of protection by means of the term. 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. And, applying this rule to the present case, it appears to me that the equitable interests of the two parties being in their nature and quality of equal worth, the Defendant having possession of the deeds has the better equity; and that there is, therefore, in this case no room for the application of the maxim qui prior est tempore potior est jure, which is only applicable where the equities of the two parties are in all other respects equal. I feel all the more confidence in arriving at this conclusion, inasmuch as it is in accordance with the opinion expressed by Lord St Leonards in his work on Vendors and Purchasers. And I have no doubt that in Mackreth v Symmons, if the equitable mortgagee had, in addition to his contract for a mortgage, obtained the title-deeds from his mortgagor, Lord Eldon would have decided in his favour. I must, however, guard against the supposition that I mean to express an opinion that the possession of title-deeds will in all cases and under all circumstances give the better equity. The deeds may be in the possession of a party in such a manner and under such circumstances as that such possession will confer no advantage whatever. For example in Allen v Knight ([1850] 5 Hare 272) (affirmed by the Lord Chancellor and reported on appeal in 11 Jur (527)) the deeds have been delivered to the first equitable mortgagee, and by some unexplained means they had 642

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got back into the possession of the mortgagor, who delivered them to a subsequent equitable mortgagee. It was insisted by the latter that it must be presumed that it was by the fault or neglect of the first mortgagee that the deeds had got out of his possession, or that at all events the Court should direct an enquiry as to the circumstances. But the Court held that the onus lay on the second mortgagee of proving such alleged fraud or neglect of the first mortgagee; and as he had failed to prove it, the Court could not presume it, nor direct an enquiry on the subject; and decreed in favour of the first mortgagee. I think it may be clearly inferred from this case that if the first mortgagee had never had the deeds delivered to him, or if it had been proved that the deeds had got back to the mortgagor through his fault or neglect, the decision would have been in favour of the second mortgagee who had the deeds. So the deeds may come into the hands of a subsequent equitable mortgagee by means of an act committed by another person which constituted a breach of an express trust as against the person having the prior equitable interests. In such a case it would be contrary to the principles of a Court of Equity to allow the subsequent mortgagee to avail himself of the injury which had been thus done to the party having the prior equitable estate or interest. Indeed it appears to me that in all cases of contest between persons having equitable interests the conduct of the parties and all the circumstances must be taken into consideration, in order to determine which has the better equity. And if we take that course in the present case, everything seems in favour of the Defendant, the equitable mortgagee. The vendors, when they sold the estate, chose to leave part of the purchase-money unpaid, and yet executed and delivered to the purchaser a conveyance by which they declared in the most solemn and deliberate manner, both in the body and by a receipt indorsed, that the whole purchase-money had been duly paid. They might still have required that the title-deeds should remain in their custody, with a memorandum by way of equitable mortgage as a security for the unpaid purchase-money, and, if they had done so, they would have been secure against any subsequent equitable incumbrance; but that they did not choose to do, and the deeds were delivered to the purchaser. Thus 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. The Defendant, who afterwards took a mortgage, was in effect invited and encouraged by the vendors to rely on the purchaser’s title. They had in effect by their acts assured the mortgagee that, as far as they (the vendors) were concerned, the mortgagor had an absolute indefeasible title both at law and in equity. The mortgagee was guilty of no negligence; he was perfectly justified in trusting to the security of the equitable mortgage by deposit of deeds, without the slightest obligation to go and inquire of the vendors whether they had received all their purchase-money, when they had already given their solemn assurance in writing that they had received every shilling of it, and had conveyed the estate and delivered over the deeds; and I do not think that the fact of the conveyance bearing date only the day before the mortgage imposed on him any such obligation. The Defendant omitted nothing that was necessary to constitute a complete and effectual equitable mortgage; and although the mortgage was taken, not for money actually advanced at the time, but for an antecedent debt, the forbearance of that debt constitutes a full and sufficient valuable consideration. Upon a consideration then of the conduct of the two parties, and a consideration of all the circumstances of the case, and especially the fact of the possession of the deeds, which the mortgagee acquired with perfect bona fides, and without any wrong done to the vendors, I am of opinion that the equity of the mortgagee is far better than that of the vendor, and ought to prevail. I may, in conclusion, venture to make the suggestion that the point now under consideration is often put by text-writers in a form calculated to mislead, when it is propounded as a question 643

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whether the vendor, in respect of his lien for unpaid purchase-money, or an equitable mortgagee, ought to be preferred; or when an opinion is expressed that the one or the other has the better equity. If I am right in my view of the matter, neither the one nor the other has necessarily and under all circumstances the better equity. Their equitable interests, abstractedly considered, are of equal value in respect of their nature and quality; but whether their equities are in other respects equal, or whether the one or the other has acquired the better equity, must depend upon all the circumstances of each particular case, and especially the conduct of the respective parties. And among the circumstances which may give to the one a better equity, the possession of the title-deeds is a very material one. But if after a close examination of all these matters, there appears nothing to give to the one a better equity than the other, then and then only, resort must be had to the maxim qui prior est tempore potior est jure, and the priority of time then gives the better equity.

Commentary 10.24  The decision in Rice v  Rice sets out that the priority in time accorded to an interest will only be decisive in circumstances where, in all other respects, the merits of the interests are equal. Kindersley V-C stated at  78 that the rule was as follows: ‘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.’ In conducting a merit analysis, consideration must be given to a broad range of factors including: whether the prior interest holder has armed the purchaser with the indicia of title and thereby contributed to the creation of the subsequent equitable interest. In the words of Kindersley V-C in Rice v Rice, whether the holder of the first equitable interests has armed a third party to ‘go into the world under false colours’ (at 646). Other factors include: whether the subsequent equitable interest holder took with notice of the existence of the prior equitable interest holder; whether the prior interest holder has sufficiently protected their interest by retaining possession of the title documents; whether the parties have followed usual conveyancing practices or taken shortcuts or risks, whether the prior equitable interest holders were beneficiaries and whether any fraudulent conduct could be attributable to the independent acts of the trustee: see also Walker v Linom [1907] 2 Ch 104. The focus of the merit analysis is, inevitably, upon the conduct of the first interest holder. In this respect, some clear postponing or disentitling conduct must be established which, in the circumstances, goes beyond mere unfairness in the outcome. As outlined by Pembroke J in Circuit Finance Australia Ltd (in liq) v Panella [2011] NSWSC 311 at [13]: Mere unfairness in the outcome is irrelevant unless there is also some tangible conduct by the holder of the first interest which caused the holder of the later interest to act on a false premise. This is why, in such a case, the conduct of the holder of the first interest is often described as ‘postponing’ or ‘disentitling’ conduct. It is not sufficient to point to the eventual outcome and contend that it is unfair. It may well be so by some moral standard. But the unfairness of the outcome is not a reason for departing from well-established legal principle. The only relevant question is whether the supposedly unfair result is the consequence of some causative act, neglect or default by the plaintiff.

The scope of the merit analysis process has been the subject of significant discussion, particularly in cases dealing with priority disputes between unregistered equitable interests under the Torrens system. The courts have held that the merit analysis requires a holistic evaluation of the circumstances including the issue of whether the prior unregistered equitable interest holder has availed themselves of protection under the caveat system and 644

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what impact, if any, a failure to seek such protection might have upon the overall merit analysis: see Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 339 per Mason and Deane JJ where their Honours stated: 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. … 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 priority principles that have evolved to deal with disputes between equitable interests should not be dealt with mechanically. The real task of the court is to determine ‘where the better equity lies’ and this requires an holistic review of the facts: Barlin Investments Pty Ltd v Westpac Banking Corporation [2012] BPR 30,671 at [31]; Perpetual Trustee Company Ltd v Smith (2010) 273 ALR 469 at [74]. This was emphasised by Ward CJ in Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd; Guan v Linfield Developments Pty Ltd (2017) 18 BPR 36,683, holding at [253] that ‘Heid v Reliance does not stand for any general proposition that only conduct leading to the creation or acquisition of a later interest will qualify as disentitling conduct. On the contrary, the approach of the joint judgment of Mason and Deane JJ confirms the longstanding position of courts of equity that all the circumstances must be taken into account and that strict, technical rules are inappropriate in this context.’ On this basis, her Honour held at  [256] that whatever the rationale for the resolution of priority disputes between competing equitable interests, ‘those principles seem to me better served (and certainly not undermined) by the recognition that disentitling conduct includes conduct leading to a failure by a subsequent interest-holder to protect its pre-existing rights, and is not limited to situations in which an act or omission of the earlier interest-holder contributes to an assumption leading to the  creation or acquisition  of the later equitable interest.’ In this regard, while it is clear that estoppel in pais is one important basis for the postponement of priority of an earlier equitable interest, given the scope of the test, and its focus upon a holistic, non-exhaustive review of the circumstances, it is not the only one. In this regard the words of Pomeroy (quoted by Ward CJ at [234]) are relevant: Among successive equitable estates or interests, where there exists no special claim, advantage, or superiority in any one over the others, the order of time controls. Under these circumstances, the maxim, Among equal equities the first in order of time prevails, furnishes the rule of decision (J Norton Pomeroy, A Treatise on Equity Jurisprudence, 2nd ed, 1892, vol 2 at 951).

See  further discussion on these issues in the context of priority disputes between unregistered Torrens title interests in Chapter 13.

Estoppel 10.25  Arguably, the true basis for determining a priority dispute between competing equitable interests is grounded in estoppel. In Rimmer v  Webster [1902] 2 Ch  163 at [173], Farwell J said, ‘If the owner of property clothes a third person with the apparent ownership … 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’. According to this view, wherever a prior equitable interest holder does not retain possession of the title 645

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documents and confers the indicia of title, allowing a third party to represent to the rest of the world that they are the full and unencumbered legal titleholders, the prior interest holder is estopped from asserting priority. The estoppel is founded in the detrimental reliance of any subsequent party upon the veracity of the indicia of title. The view that estoppel is the primary basis for equitable priority disputes was, however, rejected by Parker J in Capell v Winter [1907] 2 Ch 376, who concluded that the appropriate principle for the determination of such disputes is who, in all the circumstances, has the ‘better’ equity and this was the approach preferred by Kindersley V-C in Rice v Rice. The estoppel principle has, however, generated a lot of discussion. In Abigail v  Lapin (1934) 51 CLR 58, Lord Wright in the Privy Council noted that the representation is not generally one which emanates directly from the prior equitable interest holder. He stated at [68]: But it is seldom that the conduct of the person whose equity is post-poned 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 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 Lordship’s judgment entitles the appellants to succeed in this appeal.

In Heid v Reliance Finance Corporation (1983) 154 CLR 326, Mason and Deane JJ in the High Court noted that 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’: at 339. Their Honours added that the act of allowing a third party to hold title documents and arming them with the power to go into the world under ‘false colours’ constituted an indirect representation that was within the scope of estoppel. However, their Honours ultimately concluded that it was difficult, ‘if not impossible, to accommodate all the cases of postponement of an equity under the umbrella of an estoppel’ (at 341) and therefore they preferred to avoid what they described as the ‘contortions’ and ‘convolutions’ associated with basing the postponement of a prior equity to a later equity on this principle. In line with the approach of V-C Kindersley in Rice v Rice, Mason and Deane JJ in Heid v Reliance concluded that it was appropriate to adopt the ‘more general and flexible principle that preference should be given to what is the better equity in an examination of the relevant circumstances’: at 341. In Cash Resources Australia Pty Ltd v  BT Securities Ltd [1990] VR 576, Brooking J reinforced the importance of adopting an overall merit analysis and made the following comments at 580: Questions of priority as between competing equities must be determined by applying, not technical rules, but broad principles of right and justice: Rice v Rice (1853) 2 Drew 73, at 78–9. There are no rigid principles: King v  AGC (Advances) Ltd [1983] 1 VR 682 at  687. To  say that the question involves general considerations of fairness and justice acknowledges that 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 prior claimant has enabled such a representation to be made: Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326, at 341 per Mason and Deane JJ. 646

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The breadth of such an assessment means that it is inappropriate to prioritise one factor over another, although particular factors that result in the interest holder acquiring possession of title deeds may have the effect of putting the subsequent interest holder into a very strong position. As noted by Tadgell J in Avco Finances Pty Ltd v Fishman [1993] 1 VR 90 at 92: A claimant of an equitable security who is not only first in time but who relies in competition with another such claimant on possession of title deeds, or the equivalent, is likely to be in a very strong position as against the other; and 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 was not in possession of the title deeds or an equivalent.

Sometimes the failure to do an act that is usual to the transaction process will generate the estoppel. For example, in Nabeth Taleb v  National Australia Bank [2011] NSWSC 1562 the court concluded that the failure to lodge a caveat displaced the priority of a prior equity holder because it provided a means of deception. Bryson J made it clear that a failure to lodge a caveat will not ‘necessarily result in a loss of priority, but that in some circumstances, where a failure directly contributes to and is “causative” of the creation of the subsequent equity, it constitutes an act of omission by the holder of an earlier interest which has led the other to acquire his interest on the supposition that the earlier interest did not exist’. Similarly, in LTDC Pty Ltd v  Cashflow Finace Australia Pty Ltd [2019] NSWSC 150, Darke J held that a failure to lodge a caveat can contribute to the assumption that no interest exists and this can amount to a deliberate attempt to misrepresent the true situation. On the facts, a priority dispute between two equitable mortgages arose. The first mortgagee had not protected their unregistered mortgage with a caveat. The issue was whether this failure to protect amounted to postponing conduct. His Honour held that it did. By failing to caveat, the owners effectively represented that the property was not subject to any prior interest. The absence of a caveat made it reasonable for the subsequent mortgagee to assume no previous mortgage existed. As Darke J stated, ‘The failure to caveat amounted to a representation which contributed to the assumption upon which the plaintiff proceeded’ (at [66]). The failure was deliberate, because the defendant was aware it might lead to the creation of a subsequent interest. That meant it was, in a very real sense, ‘a deliberate courting by the defendant of that risk’ (at [67]). Removing the risk was a ‘relatively simple and inexpensive’ step, only available to the prior mortgagee, and this made the omission even more significant in a merit assessment (at [67]). See also: S Rodrick, ‘Resolving Priority Disputes Between Competing Equitable Interests’ (2001) 9 Australian Property Law Journal 172.

10.26  Revision Questions 1. At what stage does the priority accorded to time have relevance in a dispute between competing equitable interests? 2. What is meant by the term ‘the better equity’ in this context? 3. What relevance does the doctrine of notice have to a priority dispute between equitable interests? Do you think that within such a dispute any single factor should be given greater weight over another? 4. Consider the following situation: Mr  Black owns a fee simple and enters into a contract of sale with Mr  Brown who pays a deposit and agrees to a settlement in three months’ time. Prior to settlement, Mr Brown asks to view the 647

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title documents, and Mr Black agrees to allow ‘temporary’ access and sends across the documents. As soon as Mr Brown receives the title he takes it to the bank and deposits the title in return for a mortgage advance. Mr Brown then disappears with the mortgage money and does not settle. In the meantime, Mr Black enters into a contract to sell the property to Mr Green. In a dispute between the bank (equitable mortgage by deposit of title documents) and Mr Green (equitable interest arising from second contract of sale), who is likely to have priority? Describe the nature of the equitable title of each party and the factors relevant to a merit analysis. 5. What is the significance of a determination that a prior equitable interest holder, in failing to properly protect their interest, effectively induced a ‘representation’ to the rest of the world that the legal title was free? Is this the same as estoppel? Should estoppel form the foundation of the merit assessment?

Prior Mere Equity and Subsequent Equitable Interest 10.27  In circumstances where a mere or personal equitable interest arises, which is antecedent to a full equitable title, and, subsequently, a full equitable interest arises over the same land, the dispute between the prior mere equity and the subsequent full equity may be characterised as a priority dispute. This characterisation is dependent upon the assumption that the mere equitable interest has proprietary characteristics in its own right. If the mere equity merely exists as an antecedent right to the creation of a full equity, it may have no such proprietary characteristics and will therefore be incapable of generating a priority dispute. In such a situation, if the rights conferred under the mere equity have not been exercised prior to the creation of the subsequent full equity, it will be defeated. There is no universal definition of a mere equity: Burns Philp Trustee Co Ltd v Viney [1981] 2 NSWLR 216 per Kearney J; Jonsue Investments Pty Ltd v Balweb Pty Ltd [2013] NSWSC 325 at [43]. See also the discussion by R C Nolan, ‘Equitable Property’ (2006) 122 Law Quarterly Review 232, and S X Aaron, ‘Conceptualising the Singapore Real Investment Trust’ (2010) 24 Trust Law International 155. 10.28  This issue was discussed by the High Court in Latec v Terrigal (1965) 113 CLR 265. In that case, Kitto J argued that a priority dispute could arise between a prior mere equity and a subsequent full equity because it was a form of title. However, because the prior mere equity to set aside the improper sale for fraud was antecedent to the subsequent full equity of redemption, which would arise once the sale was set aside, the defence of bona fide purchaser for value without notice was applicable. Kitto J stated ‘… 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’ (at 278). Menzies J developed broadly similar views, concluding that the ‘prior in time if both are equal’ principle was inappropriate in this type of dispute. This principle was first laid down in Phillips v Phillips [1861] EngR 1044; (1862) 4 De G F & J 208; 45  ER  1164. In that case LC  Westbury stated: ‘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’. See also: Cave v Cave (1880) 15 Ch D 639 per LJ Fry at 646. Taylor J, on the other hand, did not believe that the mere equity constituted an independent proprietary title if prior to the improper sale being 648

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set aside and the equity of redemption revesting in the mortgagor, a bona fide purchaser has acquired an estate for value without notice. Significantly, the mere equity is the product of an improper sale caused by fraud and this may be distinguished from cases where the mortgagee has acted with ‘calculated indifference’ to the interests of the mortgagor, but not a lack of good faith and conduct amounting to equitable fraud: Almona Pty Ltd v Parklea Corporation Pty Ltd [2019] NSWSC 1868 at [618]. In the subsequent decision by the New South Wales Supreme Court in Ruthol v Mills the possibility of applying a different priority assessment to a competition between a mere equity and a full equitable interest was examined by the trial judge; however, it was subsequently rejected by the New South Wales Court of Appeal. The decisions in Latec Investments Ltd v Hotel Terrigal Pty Ltd (Menzies J) and Ruthol v Mills are extracted below. See also Chapter 9 at 9.40 where the judgment of Kitto J in Latec Investments Ltd v Hotel Terrigal Pty Ltd is extracted.

  Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq)  (1965) 113 CLR 265 Facts: The facts for this case are set out at 9.40. 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 GF & 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 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, at pp 215–218 (45 ER, at pp 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 harmonise 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 at p 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 649

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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 ChD, at p 649. (at p 289) 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 GM & 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 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, at p 630 (42 ER, at p 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, at p 90 (45 ER, at p 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, at p 86 (45 ER, at p 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 (at p 290). 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 (at p 291). 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 650

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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 judgment of Kitto J is extracted at 9.40.]

  Ruthol v Mills  (2003) 11 BPR 20,793 Facts: Ruthol leased land to Alphega for five years with an option to renew. Alphega had found it difficult to keep up with the rental payments and it was considered unlikely that they would exercise their renewal option. Hence, Ruthol granted Mr and Mrs Mills an option to purchase the property for $490,000. The option to purchase had to be exercised within a specific time frame and was conditional on Alphega not exercising its option. Alphega then purported to exercise its option but never formally executed the lease. Hence, the option was not actually carried out. Ruthol’s solicitors fraudulently informed Mr and Mrs Mills that Alphega had exercised its option. Consequently, Mr  and Mrs  Mills did not exercise their option to purchase within the requisite time period, believing they were not entitled to do so. Ruthol then served a notice to quit on Alphega and leased the property to Tricon with an option to purchase. Tricon purported to exercise the option to purchase granted to it in the lease. The Mills claimed an equity against Ruthol on the basis of breach of contract, relying upon the fraudulent representations of Ruthol. The trial judge, Palmer J, found that the Mills held an equitable interest in the property on the grounds that a party may not take advantage of its own wrong. Palmer J concluded that the character of the interest was in the nature of a full equitable interest. His Honour felt that the characterisation of the equitable interest was one founded upon policy rather than distinctions in the qualities of various equitable rights. On the facts, the relevant policy assessment was based upon whether the prior interest holder needed the assistance of a court of equity to perfect title. If such assistance was needed, and it was not obtained prior to a bona fide purchaser for value taking an equitable interest without notice, the right would be defeated. Palmer J concluded that the interest of the Mills did not require the assistance of a court of equity to be perfected. Its enforceability could not be denied because Ruthol, as a wrongdoer, could not be permitted to take advantage of its own wrongdoing. Consequently, as the interest of the Mills did not require the assistance of a court of equity, it could be characterised as a full equity. Palmer J then applied the relevant priority rule for a competition between the prior full equity of the Mills and the subsequent full equity of Tricon. The relevant rule for such a dispute is prior in time if both interests are equal. Working from this assumption, his Honour concluded that the merits were equal because Tricon had not demonstrated that the equitable interest of the Mills should be postponed. Consequently, the equitable interest of the Mills defeated the subsequent equitable interest of Tricon as it was prior in time. The Court of Appeal did not agree. Their Honours adopted a completely different assessment. Sheller JA concluded that the principle that a wrongdoer cannot be permitted to take advantage of its own wrongdoing should not be applied where property has gone to a third party. Consequently, Sheller JA was not prepared to give the Mills priority against Tricon as a bona 651

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fide purchaser. Cripps AJA agreed noting that the issue should be resolved in favour of Tricon by reason of the decision in Latec without the need to categorise the interest of the Mills. Sheller JA: For his third point Mr Walker adopted on behalf of Ruthol the submission put by Tricon by Mr Young of counsel that Tricon as a purchaser for value without notice had a superior right to Mr and Mrs Mills and was entitled to specific performance against Ruthol and damages for delay, leaving Mr and Mrs Mills to their remedy in damages for breach of contract against Ruthol. In his reasons for judgment, Palmer J carefully considered the competition between Mr and Mrs Mills and Tricon. There was no dispute that the grant of the Mills’ option to purchase and the grant of the Tricon option to purchase the Manly Vale property gave each grantee an equitable interest in the property; Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57 at 75 per Gibbs J. Mr Young submitted that the equitable interest which Mr and Mrs Mills had so acquired came to an end on 30 June 1997 at the expiry of the option period without the option having been exercised. Thereafter on 6  May  1998 the Tricon option was granted when the Tricon lease was executed. Palmer J said that it followed, according to Mr Young, that at the time Tricon’s equitable interest in the property came into existence, Mr and Mrs Mills had no prior equitable interest. The exercise of the option on 3 March 1999 might be valid as against Ruthol but that was only because the court would decree that, as against Mr and Mrs Mills, Ruthol could not rely upon its own wrongdoing to deny valid exercise of the option. The right of Mr and Mrs Mills to have the exercise of their option validated against Ruthol by a judgment of the court was a ‘mere equity’ which could not prevail against an equitable interest in the Manly Vale property which Tricon acquired for value without notice. Palmer J said that there was no doubt that as a general rule a ‘mere equity’ did not enter into competition with an equitable interest in property which was taken for value and without notice, even if the equitable interest was acquired later in time. Palmer J posed these questions: ‘What is the right or interest of the Mills which is in competition with the equitable interest in the Property held by Tricon? Is it a merely personal right against Ruthol which prevents Ruthol from denying that the Mills’ Option was exercised within time? If  so, is that right a common law right or an equitable right which could properly be called a “mere equity”? If the right is a common law right, does the rule enunciated in Phillips v Phillips (1861) 4 De GF & J 208 at 218; 45 ER 1164 still apply?’ His Honour by reference to the cases and text books carefully explored what is meant by the contrast between ‘mere equity’ and equitable interest. He referred in passing to Kearney J’s remarks in Burns Philp Trustee Co Limited v Viney [1981] 2 NSWLR 216 at 223: ‘… there is some circuity involved in finding the starting point for the existence of … an equitable interest, the problem being to isolate as the initiating factor the proprietary interest or the right to enforce the interest … This problem is almost of jurisprudential mystery.’ In the decision of the High Court in Latec Investments Limited v Hotel Terrigal Pty Limited (In liquidation) (1965) 113 CLR 265 the opinions of Kitto J and Taylor J differed about whether a mortgagor whose land had been fraudulently sold and transferred by the mortgagee to the purchaser retained from the date of transfer an equitable interest in the mortgaged property, the view preferred by Taylor J at 284, or something less and distinguishable from an equitable estate because logically antecedent to it, the view preferred by Kitto J at 277–8. Menzies J, the third member of the Court, said this at 291: ‘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 652

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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 DeGM & 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 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.’ Palmer J said that Phillips v Phillips could be explained as a policy decision rather than a decision resting on distinctions in the qualities of various equitable rights. The policy was that where the holder of a prior equitable interest needs the assistance of the equity court to perfect his or her title to it, that equitable interest will be defeated if, before the title is perfected, the third party takes an equitable interest for value without notice. On this appeal it is unnecessary further to investigate this proposition which can be taken to be correct. However, Palmer J concluded that Mr  and Mrs  Mills did not require the assistance of the equity court in order to exercise their option validly so that the competition between them and Tricon was not one between something less than an equitable interest, perhaps inappropriately described as a ‘mere equity’ and an equitable interest. His Honour said that Mr and Mrs Mills validly exercised their option, even though the option period had expired, because of the principle of the common law which deprives a wrongdoer of the advantage of his or her wrongdoing. For this principle his Honour went back to Coke on Littleton 148b and Broom’s Legal Maxims, 10th ed (1939) at 191 and following. Palmer J said: ‘In the present case, if the Mills had not placed a caveat on the title to the Property and the Property had been transferred to Tricon, the Mills could have successfully claimed damages for breach of contract in a court of common law. The court of common law, applying the maxim, would have held that the condition as to the time of exercise of the option had been “eliminated”, to use the words of Corbin (see para 114), that the option had been validly exercised so that a contract for sale had come into existence, that that contract had been breached by Ruthol, and that the Mills were entitled to damages. If a court of common law would recognise that the contractual right to exercise the Mills’ Option continued to exist until 3 March 1999, so also would a court of equity. The court of equity would, in addition, have recognised that because the contractual right to exercise the option continued to subsist until 3 March 1999 so also did the Mills’ equitable interest in the Property which had been conferred by the grant of the option. From the time of grant of the Mills’ Option up to the date of judgment, the Mills have never required the assistance of equity to perfect their title to an equitable interest in the Property. They have held their equitable interest without interruption from 25 February 1997. For that reason, the competition between the Mills and Tricon is a competition between equitable interests so that, if the merits are equal, the interest which is prior in time will prevail.’ Proceeding from this premise, Palmer J said that whereas in this case both Mr and Mrs Mills and Tricon had an equitable interest in the Manly Vale property, Tricon had to demonstrate that Mr and Mrs Mills’s prior equitable interest should be postponed to its later equitable interest. It bore the onus of proving an act or neglect of the prior owner which contributed in some way to the subsequent owner acquiring its interest without notice of the prior equitable interest; Lapin 653

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v Abigail (1930) 44 CLR 166 at 204 per Dixon J and Butler v Fairclough (1917) 23 CLR 78. His Honour said: ‘In the present case Tricon, quite properly, does not submit that any conduct on the part of the Mills contributed to the acquisition by it of its equitable interest in the Property without notice. The Mills did not exercise their Option nor did they register a caveat before 3 March 1999 because they had been deceived by Ruthol into believing that the Option had been terminated on 18 March 1997. Mr Mills discovered the deception by chance and thereafter acted to protect his rights with all appropriate expedition. It follows that as between the Mills and Tricon the merits are equal. Both have been deceived by Ruthol. The result is that the prior equitable interest of the Mills prevails over the subsequent equitable interest of Tricon.’ Mr Young, on behalf of Tricon, submitted that Palmer J erred in concluding that Mr and Mrs Mills had never required the assistance of equity to perfect their title to an equitable interest in the property. This suggested, so the argument ran, that the maxim ‘no man can take advantage of his own wrong’ was a basis for relief in this case but not in Latec Investments where the maxim was not called in aid by the defrauded mortgagor to claim an equitable interest in priority to the trustee for debenture holders, the chargee over the land charged by the fraudulent purchaser. Mr Young relied upon the reference in Broom at 200 to what was said in Hooper v Lane (1859) 6 HL Cas 443 at 461–2; 10 ER 1368 at 1376 by Bramwell B: ‘I think it [that is to say the maxim in question] is never applicable where the right of a third party is to be affected, as here, viz., the right of Lane; — I know of no case to that effect. Can one man by his wrongful act to another deprive a third of his right against that other?’ Mr Young submitted that this is an exception to the maxim in cases where a third party acquires rights bona fide under a fraudulent transaction. Thus the application of the maxim that ‘no man shall take advantage of his own wrong’ is no valid means of avoiding the rights of third parties, as their rights are fully acknowledged in the application of the maxim. The finding that Ruthol made a deliberate misrepresentation of fact is an equivalent of a finding of fraud against Ruthol. Latec Investments was similarly a fraud case. In both Latec Investments and the present case a person had an equitable interest in land; a fraudulent transaction took place purporting to deprive that person of the equitable interest — in Latec Investments a fraudulent sale and in the present a fraudulent assertion of exercise of a prior option. Thereafter a third  party stepped in and acquired an equitable interest in reliance upon the validity of the fraudulent transaction. A court of equity was approached to make orders allowing the person to realise the former equitable interest. Mr Young submitted that there was no sound basis for distinguishing between the two cases. Thus, whether Ruthol had committed a fraudulent act or not, Tricon as the purchaser for value without notice had a superior right to Mr and Mrs Mills and was entitled to specific performance against Ruthol and damages for delay. Tricon did not appeal from Palmer J’s orders although it sought, in effect, to have some of the trial Judge’s orders set aside. However, the point it relied on was embraced in Ruthol’s notice of appeal and the argument adopted on Ruthol’s behalf. In my opinion, the argument should succeed. While, as Palmer J said, Ruthol could not rely upon its deliberate misrepresentation to Mr and Mrs Mills about whether Alphega had exercised its option to renew the lease to defeat Mr and Mrs Mills’ claim to damages against it, the maxim ‘no man can take advantage of his own wrong’ did not enable Mr and Mrs Mills to posit in reliance on that misrepresentation an equitable interest which would defeat Tricon’s equitable interest in the Manly Vale property. Assuming, as Palmer J does correctly, that Ruthol was estopped from denying that the Mills’ option was properly exercised, what application could the maxim that no man may take 654

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advantage of his own wrong have to Tricon’s priority which could be reconciled with the decision of the High Court in Latec Investments? The maxim (that no party may take advantage of its own wrong) is well established at common law. It has its roots in the sixteenth century where it can be found in the writings of Sir  Francis  Bacon and Sir Edward Coke. Its influence on the law of contracts has been discussed notably by Reading CJ in the English Court of Appeal in The New Zealand Shipping Company Limited v the Societe des Ateliers et Chantiers de France [1917] 2 KB 717 at 723–4 (see  also [1919] AC 1), by the House of Lords in Alghussein Establishment v  Eton College [1988] 1 WLR 587 and by this Court in TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 147 and Mitchell v Pattern Holdings Pty Ltd (2002) NSWCA 212 where many of the cases are cited and discussed by Powell JA at [55]. It was recognised in this State in Green v Woodroffe (1828) Dowling Select Cases Vol 1 per Forbes CJ, Stephen and Dowling JJ. In Suttor v Gundowda Pty Limited (1950) 81 CLR 418 at 441 the High Court said that: ‘… if the stipulation be that the contract shall be void on the happening of an event which one or either of them can by his own act or omission bring about, then the party, who by his own act or omission brings that event about, cannot be permitted either to insist upon the stipulation himself or to compel the other party, who is blameless, to insist upon it, because to permit the blameable party to do either would be to permit him to take advantage of his own wrong, in the one case directly, and in the other case indirectly in a roundabout way, but in either way putting an end to the contract.’ However, in Hooper v Lane at 461–2 and 1376, Bramwell B instanced limitations of the rule that ‘no man shall take advantage of his own wrong.’ See Broom at 200. In the case of In re London Celluloid Company (1888) 39 Ch D 190 at 206, Bowen LJ described the observations of Bramwell B as being ‘very instructive’ and said that the maxim meant ‘that a man cannot enforce against another a right arising from his own breach of contract or breach of duty’. The case concerned a claim by the liquidator of a company to enforce against directors the payment of calls on shares. At 207 Bowen LJ said: ‘Here there has been a breach of contract by the company but the right to enforce payment of calls does not arise from that breach. Even if it did, I doubt whether the maxim would apply. You cannot sue a person whom you have wronged, for a demand arising out of the wrong, but that rule does not apply in favour of transferees, unless they have by special agreement been clothed with all the rights and cross demands of the transferors. Again, the maxim cannot be applied so as to defeat rights which have subsequently arisen …’ The principle of protecting the rights of third parties acquired bona fide under a fraudulent transaction is also exemplified in Broom at 200, by the case of a shareholder in a company who has been induced to take shares by the fraud of the company and who cannot avoid the contract and have his name removed from the register after an order for the winding-up of the company has been made, nor after a petition for winding-up has been presented on which an order is subsequently made; because of the intervening rights of the creditors accruing under that order: Oakes v Turquand & Anor (1867) LR 2 HL 325; Houldsworth v City of Glasgow Bank (1880) 5 AppCas 317. In Broom at 200 reference was also made to sale of goods cases such as White v Garden (1851) 10 CB 919; 136 ER 364 where it was decided that a contract for the sale of goods, obtained by fraud on the part of the purchaser, is void only at the election of the vendor but it is too late to declare such election after the goods have passed into the hands of a bona fide purchaser. There is a faint echo of the situation in the present case in the observation of Cresswell J (at 926; 367) that: ‘One of two innocent parties must suffer: and surely it is more just that the burthen should fall on the defendants, who were guilty of negligence in parting with their 655

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goods upon the faith of a piece of paper which a little inquiry would have shewn to be worthless, rather than upon the plaintiff, who trusted to the possession of the goods themselves.’ In S and Y Investments (No. 2) Pty Limited (In Liquidation) v Commercial Union Assurance Company of Australia Limited (1986) 44 NTR 14, Asche J, with whom Kearney J essentially agreed, referred to the case of In P Samuel & Co Ltd v  Dumas [1924] AC 431, where the mortgagee of a ship claimed against the loss of the ship which was insured against ‘perils of the sea’. Asche J’s description of the case continued: ‘In fact the loss of the ship was caused by the owner of the ship scuttling her and the House of Lords held that because of this deliberate act the loss did not have the accidental element which was essential to constitute a peril of the sea. But their Lordships held that otherwise the act of the shipowner would not have avoided the policy vis a vis the mortgagee who was not a party to the owner’s fraud. While the owner could not take advantage of his own wrong the mortgagee would only be excluded on this ground if, in the words of Viscount Finlay at page 457: “The mortgagee is to be considered as so identified with the owner whose wilful misconduct brought about the loss as to be incapable of taking advantage of it.”’ The maxim that a party may not take advantage of its own wrong will not usually apply to affect the right of an innocent third party acquired from the wrongdoer. Palmer J determined that Mr and Mrs Mills did not need the assistance of the equity court to perfect their equitable interest on the ground that they ‘validly exercised their option, even though the option period had expired, because of the principle of the common law which deprives a wrongdoer of the advantage of his or her wrongdoing.’ With respect, the maxim did not enable Mr  and Mrs  Mills to defeat Tricon’s claim to priority. Ruthol could not rely on its wrongdoing in misleading Mr and Mrs Mills to defeat their claim against it. But Tricon was not guilty of any wrongdoing and the maxim did not prevent its asserting its priority over the interest claimed by Mr and Mrs Mills. Accordingly, in my opinion, for the reasons given in Latec Investments, Tricon’s equitable interest as purchaser of the Manly Vale property took priority over Mr and Mrs Mills’ equity to proceed against Ruthol for breach of contract in reliance on their late exercise on 3 March 1999 of their option to purchase. Cripps AJA: I agree that the appeal should be allowed for the reasons given by Sheller JA. I will set out the salient facts for my additional comments as to why the equitable interest of Tricon in the subject property prevails over the earlier equitable interest of the Mills and why Tricon is entitled to an order for costs. By deed dated 25  February  1997 Ruthol granted the Mills an option to purchase its land provided the option was exercised between 7  April  1997 and 30  June  1997. The option entitlement was conditional on the non-exercise of the existing lessee, Alphega, of a right to renew its lease. Before the time had expired for the Mills to exercise their option they were told by Ruthol (fraudulently as it turned out) that Alphega had exercised its option and for that reason the Mills did not attempt to exercise their option during the relevant period. In fact Alphega had not exercised its option but the Mills were not aware of Ruthol’s deceit. When the Mills became aware of the true state of affairs in early 1999 they purported to exercise the option and lodged a caveat on the title to protect their interest. In March 1999 they commenced proceedings against Ruthol for specific performance and in the alternative for damages for breach of contract. In the meantime Tricon on 6 May 1998 entered into a five year lease with Ruthol to commence upon Alphega vacating the subject premises in July of that year. The instrument of lease contained an option to purchase within three years. Tricon claims it exercised the option in 656

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May 1999. Between late 1998 and early 1999 Tricon spent $250,000 renovating the premises. At the time Tricon entered into the lease agreement containing the option to purchase it had no notice of any interest the Mills might have in the subject property. Moreover it had no notice of the interest of the Mills during the period of renovation. Later Tricon became aware of the caveat lodged by the Mills and it commenced proceedings against Ruthol and the Mills seeking an order for specific performance against Ruthol and an order against the Mills that it remove the caveat. Both suits came on for hearing before Palmer J. His Honour held, inter alia, that the equitable entitlement of the Mills prevailed over the equitable interest of Tricon. In his order his Honour left it to the Mills to elect whether they wanted the contract specifically performed or whether they would accept, in lieu, an award of damages for breach of contract. His Honour directed that if the Mills became the owners of the land they would take subject to Tricon’s legal interest. His Honour also directed that in the event the Mills elected to claim damages for breach of contract Tricon was entitled to an order for specific performance. The Mills elected to have the contract specifically performed. Ruthol appealed and joined Tricon in its notice of appeal. Tricon did not appeal. Because both matters were heard together and because no objection was taken to Tricon’s submission in the appeal that it, and not the Mills, was entitled to specific performance I agree with Sheller JA that Tricon’s argument should be entertained. Palmer J concluded that as between Ruthol and the Mills it was not open to Ruthol, by reason of its conduct, to assert that the option that it gave to the Mills could not be exercised in 1999. His Honour concluded that the interest of the Mills was not a ‘mere equity’ but an equitable interest in the property and because it was earlier in time it prevailed over the equitable interest of Tricon. The equitable interest of the Mills was recognized because, as has been pointed out by Sheller JA, Ruthol was not permitted to take advantage of its own wrongdoing to maintain that the Mills had not exercised the option within time. Tricon had done no wrong to the Mills and the Mills did not contribute in any way to the position Tricon found itself in. Both the Mills and Tricon were innocent of any wrongdoing and were both the victims of Ruthol’s deceit. Before Palmer J submissions were directed to whether the interest of the Mills was relevantly a ‘mere equity’ or whether it was an equitable interest in property. His Honour found it was an equitable interest in property. In my opinion the issue should be resolved in favour of Tricon by reason of the decision of the High Court in Latec Investments Limited v Hotel Terrigal Pty Limited (In liquidation) (1965) 113 CLR 265 without the need to categorize the interest of the Mills. Latec was concerned with competing equities over land on which was erected the Terrigal Hotel. Terrigal was in arrears under its mortgage and Latec purported to exercise its powers of sale as mortgagee. It sold the land to one of its wholly owned subsidiaries entitling Terrigal to set aside the sale by reason of Latec’s fraudulent conduct. Later the subsidiary gave MLC Nominees Limited security by way of floating charge over its assets with the result that it became in equity the mortgagee of the land. The issue for determination was whether Terrigal’s equitable entitlement being first in time prevailed over the equitable entitlement of MLC Nominees Limited. Although proceeding by somewhat different routes (set out by Sheller JA) the three members of the High  Court concluded that the equitable entitlement of Terrigal did not prevail over the equitable interest of MLC Nominees Limited. Sheller JA has set out the conclusions of Menzies J in that case and I need not repeat them. In my opinion the facts in the present case are relevantly the same as those in Latec. In Latec the registered proprietor was deprived of its property by fraud. In the present case the Mills were precluded from acquiring property by fraud. In both cases the equitable interests arising subsequently were acquired without notice of the earlier interests. 657

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In my opinion the authority of Latec concludes the matter in favour of Tricon’s equitable interest in the property prevailing over the equitable interest of the Mills. Accordingly I agree with the orders of Sheller JA setting aside the decision of Palmer J. I would propose that the appellant pay the costs of the Mills. That is because as between Ruthol and the Mills the Mills would have been wholly successful had it not been for the recognition of Tricon’s equitable interest. Ruthol may have preferred to sell the land to Tricon rather than to the Mills but in the light of its conduct I do not think its wishes should be recognized by the Court. Tricon is entitled to an order for specific performance because its equity prevails over that of the Mills not because Ruthol wished it.

Commentary 10.29  The judgments in the Court of Appeal are difficult because they do not properly characterise the nature of the equitable right retained by the Mills and the priority principle underlying Tricon’s interest.6 In the circumstances, Tricon may have been entitled to assert their priority under the bona fide purchaser rule. However, the application of this rule required a clear characterisation of the competing interests. The conclusion by Sheller JA that the ‘wrongdoing’ maxim did not apply to the innocent third party, Tricon, does not clearly explain why the bona-fide-purchaser-for-value-without-notice principle was applied. The preference for one priority assessment over another is not explained. Proper classification of the nature and character of the interest has, traditionally, formed the foundation for a determination of the relevant priority rules. The applicability of the bonafide-purchaser rule to disputes between mere and full equitable interests was confirmed by Lord Westbury in Phillips v Phillips: … 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 rule… there appear to be three cases where this defence is most familiar: … thirdly, where there are circumstances which give rise to an equity as distinguished from an equitable estate: (1861) 4 De GF & J 208 at 215–18; 45 ER 1164 at 1166–7. See also Cave v Cave (1880) 15 Ch D 639 at 646 per Fry J and Latec Investments Ltd v Terrigal (1965) 113 CLR 265 per Menzies and Kitto JJ who approved of the judgment of Lord Westbury in Phillips.

The application of this rule is, however, premised upon an articulation of the competing interests involved. An explanation by Sheller JA of exactly how the non-availability of the ‘wrongdoing’ maxim had the effect of transforming the right of the Mills into a lesser ‘mere equity’ would have rationalised the application of a fundamentally different priority principle and explained the difference in approach. The absence of such analysis means that the distinction between mere and full equitable interests for the purposes of priority assessment is unclear. See  also D Wright, ‘The Continued Relevance of Divisions in Equitable Interests to Real Property’ (1995) 3 APLJ 163.

6. The New Zealand Court of Appeal has stated that ‘since nobody seems able to precisely say, as a matter of theory, what mere equities are as opposed to “equitable interests”, the closer an equitable right comes to a proprietary right, the easier it is to say that it exhibits some of the characteristics of a proprietary right. The distinction seems only to be useful when it comes to consider priorities’: Green Growth no 2 Limited v Queen Elizabeth the Second National Trust [2016] NZCA 308 at [135] per Randeson, Stevens and Wild JJ. 658

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10.30  Revision Questions 1. Why did Menzies and Kitto JJ argue that the bona fide purchaser for value without notice rule was the appropriate priority rule in a dispute between a mere and a full equitable interest? 2. If the mere equity is simply a personal right antecedent to a full equity, at what point will this right reach the stage where it may compete on an equal ‘merit’ basis with a subsequently acquired full equity? 3. It has been suggested that the application of the bona fide purchaser for value without notice rule to a competition between a prior mere equity and a subsequent equitable title is unfortunate. The notice test is, it is suggested:



… diametrically opposite to the ‘prima facie first in time’ test in terms of its emphasis and focus. In the latter test, the court’s focus is upon the conduct of the second interest holder and whether he or she had actual, constructive or imputed notice of the prior interest. By contrast, the ‘prima facie first in time’ test begins with the presumption that the first interest holder has priority, and places the onus on the second interest holder to adduce evidence to show that the first interest holder has been guilty of some act or omission that merits postponement. At this point, the focus is solely on the conduct of the first interest holder. If the second interest holder is unable to point to any potentially postponing conduct, the matter goes no further. The first interest holder wins the dispute and the conduct of the second interest holder (including the issue of notice) never becomes relevant. It is only if the second interest holder can point to some conduct on the part of the first interest holder that would support a contention that the later equity was the better equity that the court widens its focus. However, the bona fide purchaser for value without notice reorients the focus of the court. This reorientation is inappropriate within an equitable assessment. (S Rodrick, ‘Resolving Priorities between Competing Equitable Interests within the Torrens Land System’ (2001) 9 Australian Property Law Journal 38.)

Do you agree with these comments? Should the ‘prior in time if both are equal’ rule be applied to a priority dispute between a prior mere equity and a subsequent full equity? 4. Rectification is a discretionary remedy. Is the refusal to enforce rectification against a bona fide purchaser without notice a discretionary assessment?

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The Torrens System An Outline of the Torrens System: Old Title Land, the Deeds Registration System and Conversion of Old Title 11.1 Objectives of the Torrens System 11.2 Characteristics of the Torrens System 11.3 The Register 11.3 Registrable interests 11.4 Extract: Transfer of Land Act 1958 (Vic) — s 37 11.4 Extract: Real Property Act 1900 (NSW) — s 41 11.4 Extract: Land Title Act 1994 (Qld) — s 181 11.4 Paramount interests 11.5 Extract: Transfer of Land Act 1958 (Vic) — s 42 11.5 Indefeasibility of Title: the Statutory Provisions 11.6 Extract: Land Title Act 1994 (Qld) — s 184 11.6 Extract: Transfer of Land Act 1958 (Vic) — s 42 11.6 Extract: Real Property Act 1900 (NSW) — s 42 11.6 Extract: Real Property Act 1886 (SA) — ss 69 and 70 11.6 Commentary 11.7 Extract: Transfer of Land Act 1893 (WA) — s 134 11.7 Extract: Transfer of Land Act 1958 (Vic) — s 43 11.7 Extract: Carbon Credits (Carbon Farming Initiative) Act 2011 — s 39 11.7 Extract: Carbon Credits (Carbon Farming Initiative) Act 2011 — s 40 11.7 Immediate and deferred indefeasibility 11.8 Case: Gibbs v Messer 11.9 Commentary 11.10 Case: Frazer v Walker 11.11 Commentary 11.12 Case: Breskvar v Wall 11.13 Commentary 11.14 Extract: Transfer of Land Act 1958 — s 87A 11.14 Extract: Land Title Act 1994 — s 11A 11.14 Case: Mercantile Credits v Shell Co of Australia Ltd 11.15 Commentary 11.16 Revision Questions 11.17

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Statutory Exceptions to Indefeasibility 11.18 Statutory fraud 11.18 Case: Loke Yew v Port Swettenham Rubber Co 11.19 Commentary 11.20 Case: Bahr v Nicolay (No 2) 11.21 Commentary 11.22 Case: Russo v Bendigo Bank 11.23 Commentary 11.24 Case: Bank of South Australia v Ferguson 11.25 Commentary 11.26 Case: Cassegrain Pty Ltd v Gerard Cassegrain 11.27 Commentary 11.28 In Personam Exception 11.29 Case: Bahr v Nicolay (No 2) 11.30 Commentary 11.31 Case: Macquarie Bank v Sixty-Fourth Throne 11.32 Commentary 11.33 Case: LHK Nominees Pty Ltd v Kenworthy 11.34 Commentary 11.35 Case: Farah Constructions Pty Ltd v Say-Dee Pty Ltd 11.36 Commentary 11.37 Revision Questions 11.38 Volunteers 11.39 Case: King v Smail 11.40 Commentary 11.41 Case: Rasmussen v Rasmussen 11.41 Case: Valoutin Pty Ltd v Furst 11.42 Commentary 11.43 Case: Bogdanovic v Koteff 11.44 Commentary 11.45 Case: Conlan v Registrar of Titles 11.46 Commentary 11.47 Revision Questions 11.48 Inconsistent Legislation 11.49 Case: Pratten v Warringah Shire Council 11.50 Commentary 11.51 Case: Horvath v Commonwealth Bank of Australia 11.52 Commentary 11.53 Case: Hillpalm v Heavens Door 11.54 Commentary 11.55 Case: City of Canada Bay Council v Bonaccorso Pty Ltd 11.56

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Commentary 11.57 Revision Questions 11.58 Prior Certificate of Title/Erroneous Description of Land 11.59 Forgery, Insufficient Power of Attorney or Disability 11.60 Extract: Real Property Act 1886 (SA) — s 69 11.60 Paramount Interests: Adverse Possession, Easements and Tenancies 11.61 Extract: Transfer of Land Act 1958 (Vic) — s 42 11.61 Adverse possession 11.62 Extract: Real Property Law Act 1900 (NSW) — s 45D 11.62 Variations 11.63 Extract: Land Titles Act 1980 (Tas) — s 138V 11.63 Easements 11.64 Case: Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd 11.65 Commentary 11.66 Case: McGrath v Campbell 11.67 Commentary 11.68 Tenancies 11.69 Extract: Real Property Act 1900 (NSW) — s 42 11.70 State Guarantee of Title 11.71 Bringing the land under the Act 11.72 Deprivation of an interest or estate from fraud 11.73 Case: Diemasters v Meadowcorp 11.74 Commentary 11.75 Extract: Transfer of Land Act 1958 (Vic) — s 110 11.75 Error or misdescription in the Register 11.76 Registration of another person 11.77 Registrar’s Power to Correct the Register 11.78 Extract: Electronic lodgment network malfunction — s 44H 11.78 Revision Questions 11.79

An Outline of the Torrens System: Old Title Land, the Deeds Registration System and Conversion of Old Title 11.1  The Torrens system of land registration introduced a system of title by registration within Australia. This system was not the first land registration system introduced, however its features were fundamentally different from its predecessor, the Deeds Registration System. The Deeds Registration System established a centralised register with the specific aim of recording instruments or dealings over old title land. Old title land is land that does not come within the application of the Torrens system because it was issued by the Crown prior to the introduction of the Torrens system and it has not been converted to Torrens title land. While the majority of land interests in Australia now come within the application of the Torrens system, small pockets of old title land remain in Victoria (approximately 2 per cent of freehold land), New South Wales (approximately 1 per cent of freehold land), much less in Tasmania, Western Australia and 662

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South Australia (which has under 1 per cent) and none at all in Queensland, Northern Territory and the Australian Capital Territory. To verify ownership of old title land it is necessary to trace, in a complete and unbroken chain, all the land transactions that have affected the land since the time of the initial Crown grant. While this is possible in Australia, in practice it is difficult and time-consuming. Consequently, the English courts developed a rule that it was acceptable to search back to a documentary starting point, referred to as the ‘good root of title’ of not less than 60 years. The good root of title is essentially an instrument that proves, on its face, the ownership of the legal and equitable estate in the property and that reveals no doubt concerning the title of the vendor. Where the ‘good root of title’ has been checked, a purchaser can feel more secure about the nature and validity of that title. However, there is no absolute guarantee; it is always possible that an inherent defect in the title will not be revealed by such a search. A mortgage or some other interest may not, for example, be disclosed in the chain or title or it may have been created before the good root of title. In New South Wales, Queensland, Victoria and Western Australia, it is now only necessary to search back 30 years for the 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); Sale of Land Act 1970 (WA) s 22. The period has been reduced even further in Tasmania where it is only 20 years: Conveyancing and Law of Property Act 1884 (Tas) s 35(1). See also Chapter 10 at 10.7. In every state, legislation was introduced to provide for the registration of old title deeds under what became known as the Deeds Registration system: Conveyancing Act 1919 (NSW) ss 184A–184J; Property Law Act 1974 (Qld) ss 241–49; Registration of Deeds Act 1935 (SA); Registration of Deeds Act 1935 (Tas); Property Law Act 1958 (Vic) Pt 1 and Registration of Deeds Act  1856 (WA). An important qualification to this lies in the fact that the absence of any old title land in Queensland means that the Deeds Registration System in the state is of  historical relevance only. Further, in Victoria, the Deeds Registration System was deactivated in 1999 and since that time, it has not been possible to register an old title document: Property Law Act 1958 (Vic) s 6. In all states where the Deeds Registration remains operative, an instrument affecting old title land, which is evidenced in a documentary form, may be registered under the Deeds Registration System. This includes, for example, a deed of conveyance, an old title mortgage, an easement etc. There are restrictions regarding the registration of leases. In  South  Australia, leases for three years or less may not be registered: Registration of Deeds Act  1935 (SA) s  10(1). In Tasmania and Western Australia a lease that is under 14 years, bona fides and given for a rent equal to the full value of the property, may not be registered: Registration of Deeds Act (WA) s 3; Registration of Deeds Act 1935 (Tas) s 3. Registration under the Deeds Registration System confers priority upon the interest that will be accorded by the date of registration. This means that a registered old title document will take priority over a later registered interest provided the first registered interest is bona fides and is taken, at the point of execution, without notice of the existence of a prior interest: Conveyancing Act 1919 (NSW) s 184G; Registration of Deeds Act 1935 (Tas). Registration under the Deeds Registration System could, therefore, alter the way in which a priority dispute was resolved under general law principles. For example, where a prior equitable and subsequent legal interest exist, both being issued bona fide and for value and evidenced in documentary form, with the legal interest holder acquiring their title without notice of the prior equity, the prior equity may gain priority if it is registered first. The fact that the legal interest holder was a bona fide purchaser for value without 663

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notice is irrelevant. Significantly, however, failure to register an instrument will not render that interest void: see Moongking Gee v Tahos (1963) 63 SR (NSW) 935; Boyce v Beckman (1890) 11 LR (NSW) (L) 139. Unlike the Torrens system of land registration, registration under the Deeds Registration System does not cure the interest of any inherent defects. Hence, registration under the Deeds Registration System will not render an instrument that is subject to a nemo dat defect or which contravenes a specific legislative provision, effective. Registration under the Deeds Registration System does not confer upon a registered instrument any greater or improved status. The aim of the Deeds Registration System was simple: reduce the risk that a purchaser might acquire an interest in land without knowledge of an earlier inconsistent interest. Thus, the capacity to register most instruments affecting general law land under the Deeds Registration System is not dependent upon the date of execution or creation of the interest, or upon the nature of the interest but, rather, upon the date of registration. The aim of achieving a complete conversion of old title land to Torrens title land and thereby focusing exclusively upon the Torrens system of land registration, has been tackled differently in different states. As mentioned above, there is no longer any old title land in Queensland. This is largely a consequence of the effective introduction of a compulsory conversion scheme. Section 250(1) of the Property Law Act 1974 (Qld) specifically allowed the Registrar to direct unregistered land interests to be brought under the application of the Real Property Acts. Old title or unregistered land could be registered in the name of the Public Curator in circumstances where no claim was made following appropriate advertisement of the process. In Victoria, the deactivation of the Deeds Registration System combined with the introduction of specific provisions, pursuant to the Transfer of Land (Single Register) Act 1998, encouraging the Register to bring old title under the operation of the Torrens system with ‘all reasonable speed’ has promoted conversion and the number of old title land interests has been correspondingly reduced. A similar ‘reasonable speed’ provision exists in the Real Property (Registration of Titles) Act 1945 (SA). While searches may still be made of the register in Victoria, it is no longer possible to lodge documents. Further, the conversion processes have been expedited with old title land being tagged under an initial ‘identification folio’ that may subsequently be converted into a ‘provisional folio’ with a certificate of title that continues to be subject to existing and enforceable general law interests. New  South  Wales and Tasmania have adopted similar approaches in their legislative framework. In New  South  Wales, the Registrar-General has the power to initiate the conversion of an old title land interest. A ‘qualified folio’ may be issued over old title land despite uncertainty concerning the existence or enforceability of the title or other interests: Real Property Act 1900 (NSW) s 28EA. Where a qualified folio is issued, it will remain subject to any subsisting interests and a caution to this effect is placed upon that title. A ‘subsisting interest’ will not, however, include equitable interests that were already postponed pursuant to the acquisition by a bona fide purchaser for value without notice. Similar provisions exist in the Land Titles Act 1980 (Tas) where a qualified folio may be issued with caution also: see ss 21 and 25. In Western Australia the Registrar has been given the power to accept an application for conversion, despite the description of land in the application being different from that contained within the title deeds, in circumstances where the discrepancy is a consequence of an inaccurate survey or plan: Transfer of Land Act 1893 (WA) s 27. 664

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11.2

Objectives of the Torrens System 11.2  The Torrens system was set up with the specific objective of improving the process of title investigation as well as providing registered interest holders with a greater guarantee as to their security of title. The difficulties inherent in investigating and transferring old title land were not really addressed by the Deeds Registration System. The Torrens system was devised by Sir Robert Torrens who emigrated to South Australia in 1840 to take up the post of Collector of Customs. His proposals for reform were made in an environment where a new registration framework was favoured. His passion for the reform resulted in the introduction of what is known today as the Torrens System of Land Registration. This system has been adopted by legislation within each state: Land Titles Act  1925 (ACT); Real Property Act  1900 (NSW); Land Title Act  2000 (NT); Land Title Act  1994 (Qld); Real Property Act 1886 (SA); Land Titles Act 1980 (Tas); Transfer of Land Act 1958 (Vic); Transfer of Land Act 1893 (WA). Torrens made it clear that he disliked the complexities associated with the inherited old title law system. He stated that the old title system, ‘could not be patched or mended: the very foundation was rotten therefore the entire fabric must be razed to the ground and a new super-structure substituted’: see Whalan, The Torrens System, LBC, Sydney, 1992. The primary problem with the inherited English law of real property was the dependent nature of titles. All purchasers had to carry out a retrospective investigation of title every time land was conveyed or otherwise dealt with. This was costly and time-consuming. Torrens proposed a system of independent titles whereby upon each conveyance, the land would be surrendered to the Crown, which would then re-grant it to the purchaser. This removed the need to retrospectively investigate title and embraced the notion, consistently utilised by Torrens himself, that each new title would confer ‘indefeasibility’ upon the holder. The framework of this new system was that a single document evidencing title for each parcel of land, known as the certificate of title, would replace the old chain of title. This ‘single’ document would be held by the Registrar-General and would be available for public inspection, and a duplicate of the original folio would be given to the owner of the land. Old complex conveyancing forms would be replaced by standard forms issued by the Registrar-General in simple and straightforward language thereby removing the ‘bulky documents, arcane learning and time-honoured technicalities’ enshrined in the old title system. The first Torrens legislation was introduced in South  Australia in the Real Property Act 1858 and came into effect on 1 July 1858. Torrens was appointed the first RegistrarGeneral in South  Australia. The Torrens system of land registration soon spread to all Australian states. The original legislation in each state was: Transfer of Land Act 1862 (Vic); Real Property Act 1862 (Tas); Real Property Act 1861 (Qld); Real Property Act 1858 (SA); Transfer of Land Act 1874 (WA). The current legislation in each state is as follows: Transfer of Land Act 1958 (Vic); Real Property Act 1900 (NSW); Land Title Act 1994 (Qld); Land Titles Act 1980 (Tas); Real Property Act 1886 (SA); Transfer of Land Act 1893 (WA); Land Title Act 2000 (NT); Land Titles Act 1925 (ACT). The Torrens framework is also utilised in a number of overseas countries including New Zealand, Malaysia, Singapore, Hong Kong, Israel and some of the Canadian Provinces. A similar system of land registration was also introduced in the United Kingdom, albeit with some notable differences, under the Land Registration Act 1925. 665

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Australian Property Law

From the date when the Torrens legislation was introduced, all subsequent land grants came within the application of the Torrens system of registration. All land alienated prior to the introduction of this legislation and not converted remains subject to the old title regime of priorities and registration. The Torrens system is not uniform among each of the Australian states. The lack of uniformity in the Torrens legislation adds significantly to transaction costs and has increased barriers to interstate commerce. Many reform proposals have suggested a move towards increased uniformity and harmony; however, the biggest reform has been the shift to computerised titles, which also allows for linkage with other governmental agencies. Legislation in every state now provides for the Register to be kept in a computerised form: Transfer of Land Act 1958 (Vic) s 27(2); Real Property Act 1900 (NSW) s 31B(3); Real Property Act 1886 (SA) s 51B; Land Title Act 1994 (Qld) s 8; Land Titles Act 1980 (Tas) s 33(3); Transfer of Land Act 1893 (WA) s 48; Land Title Act 2000 (NT) s 6; Land Titles Act 1925 (ACT) s 43. In Victoria, the Transfer of Land (Electronic Transactions) Act 2004 issued amendments to the Transfer of Land Act 1958, culminating in the introduction of ss 44A–44N. These amendments allow for the electronic lodgment and registration of Torrens title land transactions. Section 44B(1) makes it clear that the Registrar may provide an electronic lodgment network for the purpose of lodging electronic instruments. Section 44(2) further sets out that the Registrar may determine the requirements for this electronic lodgment network, which include the conditions of access, requirements for the retention of documents supporting or authenticating electronic instruments, insurance requirements or other matters. Section 44G then sets out that the Registrar must, on the application of any person, produce a document in writing recording information that was registered and recorded on a folio as a result of an electronic instrument. In Queensland, the register is recorded on an electronic database via the use of electronic imaging and a paper certificate of title will only be issued where specifically requested by the owner: Land Title Act 1994 (Qld) s 42(1). In Western Australia titles may be held in digital format: Transfer of Land Act  1893 (WA) s  48(1). In New  South  Wales, the capacity of the register to be kept in electronic format is set out in s 31B(3) of the Real Property Act. Since 1983 when the first conversion of paper title to electronic title was carried out, millions of electronic titles have been issued and today, over 98 per cent of the Torrens register in New South Wales is electronically stored with computerised titles being maintained in the Integrated Titling System. In Primepoint Asset Pty Ltd v Fabray Pty Ltd [2010] WASC 366 the Supreme Court of Western Australia noted that the difficulties of attempting to superimpose a digital system over a paper-based Torrens framework became apparent when the distinction between a title that has been ‘created and registered’ and a title that has been electronically ‘issued’ were explored. Kenneth-Martin J concluded that the most sensible and unambiguous approach was to conclude that the ‘issue’ date for a duplicate certificate of title is the date on the face of the duplicate certificate of title and the record of title itself, and not the precise date and time that the actual copy of the duplicate certificate of title emerged from the printer. Eventually, computer land title registers will completely replace documentary certificates of title and issues of computer integrity will acquire even greater significance. This issue has been well discussed. See generally: D Whalan, ‘Electronic Computer Technology and the Torrens System’, (1967) 40 ALJ 413; R Cocks and J Barry, ‘Electronic Conveyancing: Challenges for the Torrens System’ (2001) 8 Australian Property Law Journal 270; AG Land, ‘Computerised Land Title and Land Information’ (1984) 10 Monash University Law 666

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Review 196; L Griggs, ‘Torrens Title in a Digital World’ (2001) 8(3) Murdoch University Electronic  Journal of Law ; S A Christensen and A  P Stickley, ‘Electronic Title in the New Millennium’ (2000), 4(2) Flinders Journal of Law Reform 209; M Raff, ‘Torrens, Hubb, Stewardship and the Globalisation of Property Law Systems’ (2009) 30(2) Adelaide Law Review 245; R Low, ‘Maintaining the Integrity of the Torrens System in a Digital Environment: A Comparative Overview of the Safeguards Used within the Electronic Land Systems Register in Canada, New Zealand, United Kingdom and Singapore’ (2005) 11 Australian Property Law Journal 155; Grinlinton, Torrens In the Twenty-first Century (2003) esp at pp 6–26.

Characteristics of the Torrens System The Register 11.3  The Torrens legislation in all states sets up a Register that records all parcels of land coming within its application. For each parcel of land, the Register creates a folio describing the land to which it relates and the estate or interest held in the land by the named proprietor or owner. The folios can be maintained in any medium or form with a great many now existing in electronic format. The duplicate certificate of title is a copy or extract of the contents of the original folio held by the Registrar-General. Each certificate of title, both the original and the duplicate, has a unique volume and a folio number. All interests that have been registered against that land are set out on both the original folio and the duplicate certificate of title. The original folio will also list all caveats which have been lodged.

Registrable interests 11.4  Registration under the Torrens system is not compulsory. However, in most instances, given the security of title that registration confers, it is advisable. Most dealings are capable of being registered. Registry instruments may also be lodged in an electronic format.1 In most jurisdictions, registrable interests include fee simple and life estates, mortgages and easements. The most common interests that are registered are estates and mortgages, although it is also possible for leases over three years and easements to be registered. Where a dealing is registered, it will be indicated on the original certificate of title held at the Land Titles Office as well as the duplicate certificate of title held by the documentary owner. Some interests may only be recorded on title rather than registered and this is the case with restrictive covenants. Some interests may remain unregistered for a number of reasons. The holder may choose not to register the interest or the interest may not be capable of being registered or recorded on the title. For example, in all states, trusts are precluded from registration. The reason for this is because the registration of such interests would undermine the fundamental conclusiveness of the Register. As outlined by Rich and Evatt JJ in Wolfson v Registrar-General (NSW) (1934) 51 CLR 300 at (with respect to the Real Property Act 1900 (NSW)): … the declared policy of the system is to keep trusts off the register, and it appears to us that the notification of such special and elaborate equities as those involved in the present case as encumbrances is within the very evil to which the Act was directed. The register was not to 1. See Transfer of Land Act 1958 (Vic) s 44S; Real Property Act 1900 (NSW) s 3A; Real Property Act 1886 (SA) s 51B; Land Titles Act 1980 (Tas) s 48B; Transfer of Land Act 1893 (WA) s 14. 667

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Australian Property Law

present a picture of legal ownership trammeled by all sorts of equitable rights in others, which those who dealt with the registered proprietor must take into account. Sec 95(4) affords no justification for putting them upon the register. Such rights must be protected by caveat, not by notification.

In Victoria, s 37 of the Transfer of Land Act 1958 (Vic) sets out that notice of a trust must not be recorded in the register. See also Land Titles Act 1925 (ACT) s 124; Real Property Act 1900 (NSW) s 82; Real Property Act 1886 (SA) s 162; Land Titles Act 1980 (Tas) s 132; Transfer of Land Act 1958 (Vic) s 37; Transfer of Land Act 1893 (WA) s 55. There are no equivalent provisions in the Northern Territory and Queensland. EXTRACT Transfer of Land Act 1958 (Vic) — s 37 37  Entry of trusts in Register The Registrar shall not record in the Register notice of any trust whether express implied or constructive; but trusts may be declared by any document, and a duplicate or an attested copy thereof may be deposited with the Registrar for safe custody and reference; and the Registrar may protect in any way he deems advisable the rights of the persons for the time being beneficially interested thereunder or thereby required to give any consent; but the rights incident to any proprietorship or to an instrument registered under this Act shall not be in any manner affected by the deposit of such duplicate or copy nor shall any such duplicate or copy form part of the Register or be deemed to be registered.

It has been suggested that the wording of the Torrens legislation precludes any land interest existing over Torrens land until it has been registered. This interpretation is a consequence of the fact that in all states apart from Queensland and the Northern Territory, the Torrens legislation implies the non-existence of unregistered land interests. For example, s 41(1) of the Real Property Act 1900 (NSW) is set out below. EXTRACT Real Property Act 1900 (NSW) — s 41 41  Dealings not effectual until recorded in Register (1) No dealing, until registered in the manner provided by this Act, 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 dealing in the manner provided by this Act, the estate or interest specified in such dealing 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 dealing, or by this Act declared to be implied in instruments of a like nature.

See also: Land Titles Act 1925 (ACT) s 57; Transfer of Land Act 1958 (Vic) s 40; Land Title Act 2000 (NT) s 184; Land Title Act 1994 (Qld) s 181; Real Property Act 1886 (SA) s 67; Land Titles Act 1980 (Tas) s 49; Transfer of Land Act 1893 (WA) s 58. The wording in s 41 of the Real Property Act 1900 (NSW) may be construed as implying that registration is the touchstone for the creation of all Torrens title land interests and, where an interest is not registered, it does not exist. This interpretation has, however, been 668

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discredited, given the fact that the Torrens legislation specifically anticipates the existence of unregistered interests in the provisions setting up the caveat system. The issue was specifically raised by the High Court in Barry v Heider (1914) 19 CLR 197 at 216, where Isaacs J concluded that the section, ‘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 land.’ See also Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87 at [128]; Clarence City Council v Howlin [2019] TASFC 1 at [45] per Brett J and Marshall AJ. All registered Torrens title interests are treated as if they were legal interests. Thus, broadly speaking, registered interests can be classified as legal interests and unregistered interests can be classified as equitable interests. However, this is not absolute. It remains possible to characterise some interests as legal despite the fact that they have not been registered. As noted by Professor Butt, legal interests are ‘not transmuted into equitable interests just because the land is Torrens land’: P Butt, Land Law, 6th ed, 2010, p 762; see also Sykes, Securities, 5th ed, 1993, pp 224–5. The paradigm shift that the Torrens system introduced meant that interests were no longer  distinguished on the basis of jurisdictional origin but registered status. The underlying ethos of the Torrens system depends upon replacing the division between legal and equitable land interests with a new division between registered and unregistered interests. This means that we must: … divorce the idea of separate bodies of law and equity and search for the interests that should be registered and those that should be protected by caveat. In doing this it is imperative that consideration of legal and equitable interests form no part of our thinking. This will only lead a retreat back into the morass of the competitive pressures between legal and equitable interests and their classification: L Griggs, ‘Torrens Title — Arise the Registered and Unregistered, Befall the Legal and Equitable’ (1997) 4 Deakin Law Review 35 at 45.

In some cases, this will mean that courts must address the interplay between common law doctrines and the overarching purposes of the Torrens statutory scheme. It is important to ensure that courts adhere to the principle of coherence. See further: E Bant, ‘Statute and Common Law: Interaction and Influence in Light of the Principle of Coherence’ (2015) 38(1) UNSW Law Journal 367. In the Northern Territory and Queensland, the Torrens legislation makes it clear that a failure to register will preclude a legal interest in land from arising. For example, s 181 of the Land Title Act 1994 (Qld) sets out the following. EXTRACT Land Title Act 1994 (Qld) — s 181 181  Interest in a lot not transferred or created until registration An instrument does not transfer or create an interest in a lot at law until it is registered.

All dealings must use the appropriate forms, prescribed by the Torrens legislation, in order to be registered. There are specific forms applicable to each type of dealing. The traditional process is that the duplicate certificate of title must be accompanied with the appropriate form and lodged with the Registrar before a dealing may be registered. 669

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Australian Property Law

For example, to register a transfer of land, a grantee must lodge a completed transfer of land form and the duplicate certificate of title. If the title is computerised, the Registrar will issue a new certificate of title reflecting the contents of the folio after the dealing. Where the title is not computerised, the paper duplicate is added to, so that the new dealing is included. Once a dealing is lodged in the appropriate form, the Registrar cannot refuse to register it; however, all forms should be completed accurately and properly before accepted for registration. Where a dealing is lodged electronically by an electronic lodgement network (ELN) subscriber, the transaction will be prepared electronically and digitally signed. Once the lodgement passes a validation check, the transaction may be registered. Following registration of the transaction a new certificate of title is produced and a Registration Confirmation Statement issued to the lodging party.

Paramount interests 11.5  The Torrens legislation in all states and territories makes a specific range of land interests immune from or ‘paramount’ to the effects of registration. These interests are specifically listed in the legislation in each state and include: easements, rights acquired under adverse possession, tenants in possession, and rates and taxes. These rights may be described as ‘paramount’ because they remain enforceable against subsequent registered interest holders despite their unregistered status. The scope and nature of paramount interests is considered in more detail at 11.61. Adverse possession is protected to some extent in each state. In Queensland, Victoria and Western Australia adverse possession is completely immune to the effects of a subsequent registration: Land Title Act  1994 (Qld) s  185(1)(d); Transfer of Land Act  1958 (Vic) s 42(2)(b); Transfer of Land Act 1893 (WA) s 68. A similar position exists in Tasmania, although this is effected by making the title of the registered proprietor subject to ‘rights acquired or in the course of being acquired under a statute of limitations’: Land Titles Act  1980 (Tas) s  40(3)(h). In New  South  Wales and South  Australia rights acquired by adverse possession are not protected. However, an adverse possessor may apply to be registered or to be recorded as proprietor: Real Property Act  1900 (NSW) Pt 6A; Real Property Act 1886 (SA) ss 69VI, 80A–80I and 251. It is not possible to acquire land by adverse possession in the Northern Territory or Australian Capital Territory. Leases are also protected to varying degrees. In Victoria, the interests of any tenant in possession are paramount: Transfer of Land Act 1958 (Vic) s 42(2)(e). This provision has been held to include within the scope of its protection an equity of rectification as well as an option to renew: Downie v Lockwood [1965] VR 257. In Queensland, New South Wales, Tasmania, the Australian Capital Territory and the Northern Territory, protection is restricted to leases for three years or less: Land Titles Act  1925 (ACT) s  58(1)(d)–(e); Real Property Act  1900 (NSW) s  42(1)(d); Land Title Act  1994 (Qld) s  185(1)(b), (2); Land Titles Act 1980 (Tas) s 40(3)(d); Land Title Act 2000 (NT) s 189(1)(b). In Western Australia, protection is restricted to leases for five years: Transfer of Land Act 1893 (WA) s 68; in South Australia it is only one year: Real Property Act 1886 (SA) s 69(h). Easements and rights of way are also protected to in different degrees. Easements that are explicitly noted on title are protected in every state. However, the degree to which implied easements are protected in each state varies. In Tasmania all easements and public rights of way are regarded as paramount except for the fact that equitable easements will not be enforceable against a bona fide purchaser for value: Land Titles Act 1980 (Tas) s 40(3)(c), (e). In Victoria and Western Australia all easements and public rights of way are treated 670

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as paramount interests including equitable interests: Transfer of Land Act  1958 (Vic) s 42(2)(d); Transfer of Land Act 1893 (WA) s 68. In the other states, easements are only protected in circumstances where there has been an omission or misdescription of the easement or right of way: Real Property Act 1900 (NSW) s 42(1)(a); Land Titles Act 1925 (ACT) s 58(1)(b); Real Property Act 1886 (SA) s 69(d); Land Title Act 1994 (Qld) s 185(1)(c); Land Title Act 2000 (NT) s 189(1)(c). In Victoria, the range of paramount interests is listed in s 42(2)(a)–(f) of the Transfer of Land Act 1958 (Vic). This provision is extracted below. EXTRACT Transfer of Land Act 1958 (Vic) — s 42 (2) Notwithstanding anything in the foregoing the land which is included in any folio of the Register or registered instrument shall be subject to — (a) the reservations exceptions conditions and powers (if any) contained in the Crown grant of the land; (b) any rights subsisting under any adverse possession of the land; (c) any public rights of way; (d) any easements howsoever acquired subsisting over or upon or affecting the land; (e) the interest (but excluding any option to purchase) of a tenant in possession of the land; (f) any unpaid land tax, and also any unpaid rates and other charges which can be discovered from a certificate issued under section three hundred and eightyseven of the Local Government Act 1958, section 158 of the Water Act 1989 or any other enactment specified for the purposes of this paragraph by proclamation of the Governor in Council published in the Government Gazette — notwithstanding the same respectively are not specially recorded as encumbrances on the relevant folio of the Register.

Indefeasibility of Title: the Statutory Provisions 11.6  Once a titleholder is registered under the Torrens system they will acquire what

has been described as an ‘indefeasible’ title. Indefeasibility of title refers to the fact that the registered holder acquires a conclusive and secure title subject only to other interests registered on that title, statutory fraud and other established statutory and non-statutory exceptions. Importantly, a registered holder will not be affected by the doctrine of notice. Indefeasibility of title is a direct consequence of explicit statutory provisions, known as the ‘paramountcy’ provisions, contained in the Torrens legislation in each state. Indefeasibility is not explicitly mentioned in these provisions as it describes their overall effect. The paramountcy provisions represent the core of the Torrens legislative provisions in each state. In Queensland, they are set out in the Land Title Act 1994 (Qld) s 184. This provision along with the equivalent provisions in New  South  Wales and Victoria: Real Property Act 1900 (NSW) s 42 and Transfer of Land Act 1958 (Vic) s 42, is extracted below. 671

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EXTRACT Land Title Act 1994 (Qld) — s 184 184  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. (2) In particular, the registered proprietor: (a) is not affected by actual or constructive notice of an unregistered interest affecting the lot; and (b) is liable to a proceeding for possession of the lot or an interest in the lot only if the proceeding is brought by the registered proprietor of an interest affecting the lot. (3) However, subsections (1) and (2) do not apply: (a) to an interest mentioned in section 185; or (b) if there has been fraud by the registered proprietor, whether or not there has been fraud by a person from or through whom the registered proprietor has derived the registered interest.

EXTRACT Transfer of Land Act 1958 (Vic) — s 42 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. (2) Notwithstanding anything in the foregoing the land which is included in any folio of the Register or registered instrument shall be subject to — (a) the reservations exceptions conditions and powers (if any) contained in the Crown grant of the land; (b) any rights subsisting under any adverse possession of the land; (c) any public rights of way; (d) any easements howsoever acquired subsisting over or upon or affecting the land;

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(e) the interest (but excluding any option to purchase) of a tenant in possession of the land; (f) any unpaid land tax, and also any unpaid rates and other charges which can be discovered from a certificate issued under section  three hundred and eighty-seven of the Local Government Act  1958, section  158 of the Water Act 1989 or any other enactment specified for the purposes of this paragraph by proclamation of the Governor in Council published in the Government Gazette — notwithstanding the same respectively are not specially recorded as encumbrances on the relevant folio of the Register. W EXTRACT Real Property Act 1900 (NSW) — s 42 42  Estate of registered proprietor paramount (1) 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 except: (a) the estate or interest recorded in a prior folio of the Register by reason of which another proprietor claims the same land, (a1) in the case of the omission or misdescription of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act, (b) in the case of the omission or misdescription of any profit à prendre created in or existing upon any land, (c) as to any portion of land that may by wrong description of parcels or of boundaries be included in the folio of the Register or registered dealing evidencing the title of such registered proprietor, not being a purchaser or mortgagee thereof for value, or deriving from or through a purchaser or mortgagee thereof for value, and (d) a tenancy whereunder the tenant is in possession or entitled to immediate possession, and an agreement or option for the acquisition by such a tenant of a further term to commence at the expiration of such a tenancy, of which in either case the registered proprietor before he or she became registered as proprietor had notice against which he or she was not protected:

Provided that: (i) The term for which the tenancy was created does not exceed three years, and (ii) in the case of such an agreement or option, the additional term for which it provides would not, when added to the original term, exceed three years.

(2) In subsection (1), a reference to an estate or interest in land recorded in a folio of the Register includes a reference to an estate or interest recorded in a registered mortgage, charge or lease that may be directly or indirectly identified from a distinctive reference in that folio.

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In South Australia, the paramountcy provisions are set out in the Real Property Act 1886 (SA) ss 69 and 70. These are extracted below. EXTRACT Real Property Act 1886 (SA) — ss 69 and 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: (a) Fraud 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.

Similar provisions exist in other states: see Land Titles Act 1925 (ACT) s 159; Land Title Act 2000 (NT) s 184; Land Titles Act 1980 (Tas) s 42; Transfer of Land Act 1893 (WA) s 202.

Commentary 11.7  The concept of indefeasibility is a convenient descriptor for the effect of the paramountcy provisions in the Torrens legislation in each state. ‘Indefeasibility’ is not a term utilised explicitly within any of the provisions of the legislation. While Lord Wilberforce described it as a ‘convenient description’ (Frazer v Walker [1967] 1 AC 569, 580 per Lord Wilberforce), others have referred to it as a ‘patent misnomer’ (D J Whalan, ‘The Torrens System in Australia’, Law Book Company, Sydney, 1982 at 297, preferring ‘state-guaranteed title’). Indefeasibility, or the guarantee of title that is set out in the paramountcy provisions represents the foundation of the Torrens system of land registration: Bahr v  Nicolay (No 2) (1988) 164 CLR 604, 613 (Mason CJ and Dawson J). These provisions ensure that a registered holder acquires a guaranteed statutory title, subject only to other registered encumbrances and established statutory and non-statutory exceptions. The indefeasibility of registered title refers to the fact that every time the title is registered, it is recreated anew and acquires a greater level of ‘registered’ protection than it would have otherwise received in its unregistered form. Barwick CJ in Breskvar v Wall (1971) 126 CLR 376 at 385–6 made the following comments regarding the effect of registration: 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 674

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have had. The title it certifies is not historical or derivative. It is the title which registration itself has vested in the proprietor.

Every registration creates a new, ‘indefeasible’ title founded upon the conditions underlying the particular registration. That title is not, as Barwick CJ notes, ‘historical’, nor is it ‘derivative’, but rather it is a product of the registration. In this sense, registering under the Torrens system is a creative process which ensures that the title is immunised against past defects. This, in turn, means purchasers searching the register can rely upon its accuracy. See also Paragreen v Lim Group Holdings Pty Ltd [2020] VSCA 84 per Tate, Niall and Kaye JJA at [59]. The effect of indefeasibility was outlined by Atkinson J in Tara Shire Council v Garner [2003] 1 Qd R 556 at [49]: As a consequence of indefeasibility, purchasers of land are able to rely upon the details of the register to confirm that the person from whom they are purchasing has the capacity to transfer the land. In addition, indefeasibility permits registered proprietors to hold the land with certainty that their title cannot be impugned by actions taken in relation to the land by a previous owner.

The Privy Council in Gibbs v Messer [1891] AC 248 came to a similar conclusion, stating 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.

A registered proprietor acquires a new enforceable title that cannot be impugned by a prior title, even if the registered proprietor took notice of it. The registered proprietor can rely on the assurance of registration and, in turn, persons searching the register can rely upon its veracity. In Black v Garnock (2007) 230 CLR 438, 461, Callinan J observed that: 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.

Title under the Torrens system is therefore derived from the Registrar-General’s act in registering an instrument. This means that it is the act of a statutory official acting under statutory authority — not from the parties’ act in executing the instrument. Registration is therefore the source of the title as it confers on the person registered as proprietor a new title that did not previously exist: Peldan v Anderson (2006) 227 CLR 217 at [20]. In Halloran v Minister Administering National Parks and Wildlife Act 1974 (2006) 229 CLR 545, the High Court agreed, noting what while registration creates a new title, this process cannot be equated with the creation process associated with a legal or equitable interest. Gleeson CJ, Gummow, Kirby and Hayne JJ stated at [35] that: … the Torrens system is one of title by registration, not of registered title. The assimilation of the registered title to a legal title may be convenient so long as it is appreciated what is involved. It is likewise with respect to the use of the term ‘equitable’ to describe interests recognised in accordance with the principles of equity but not found on the Register.

One of the purposes underlying indefeasibility is the need to ensure an accurate and reliable public register. In Queensland Premier Mines Pty Ltd v French (2007) 235 CLR 81, the High Court stated at [15] that the public policy that lies at the heart of the Torrens system is that the register should be open to the public and should record all information relevant to an interest, and an ‘inspection of the register should reveal all about the title’. 675

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In Castle Constructions Pty Limited v Sahab Holdings Pty Ltd (2013) 247 CLR 149 at [20], the plurality (Hayne, Crennan, Kiefel and Bell JJ) stated: It is of fundamental importance to recognise that the Torrens system of registered title, of which the RPA is a form, ‘is not a system of registration of title but a system of title by registration’.. Together with the information appearing on the relevant folio, the registration of dealings manifests the scheme of the Torrens system to provide third parties with the information necessary to comprehend the extent or state of the registered title to the land in question.

An important aspect of the paramountcy provisions in each state is that registered landholders are not subject to the doctrine of notice and that mere notice of the existence of a prior interest will not constitute fraud: Land Titles Act 1980 (Tas) s 41; Transfer of Land Act 1958 (Vic) s 43; Transfer of Land Act 1893 (WA) s 134; Land Titles Act 1925 (ACT) s 59; Real Property Act 1900 (NSW) s 43; Land Title Act 2000 (NT) s 188(2)(a); Land Title Act  1994 (Qld) ss  178(3) and 184(2)(a); Real Property Act  1886 (SA) s  187. Section 134 of the Transfer of Land Act 1893 (WA) and s 43(1) of the Transfer of Land Act 1958 (Vic) are extracted below. EXTRACT Transfer of Land Act 1893 (WA) — s 134 134  Purchaser from registered proprietor not required to inquire into title and not affected by notice of unregistered interest etc. Except in the case of — (a) fraud; or (b) Crown land the subject of a qualified certificate of Crown land title, no person contracting or dealing with or taking or proposing to take a transfer or other instrument from a person who is or becomes the proprietor of any registered land lease mortgage or charge 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 or becomes registered or required or in any manner concerned to inquire or ascertain the circumstances under or the consideration for which any mortgage or other encumbrance was or is discharged or removed from the Register at any time prior to or simultaneously with the registration of such transfer or other instrument 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.

EXAMPLE If Rob purchases a fee simple and registers that title, Rob will acquire an indefeasible title. The fact that Rob, prior to entering into the contract of sale, ought to have known of the existence of a prior equitable title over the property held by Maria is irrelevant. Registration protects Rob against the general law consequences of notice. The only qualification to this is where the notice that Rob received, combined with the circumstances of its receipt, constitute one of the established exceptions to indefeasibility in the form of either statutory fraud or an in personam action. 676

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EXTRACT 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.

The abolition of the doctrine of notice confers a greater level of protection and security upon registered titleholders than is available under general law. It allows a registered titleholder to enforce their title, even in circumstances where they took that title with notice of the existence of a previous interest. The aim is to ensure that members of the public who search the land register are fully informed regarding all of the enforceable estates and interests on the registered title and that there is no further place they need to look. 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 …’ Unfortunately, this objective has been somewhat undermined by the failure of the Torrens register to embrace new land registers. For example, the Emission Reduction Fund Register has been set up with the aim of incentivising decarbonisation land projects. This register is separate to the central land register. The Emission Reduction Fund Register contains important information about Emission Reduction Fund projects that may impact land, including any carbon maintenance obligations that might exist. The idea is to ensure that potential purchasers of land are aware of the existence of carbon offset projects that might attach to the land and impact its value. The Torrens register has a discretion to make an entry or notion relating to Emission Reduction Fund projects, but there is no specific obligation to set out the rights and obligations of the project pursuant to the Carbon Credits (Carbon Farming Initiative) Act 2011 (Cth) and how such rights may affect the estate or interest. This seems contrary to the objectives underlying the implementation of the Torrens register. Sections 39–40 of the Carbon Credits Act confer the discretionary power upon the Registrar to make an entry. These provisions are set out below: EXTRACT Carbon Credits (Carbon Farming Initiative) Act 2011 — s 39 Entries in title registers — general Scope (1) This section applies to an eligible offsets project.

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Entries (2) The relevant land registration official may make such entries or notations in or on registers or other documents kept by the official (in electronic form or otherwise) as the official thinks appropriate for the purposes of drawing the attention of persons to: (a) the existence of the eligible offsets project; and (b) the fact that requirements may arise under this Act in relation to the project; and (c) such other matters (if any) relating to this Act as the official considers appropriate.

EXTRACT Carbon Credits (Carbon Farming Initiative) Act 2011 — s 40 Entries in title registers — land subject to carbon maintenance obligation Scope (1) This section applies to one or more areas of land if those areas of land are subject to a carbon maintenance obligation. Entries (2) The relevant land registration official may make such entries or notations in or on registers or other documents kept by the official (in electronic form or otherwise) as the official thinks appropriate for the purposes of drawing the attention of persons to the obligation.

The discretionary nature of the above provisions combined with the failure to require the Register to outline in full the nature of the rights and obligations and their effect on the land undermines the objective of the Torrens register to provide a complete repository of all information regarding a parcel of land and the interests attached to it. As outlined by V Johnston and B France-Hudson, ‘Implications of Climate Change for Western Concepts of Ownership: Australian Case Study’ (2019) 42(3) UNSW Law Journal 869 at 891: It is particularly problematic that this mechanism does not clearly draw the connection between the rights and obligations created under the Carbon Credits Act and its effect on title and ownership of land. This can be contrasted to the Torrens approach to notifying estates and interests in land, and the processes used in other environmental laws to record interests against land title. This is problematic, not least due to the discretionary power that is given by Carbon Credits Act sections 39–40 to land registry officials to make entries or notations on the land Register in order to draw attention either to the existence of the ERF [Emission Reduction Fund] project (section 39) or a CMO (section 40). If such an entry is made on the Register it is likely to serve the purpose of providing notice of the rights and obligation imposed by the Carbon Credits Act. However, it is important to recognise that this was not a purpose that the Torrens system was designed to serve. Rather, the Register is intended to provide a complete and accurate reflection of all estates and interests in land. Although the Torrens system can accommodate unregistered estates and interests in land, by express statutory notations and recordings, by caveat, priority notice, or as a statutory exception to indefeasibility, each of these mechanisms applies to limited classes of proprietary estates and interests in land. However, the rights and obligations imposed under the Carbon Credits Act do not fit within the recognised categories. 678

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Immediate and deferred indefeasibility 11.8  Different interpretations have been given to the paramountcy provisions in each state. One of the most significant issues is whether, upon registration, a registered holder immediately acquires the protection of registration and an indefeasible title, subject to any statutory fraud that has been committed or brought home to the registered proprietor (this interpretation is known as ‘immediate indefeasibility’) or whether, upon registration, a registered holder will have their indefeasible title deferred in circumstances where the transaction is affected by a fraud that may not have been committed or brought home to the registered proprietor. (This interpretation is known as ‘deferred indefeasibility’.) The scope of the paramountcy provisions and the effect of registration has attracted a lot of attention because this represents the interface between general law principles and Torrens legislation. As outlined by D J Whalan (The Torrens System in Australia, 1982) at 297: … no other part of Torrens system law has created such diversity of judicial and academic opinion as that concerned with indefeasibility and the effect of registration under the Torrens Act. The principal reason is that this is the point at which the doctrines of the general law and the Torrens statutes meet most forcefully; from earliest times it has proved to be the flashpoint

For the most part, Australian courts have consistently upheld an immediate indefeasibility interpretation of the paramountcy provisions (see below). However, there are a number of instances where the ‘deferred indefeasibility’ interpretation has been favoured. The first lies in what has come to be known as the ‘fictitious person’ exception. Where a person transacts with a fictitious person, that is, a person who has been made up as a part of a fraudulent scam or a person who simply does not exist, any subsequent registered title will be deferred; the rationale is that the system will only confer protection on a person who has actually derived title from a real person existing on the Register. 11.9  This exception endorses a form of deferred indefeasibility and was set out in Gibbs v Messer [1891] AC 248, extracted below.

  Gibbs v Messer  [1891] AC 248 (PC) Facts: The registered proprietor of land, Messer, went away with her husband and left her certificate of title with her solicitor, Cresswell. Subsequently, Cresswell forged a transfer of the title in favour of a fictitious person described as ‘Hugh Cameron’ who was eventually registered as the proprietor of the land. Cresswell then borrowed money from the McIntyres and secured it by way of a mortgage which he fraudulently prepared from Hugh Cameron to the McIntyres. The mortgage was subsequently registered and Cresswell absconded with the mortgage moneys. The issue was whether or not the McIntyres held an indefeasible title in the mortgage given that the registration had occurred pursuant to a fraud involving a fictitious person. Lord Watson: … 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, 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 679

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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 circumstance 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 … 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 a 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 fails to appreciate the different 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. [The Privy Council ultimately ordered that Messer be reinstated as registered proprietor without the mortgage encumbrance.]

Commentary 11.10  The conclusions of Lord Watson in Gibbs v Messer appear to endorse a ‘deferred

indefeasibility’ interpretation of the paramountcy provisions. Indefeasibility is ‘deferred’ in circumstances where the transaction creating the registration is tainted by fraud. Alternatively, the decision can be treated as creating an unusual exception, namely, a registered titleholder cannot claim the protection of indefeasibility where they have dealt with a ‘fictitious’ person rather than a registered proprietor. Under the latter approach registered proprietors may only claim an indefeasible title where it is established that they took their title from a real person. Where this cannot be proven, and such a case would be

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unusual today given the fact that mortgage protocols require the bank to deal directly with the mortgagor, the registered title of the mortgagee is likely to be found to be defeasible. 11.11  The decision of Gibbs v  Messer was subsequently distinguished by the Privy

Council in Frazer v  Walker [1967] 1 AC 569. In that case, the Privy Council rejected deferred indefeasibility and endorsed an ‘immediate’ indefeasibility interpretation of the paramountcy provisions subject to the enforceability against a registered titleholder of in personam claims. The case is extracted below.

Frazer v Walker [1967] 1 AC 569 (PC) Facts: The registered proprietors of land were Mr and Mrs Frazer. Mrs Frazer borrowed money and gave the mortgagees a security over the land by forging her husband’s signature to the mortgage. Subsequently, Mrs Frazer failed to meet the payments and the mortgagee exercised their power of sale and sold the land to Walker. Walker subsequently became the registered proprietor and sought possession of the land. Mr Frazer argued that the mortgage was a nullity as his name had been forged on the mortgage documents. The Privy Council rejected the arguments of Mr Frazer holding that the title of Walker, as a registered bona fide third party purchaser for value, was indefeasible. Lord Wilberforce: (After discussing the fact that the decision in Assets Co Ltd v Mere Roihi [1905] AC 176 supported the view that registered proprietors can acquire an indefeasible title from void instruments generally his Honour went on to examine the decision in Gibbs v Messer.) … 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 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. 681

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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 Lordships it appears that there is room for some difference of opinion as to what precisely may be comprehended from 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.

Commentary 11.12  The decision of the Privy Council in Frazer v Walker directly endorses immediate

indefeasibility. Lord Wilberforce makes it clear that in his opinion the legislation intended to confer full and immediate indefeasibility upon registered proprietors who had not committed a fraud, subject only to the continuing applicability of in personam responsibilities and the power of the Registrar to correct entries. Lord Wilberforce makes it clear that the indefeasibility intended to be conferred is not intended to immunise the registered proprietor from all claims whatsoever, whether or not they may otherwise affect the land. In the words of Lord Wilberforce in Frazer v  Walker, indefeasibility ‘does not involve that the registered proprietor is protected against any claim whatsoever’; however,

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it must come within the bounds of statutory fraud, in personam responsibilities or other established exceptions before such title will be set aside. On the facts of Frazer v Walker it was clear that the mortgagee had passed the title onto an innocent third party purchaser, who, upon becoming registered, necessarily acquired the protection of the legislation. This is an important aspect to the decision. Where a mortgage has been tainted by fraud but the mortgagee has passed title on to a bona fide third party purchaser, the Torrens legislation will protect the title of the innocent third party against the effects of the prior fraud. This stems from the fact that title is not derivative and every registration creates a new title. Hence, where a fraudulent scheme results in the registration of a mortgage, an innocent third party who takes title from a fraudulent registered proprietor will not have their title impugned by the fraud. Lord Wilberforce held that immediate indefeasibility could be conferred upon any registered instrument, including the prior void mortgage, provided the fraud had not been committed or brought home to the registered interest holder. See  also P  M Jacobson, ‘Indefeasibility of Title: Frazer v Walker’ [1968] 6(1) Sydney Law Review 73. 11.13 In Breskvar v  Wall (1971) 126 CLR 376, the Australian High  Court considered Frazer v Walker and further examined the effect of title registration, approving in dicta an immediate indefeasibility interpretation. One of the issues in the case was whether the registration of a transfer (void under the Stamp Act 1894 (Qld) because it did not contain the name of the transferee) conferred an indefeasible title upon a subsequently registered proprietor, Wall. The case itself dealt with a priority dispute between two unregistered interests. The case is extracted below.

  Breskvar v Wall  (1971) 126 CLR 376 Facts: On 5 March 1968 and until 15 October 1968, the appellants were the registered proprietors of an estate in fee simple, free of encumbrances, at Acacia Ridge. As a means of securing a loan of $1200 made to them by the second respondent, they signed a memorandum of transfer of the land comprised in the certificate of title. At the time of its execution on 5 March 1968, the name of a purchaser was not inserted in the memorandum. It was thus in breach of s 53(5) of the Stamp Act of 1894 (Qld). No name of a purchaser was inserted in the memorandum of transfer prior to September 1968 when the second respondent, fraudulently, inserted the name of his grandson, the first respondent. Subsequently, on 15  October  1968, the second respondent registered the memorandum of title. On 31 October 1968 the first respondent agreed to sell the whole of the land to the third respondent by contract. Pursuant to the contract, the first respondent executed a memorandum of transfer. The third respondent was a bona fide purchaser for value of the land and took without notice of any of the matters concerning the appellants. In December 1968 a land agent who was endeavouring to effect a sale of the land by the appellants searched the register and informed the appellants of the registration of the memorandum of transfer of 5 March 1968. The appellants then lodged a caveat with the Registrar-General against dealings with the land. On 9 January 1969 the third respondent lodged for registration the memorandum of transfer dated 7 November 1968; however registration could not be effected because of the appellants’ caveat. The appellants sought declarations that the transfer of 5 March 1968 was executed by way of security only and was not effective to transfer the fee simple in the land to the first respondent; 683

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further, that the transfer was void by reason of s 53(5) of the Stamp Act; that the first respondent was at  all material times a trustee of the land for the appellants; that the appellants were seised of a legal estate in fee simple in the land; that the transfer of 5 March and the entry of it in the register book be cancelled and the relevant certificate of title ‘altered accordingly’, or alternatively, that the first respondent retransfer the land to the appellants in fee simple free of all encumbrances. Finally, and as an alternative to the other relief claimed, the appellants sought damages against the first and second respondents. Barwick CJ: … The learned trial judge with carefully prepared reasons (1972) Qd R 28 which refer to the principal relevant authorities, ordered the appellants to remove the caveat lodged by them on 13  December  1968 and that judgment be entered against the first and second respondents for the sum of $2,800 being $4,000 damages less $1,200 already received, with in each instance appropriate orders as to costs. His Honour found the appellants from the time of the registration on 15 October 1968 of the memorandum of transfer of 5 March 1968 to have only an equity to have that memorandum set aside and to the retransfer of the land and that, by reason of their conduct, that equity though prior in time was postponed to the equitable interest of the third respondent as a purchaser bona fide and for value and without notice. The first respondent is the now registered proprietor of the said land for an estate in fee simple free of encumbrances. The certificate of title which sets out those particulars is conclusive evidence that the said respondent is seised of that estate in that land. Section 33 of the Act is unqualified in its terms and applies to all such certificates and not merely to the certificate initially issued upon the title to the land being brought under the provisions of the Act. Section 96 reinforces the conclusiveness of the certificate by providing that in a suit by the registered proprietor against a purchaser for specific performance the certificate of title shall be conclusive evidence that the registered proprietor has a good and valid title to the land and shall entitle such registered proprietor to a decree for the specific performance of the contract of purchase. Section 125 of the Act provides that registration as proprietor of the land shall be equivalent to possession of the land by the proprietor for the purpose of bringing an action of ejectment against any person. Section 123 precludes any action of ejectment against the registered proprietor, putting aside the cases of mortgagee against mortgagor and encumbrancee against encumbrancer and lessor against lessee, other than (a) a person deprived of any land by fraud as against a person registered as proprietor through fraud or a person deriving otherwise than as a purchaser or mortgagee bona fide and for value from or through a person registered as proprietor through fraud; (b) a person deprived of any land by reason of a wrong description of any land or of its boundaries; (c) a registered proprietor claiming under a prior certificate of title or under a prior grant registered under the provisions of the Act covering the same land. The section goes on to provide that except in those three classes of case the certificate of title shall be an ‘absolute bar and estoppel to any such action’ against the registered proprietor. These sections are to my mind central to the Torrens system of title by registration: they make the certificate conclusive evidence of its particulars and protect the registered proprietor against actions to recover the land, except in the specifically described cases. Section 44 complements these provisions by providing that the registered proprietor holds the land absolutely free from all unregistered interests except (a) ‘in the case of fraud’ — which means except in the case that the registration as proprietor was obtained by the proprietor’s own fraud – see Assets Co Ltd v Mere Roihi (1); (b) in the case of a proprietor claiming the same land under a prior certificate of title or under a certificate of title issued under Pt III of the amendment of the Act in 1952, ie a certificate based on a possessory title, or under a prior registered grant; (c) in the case of right of way or other easement omitted from or misdescribed in the certificate of title; and (d) in the case of the wrong description of the land or of its boundaries. The substantial correspondence 684

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of these exceptions to the exceptions to s 123 is readily observed, though the correspondence clearly enough is not complete. The opinions held in some places in the past that the conclusive quality of the certificate of title did not enure for the benefit of a registered proprietor, other than the proprietor firstly registered on the land being brought under the provisions of the Real Property Act seem to me to be more than difficult to maintain in the light of the provisions to which I have referred but, in any case, they were shown to be untenable by the decision of the Privy Council in Assets Co Ltd v Mere Roihi (1905) AC 176 where Lord Lindley pointed out that ‘the sections making registered certificates conclusive evidence of title are too clear to be got over’. ‘In dealing with actions between private individuals, their Lordships are unable to draw any distinction between the first registered owner and any other.’ (1905) AC, at p 202. This is also made clear by the more recent decision of the Privy Council in Frazer v Walker (1967) 1 AC 569, at pp 581, 584–585. 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: or in default of his compliance with such an order on his part, perhaps vesting orders may be made to effect the proper interest of the claimants in the land. Also s 124 gives the Supreme Court power to cancel an entry in the register book and to substitute another entry in the event of the recovery of any land by ejectment from a fraudulent proprietor or from any of the persons against whom an action of ejectment is not expressly barred by the Act. This is the only power of the Supreme Court to amend the register. See Assets Co Ltd v Mere Roihi (1905) AC 176, at p 195; Frazer v Walker (1967) 1 AC 569, at p 581. Section 85 of the Land Transfer Act 1952 (NZ) with which the last-mentioned case was concerned gives the power of amendment upon the recovery of any land estate or interest by any proceeding whereas s 124 of the Act deals only with the recovery of land by action of ejectment. The suit for declarations and orders for amendment of the register brought by the appellant in Frazer v Walker (1967) 1 AC 569 was held by the Privy Council in that case to be an action for the recovery of land: (1967) 1 AC, at p 586. The appellants’ suit in this case was not an action of ejectment but it was, in my opinion, an action for the recovery of land and, in any case, so far as it concerned the first respondent was within the exceptions contained in s 123. Such a suit not within those exceptions would be effectively barred by s  123. Thus, except in and for the purposes of such excepted proceedings, the 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 registration itself has vested in the proprietor. Consequently, a registration that 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 (1967) 1 AC 569 of the decision of the Supreme Court of New Zealand in Boyd v Mayor, &c, of Wellington (1924) NZLR 1174, at  p 1223, now places that conclusion beyond question. Thus the effect of the

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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. I have thus referred under the description, the Torrens system, to the various Acts of the States of the Commonwealth which provide for comparable systems of title by registration though these Acts are all not in identical terms and some do contain significant variations. It is I think a matter for regret that complete uniformity of this legislation has not been achieved, particularly as Australians now deal with each other in land transactions from State to State. It follows, in my opinion, from the provisions of the Victorian Act which are counterpart to those of the Act to which I have referred and from the decisions of the Privy Council in Frazer v Walker (1967) 1 AC 569 and in Assets Co Ltd v Mere Roihi (1905) AC 176 on comparable sections of the New Zealand Act that the appeal of the registered proprietor in the case of Clements v  Ellis (1934) 51 CLR 217 ought to have been allowed. The respondent in that case had no claim in personam against the appellant and did not otherwise fall within the category of those who might successfully claim the land from the registered proprietor. As is pointed out in Frazer v Walker (1967) 1 AC 569, at p 586 a claim such as that made in Clements v  Ellis (1934) 51 CLR 217 is a claim to the land for the purpose of the Torrens system. A person in the position of that appellant had no need to call in aid s  179 of the Transfer of Land Act 1915 (Vic) or its counterpart in the legislation of another ‘Torrens’ Act. He was a registered proprietor: he was not merely in the situation of a person contracting or dealing with or taking or proposing to take a transfer from a registered proprietor nor did he need to rely on having dealt with a registered proprietor. It is unnecessary for the resolution of the present case to discuss the function in a Torrens system of such provisions as s 179. It follows in my opinion from Frazer v Walker (1967) 1 AC 569 that Clements v Ellis (1934) 51 CLR 217 was not correctly decided. Further in my opinion, Mayer v Coe (1968) 88 WN (Pt 1) (NSW) 549 and Ratcliffe v  Watters (1969) 2 NSWR 146 correctly applied Frazer v Walker (1967) 1 AC 569. The situation therefore immediately after the registration of the memorandum of transfer of 5  March 1968 by the endorsement of a memorial on the certificate of title was that the fee simple in the land was vested in the first respondent. It follows that it was not and still is not vested in the appellants. But according to the findings of the trial judge that registration was procured by the first respondent by his own actual fraud. Consequently, although the registered proprietor in whom the fee simple was vested, the first respondent did hold his estate subject to the rights of the appellants. He did not hold it on trust for the appellants but as between themselves and the first respondent they had a right to sue to recover the land and to have the register rectified, their ability to make such a claim being within s  124(d). But, as the trial judge correctly points out, such a claim is an equitable claim enforceable by reason of the principles of the Court of Chancery. The appellants require the assistance of a court having equitable jurisdiction. If there had been no transaction by the first respondent with the third respondent, the appellants would have been entitled to succeed against the first respondent. Whether or not the Supreme Court could have amended the register need not be decided. Clearly an order for the execution by the first respondent of a memorandum of transfer to the appellants and for delivery to them of the duplicate certificate of title could have been ordered: and that order appropriately enforced. But the purchase by the third respondent bona fide for value and without notice intervened before that equitable right of the appellants was fulfilled. The third respondent thus acquired an equitable interest in the land. The ability to create and the validity of an equitable estate in land, the title to which is under the Torrens system were fully established in Barry v Heider (1914) 19 CLR 197. See also Great West Permanent Loan Co v Friesen [1925] AC 208. The interest of the third respondent in the land was competitive with that of the appellants as persons deprived 686

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of their land by fraud. Their claim to the assistance of a court of equity whether regarded as a mere equity or an equitable interest in the land was not in its nature paramount or superior to that of the third respondent: nor in my opinion was that of the third respondent over that of the appellants which I think was an equitable interest in the land. As was pointed out by counsel, s  48 of the Real Property Act of 1877 (Q) is still operative not having been repealed. That section so far as is presently relevant provides: ‘Every instrument signed by a proprietor … purporting to pass an estate or interest in 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 … a right or claim to the registration of such estate.’ I do not think myself that this provision adds anything significant to the position of the third respondent. Without that section  his presentation of the memorandum of transfer with the duplicate certificate of title, which I assume he obtained on settlement of his purchase, would have entitled him to registration, subject of course to the effect of the appellants’ caveat. So far as concerns an equitable interest in the land and competition with the interest of the appellants, the third respondent would, in my opinion, be in as strong a position without that section as it is with it. There is thus a competition between the respective interests of the appellants and of the third respondent to be resolved on equitable principles. Those principles are well established: see  Rice v  Rice (1854) 2 Drew 73 (61 ER 646); Shropshire Union Railways & Canal Co v  The Queen (1875) LR 7 HL 496; Lapin v  Abigail (1930) 44 CLR 166; Abigail v  Lapin [1934] AC 491; (1934) 51 CLR 58. The creation of the appellants’ interest is prior in point of time. It arose at  the time the first respondent became the registered proprietor. The circumstance that the memorandum of transfer by virtue of which the registration was obtained was executed in breach of the Stamp Act and void did not, in my opinion, prevent the appellants’ right to sue the respondent arising. The priority of the creation of that right will only be lost by some conduct on the part of the appellants which must have contributed to the assumption, false as the event proved, upon which the holder of the competing equity acted when that equity was created. Here the appellants armed the second respondent with the means of placing himself or his nominee on the register. They executed a memorandum of transfer, without inserting therein the name of a purchaser; they handed over the relevant duplicate certificate of title and they authorised the second respondent, if occasion arose for the exercise of his powers as a mortgagee, to complete and register the memorandum of transfer. It seems to me that the actual decision of their Lordships in Abigail v Lapin (1934) AC 491; (1934) 51 CLR 58 governs this case. Here, as there, it can properly be said that ‘the case … becomes one of an agent exceeding the limits of his authority but acting within its apparent indicia’: see (1934) AC 491, at p 508; (1934) 51 CLR 58, at p 72 and the cases there cited. The appellants therefore lose the priority to which the prior creation of their interest in the land would otherwise have entitled them. The third respondent also sought to postpone the equity of the appellants by reason of their failure to lodge a caveat to protect their interest in the land as mortgagors. But having regard to what I have already said there is no need for the third respondent to place any reliance on that circumstance. However, I have recently expressed myself in relation to the effect of the failure of a person to lodge a protective caveat and find no need to repeat or amplify what I have written in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546. I agree with the conclusion of the trial judge that the right of the appellants to recover their land from the first respondent should be postponed to the equitable interest therein of the third respondent as a purchaser bona fide for value and without notice. Consequently the order of the Supreme Court was correct. In my opinion, the appeal should be dismissed.

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Commentary 11.14  The conclusions of the High  Court in Breskvar v  Wall regarding the nature and effect of the Torrens system have come to be accepted as institutionalised canons. Barwick CJ highlights the fact that each registration creates a new title. The title that is registered is not derivative or historical. This is because the Torrens system is a system of title by registration, rather than a system that deals with the registration of title. This means that each registration confers upon a holder a new title that is subject only to other registered encumbrances and established exceptions. The impact of this is that registration under the Torrens system has the power to cure defects that may have existed in the title prior to registration. Barwick CJ makes it clear that registration will not be affected by a fraud that the registered proprietor has not been personally involved in. On the facts, the void status of the transfer document did not affect the indefeasible status of the third respondents, the subsequent purchasers. The title of the first respondent, the grandson, was defeasible because of his involvement in the actual fraud but this did not prevent the grandson from conferring equitable title upon the purchasers. These conclusions are a broad product of the decision in Frazer v  Walker where the Privy Council held that if a registered proprietor receives title from a fraudulent transferor, and the transaction is tainted by fraud, the Torrens legislation will confer immediate indefeasibility upon the title of the subsequently registered proprietor, provided that have neither committed nor had brought home any fraud themselves. The direct facts of Breskvar v  Wall concerned a competition between the unregistered interest of the Breskvars arising out of the forged transfer and the subsequent equitable interest of the bona fide purchaser. These facts also involve a discussion of the priority rules relevant to a determination of a dispute between unregistered interests. See Chapter 13 for further discussion on this. Recent cases upholding the conclusions of Barwick CJ in Breskvar v  Wall include: Epworth Group Holdings Pty Ltd v  Permanent Custodians Ltd [2011] SASFC 32 at [40]–[41]; Van Den Heuvel v Perpetual Trustees Victoria Ltd [2010] NSW Conv R 56-266; Cam v Linke Nominees [2010] FCA 1148 at [36]; Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [156]; Halloran v  Minister Administering National Parks and Wildlife Act  1974 (2006) 229 CLR 545 at 559–60; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [190]– [198]; Black v Garnock (2007) 230 CLR 438 at 443; and Peldan v Anderson (2006) 227 CLR 471 at  480; Castle. Constructions Pty Ltd v  Sahab Pty Ltd (2013) 247 CLR 159 at [20]; Mekpine Pty Ltd v Moreton Bay Regional Council [2014] QCA 317 at [82] per McMurdo P, Holmes and Morrison JJA; Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425 at [16] per French CJ, Hayne, Bell and Gageler JJ; Saldanha v City of Belmont [2018] WASCA 7 at [67] per Mitchell, Beech and Pritchard JJA. The High Court subsequently confirmed the approach of Breskvar v Wall in Leros Pty Ltd v Terara Pty Ltd (1991) 106 ALR 595. In that case the issue was whether the registered proprietor, Leros Pty Ltd, held a title that was subject to a five-year lease with an option to renew. The lease had been noted on the title via a caveat lodged by Terara Pty Ltd. The principal difficulty with the caveat was that before it was lodged, the property had been transferred and registered in the name of a new proprietor and that registration was not expressed to be subject either to the lease or to the option to renew. The High  Court held that the effect of the registration of the subsequent dealing was to extinguish all prior unregistered estates or interests which, but for that registration, would have conflicted with the proprietor’s estate unless the interest was protected by 688

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one of the recognised exceptions. A person seeking to preserve an unregistered interest not falling within a recognised exception was obliged to either register that interest in advance of the registration of a subsequent inconsistent dealing or alternatively prevent such registration by caveat. Once the subsequent inconsistent dealing is registered, a prior unregistered interest will be extinguished if it is not protected and, where this occurs, the prior unregistered interest may not be asserted against the registered proprietor. The court in Leros Pty Ltd v Terara Pty Ltd noted that, in accordance with Breskvar v Wall, the Torrens legislation conferred immediate indefeasibility upon the registered proprietor. In dicta, the High Court in Leros concluded that the fact that Leros Pty Ltd took with notice of Terara’s prior interest did not mean that Leros was bound by an enforceable equity against it. The court agreed with Breskvar v Wall that the legislation had the effect of ‘cutting off the retrospective or derivative character of the title upon each transfer or transmission, so that each freeholder is in the same position as a grantee direct from the Crown’ and is not bound by prior interests, even where the registered proprietor took with notice of their existence. Once an interest is defeated by the registration of a subsequent inconsistent dealing, that interest will be extinguished absolutely and cannot be asserted against a later proprietor. Thus, a prior interest does not become an inchoate or ‘suspended’ title, which may be subsequently revived against a later proprietor. The registration of the inconsistent dealing will completely destroy the prior title: Leros Pty Ltd v Terara Pty Ltd is extracted in Chapter 13 at 13.10. Some Victorian decisions have suggested that a more lenient approach to the interpretation of the paramountcy provisions is necessary. It has been argued, in line with the decision in Gibbs v  Messer, that the title of a registered proprietor could be ‘deferred’ where the transaction producing the registration was affected by fraud, even where the registered proprietor was not directly involved in the fraud. This approach has been the subject of much discussion, particularly within the Victorian jurisdiction because of s 44(1) of the Transfer of Land Act 1958 (Vic), which, on a direct reading, seems to indicate that any folio procured or made by fraud is void. In Chasfild Pty Ltd v Taranto [1991] 1 VR 225, Gray J in the Victorian Supreme Court held that the phrase ‘procured or made by fraud’ in s 44(1) should not be confined to fraud on the part of the registered proprietor as was the case in s 42(1), otherwise the purpose of s 44(1) would completely overlap with s 42(1). His Honour concluded that it was the intention of the drafters of the Victorian Torrens legislation to expand the fraud to include all frauds affecting the dealing and that it would be ‘disappointing’ and ‘surprising’ if the Victorian legal system allowed the defendants to be dispossessed of their own home through the enforcement of a forged mortgage. This decision was subsequently rejected in Vassos v  State Bank of South  Australia [1993] 2 VR 316, where Hayne J expressly disagreed with Gray J in Chasfild and concluded that the reference to fraud in s 44(1) of the Victorian legislation should have the same interpretation as the reference in s 42(1) in order to be consistent. It is now accepted that an immediate indefeasibility interpretation is consistent with the aims of the Torrens system. See: P  O’Connor, ‘Deferred and Immediate Indefeasibility: Bijural Ambiguity in Registered Land Title Systems’ (2009) 13 Edinburgh Law Review 194; P Carruthers, ‘A Tangled Web Indeed: The English Land Registration Act and Comparisons with the Australian Torrens System’ (2015) 38 University of New South Wales Law Journal 1261. Nevertheless, changes to the Torrens legislation in Queensland, New  South  Wales and Victoria have introduced a form of deferred indefeasibility that has been described as ‘qualified indefeasibility’, with respect to the registration of forged 689

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mortgages: see  Real Property Act  1900  (NSW)  s 56C;  Land Title Act  1994  (Qld)  ss 11A(2), 11B(2), 185(1A); Transfer of Land Act 1958 (Vic) ss 87A, 87B. These provisions effectively set out that a mortgagee must take reasonable steps to verify the authority and identity of a mortgagor, otherwise the Registrar can refuse to register the mortgage of remove the mortgage from the Register. Section 87A of the Transfer of Land Act 1958 (Vic) is extracted below: EXTRACT Transfer of Land Act 1958 — s 87A Mortgagee to verify identity of mortgagor for execution of mortgage or variation of mortgage S 87A(1) amended by No. 42/2017 s 31 (1) In respect of a mortgage or a variation of mortgage, a mortgagee must take reasonable steps to verify the authority and identity of a mortgagor to ensure that the person executing the mortgage, or on whose behalf the mortgage is executed, as mortgagor is the same person who is, or is to become, the registered proprietor of the land that is security for the payment of the debt to which the mortgage relates. (2) For the purposes of subsection  (1), the mortgagee is considered to have taken reasonable steps to verify the authority and identity of the mortgagor if the mortgagee has taken steps consistent with any verification of identity and authority requirements — (a) determined by the Registrar in accordance with section 106A; or (b) set out in the participation rules (within the meaning of the Electronic Conveyancing National Law (Victoria)). (3) If, in relation to a mortgage, the  Registrar  is satisfied that the mortgagee did not take reasonable steps to verify the authority and identity of the mortgagor and the registered proprietor of the land did not grant the mortgage, the Registrar may — (a) if the mortgage has not been registered, refuse to register the mortgage; or (b) if the mortgage has been registered, remove the mortgage from the Register. (4) If, in relation to a variation of mortgage, the Registrar is satisfied that the mortgagee did not take reasonable steps to verify the authority and identity of the mortgagor and the registered proprietor of the land did not grant the mortgage, the Registrar may — (a) if the variation of mortgage has not been  registered, refuse to  register  the variation; or (b) if the variation of mortgage has been  registered, remove the variation from the Register. (5) If the Registrar removes a mortgage from the Register under subsection (3) — (a) the mortgagee no longer has an indefeasible interest in the mortgaged land; and (b) the mortgage is void. (6) If the Registrar removes a variation of mortgage from the Register under subsection (4) the variation is void.

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Section 11A(2) of the Land Titles Act 1994 (Qld) is extracted below: EXTRACT Land Title Act 1994 — s 11A Original mortgagee to confirm identity of mortgagor 11A Original mortgagee to confirm identity of mortgagor (1) This section applies to — (a) the mortgaging of a lot or an interest in a lot; and (b) an amendment of a mortgage mentioned in paragraph (a). (2) Before the instrument of mortgage or amendment of mortgage is lodged for registration, the mortgagee under the instrument (the ‘original mortgagee’) must take reasonable steps to ensure the person who is the mortgagor under the instrument is identical with the person who is, or who is about to become, the registered proprietor of the lot or the interest in a lot.

The registration of fee simple grants under the Real Property Act  1886 (SA) will not, through the Act’s indefeasibility provisions, extinguish subsisting native title rights. The reason for this is, as outlined by the Full Federal Court outlined in Jango v  Northern Territory of Australia (2007) 240 ALR 432, the relevant native title claims were already extinguished by the Validation Act  1994. The court made it clear that registration of a fee simple grant under the Real Property Act 1886 (SA) would not in any way effect an entitlement to compensation under the relevant legislation. This was confirmed by the High Court in Northern Territory v Griffiths (2019) 364 ALR 208 at [75], where Kiefel CJ, Bell, Keane, Nettle and Gordon JJ held that ‘… although native title rights and interests have different characteristics from common law land title rights and interests, and derive from a different source, native title holders are not to be deprived of their native title rights and interests without the payment of just compensation any more than the holders of common law land title are not to be deprived of their rights and interests without the payment of just compensation. Equally, native title rights and interests cannot be impaired to a point short of extinguishment without payment of just compensation on terms comparable to the compensation payable to the holders of common law land title whose rights and interests may be impaired short of extinguishment.’ 11.15  The scope of protection given by registration extends to include all associated

interests. Thus, a registered lease will protect all properly created and attached covenants including options to renew because the Act deals with ‘registrable instruments’ not with ‘registrable interests’. The scope of protection given to a registered lease with an option to renew was discussed by the Australian High Court in Mercantile Credits v Shell Co of Australia Ltd (1976) 136 CLR 326 which is extracted below.

—  Mercantile Credits v Shell Co of Australia Ltd  — (1976) 136 CLR 326 Facts: Shell Co of Australia Ltd was given a five-year lease by registered proprietors over particular land. The lease contained various covenants for renewal and was subsequently registered. When the first term expired, the first option to renew was exercised and the new term 691

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was registered. The registered proprietor then mortgaged the land to Mercantile Credits. Prior to registering the second renewal, Mercantile Credits gave notice of its intention to exercise its power of sale following default on the mortgage repayments by the registered proprietor. Shell Co then lodged a caveat forbidding registration of any subsequent dealing unless it was subject to the renewed lease. Mercantile Credits sought a declaration that the extension was not binding upon it as a mortgagee over the land because the protection conferred upon a registered lease did not include protection to associated options to renew. Barwick CJ: … In my opinion, because of the specific enforceability of the right to renew, if exercised, the registration of the memorandum of lease containing the covenant for renewal created an interest in the land commensurate with the extent of the covenant. The memorandum of lease in its entirety so far as it affected any estate or interest in the land obtained the priority given by s 56, and the title of the registered proprietor of the lease, including that interest in the land derived from the covenant for renewal, became absolute and indefeasible by virtue of s 69. Section  119 of the Act may be regarded as confirmatory of this conclusion. Part XI of the Act, in which s 119 occurs, permits of, but does not require, the registration of a lease for a term of one year or less (see s 116). An express permission is given by s 117 for the inclusion in a registered lease of a right or covenant to purchase the leased land. There is, in my opinion, no relevance in the absence from this section of an express reference to a right of renewal. It is clear from the terms of s 119 that the presence of such a right in a registered lease is contemplated, although the reference in that section is only to a lease for a term of one year or less. It could scarce be said that a right of renewal could be included in the registered lease for a term of one year or less but not in a registered lease granting a longer term. Section 119 gives protection to an unregistered lease for a term of one year or less against a subsequently registered dealing if the tenant under such a lease is in actual possession of the land, presumably at  the date of the execution of the subsequent dealing. But, by the proviso to the section, no right of purchase of the freehold or of renewal of the term shall be valid against the person having the benefit of the subsequent dealing unless the instrument from which the term is derived is registered or unless a caveat protecting the right of purchase or of renewal is lodged with the Registrar. The proviso in this section was necessary, in my opinion, because, without it, the effect of the earlier substantive provision of the section would have made the subsequent dealing subject to the right of purchase or of renewal as the case may be. In the result, the person claiming under the subsequent dealing is only affected by a maximum term of one year in the case of a tenant in actual occupation under an unregistered lease or agreement for lease. Section 119 seems to me to have been enacted against the background of the assumed validity as against the subsequent dealing of the right of purchase or of renewal contained in a registered instrument. In that sense, the section is not only consistent with the conclusion I have expressed but, in my opinion, is confirmatory of it. The learned judge of the Supreme Court found in s 119 itself an implication that a right of renewal in a registered lease was entitled to priority and indefeasibility. I do not think this result flows from s 119. It is the result, in my opinion, of the other provisions and factors to which I have referred. Submissions were made on behalf of the appellant based on the view that the right of renewal was not itself an interest in land which could be registered under the Act. But, in my opinion, this was not a relevant approach to the problem posed in this case. As I have said, the Act deals with registrable instruments, not with registrable interests. Of course, a promise to renew a lease not contained in a conforming memorandum of lease but as a disjoint promise in a separate instrument, could not be registered. In that sense, it may be correct to say that a written covenant to renew a lease is not itself a registrable instrument. But when the covenant 692

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is part of a memorandum of lease in due form, it cannot be said, in my opinion, that any interest in the land which the instrument as a whole intends and is effective to create, is not included within the ambit of ss 54 and 69.

Commentary 11.16  The High  Court in Mercantile Credit v  Shell Australia Co set out that a right

of renewal contained within a registered lease shall receive the same indefeasibility protection as all other terms and conditions incorporated within the lease. Barwick CJ concluded that the legislation dealt with ‘registrable instruments’ rather than registrable interests and therefore dismissed the argument that a right to renew did not constitute a registrable interest. Hence, where the right to renew is incorporated into the instrument creating the lease rather than being contained within a separate instrument, it will receive the same level of protection from the Torrens legislation as would be conferred upon any of the provisions contained within the lease instrument. Gibbs J took a slightly different approach to that of Barwick CJ, examining the nature and scope of the right to renew itself. In referring to the decision of Muller v Trafford [1901] 1 Ch 504, Gibbs J quoted from the judgment of Farwell J who had concluded that a right to renew: … 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: at [509].

In line with these comments, Gibbs J concluded that the right of renewal is ‘an incident of the lease’ and directly affects the nature of the term itself. His Honour acknowledged, however, the conceptual difficulty of arguing that a right to renew is a fundamental term of the lease when, on the facts, the lease was created by the renewal itself and it was this ‘renewed’ lease which Shell Australia Co sought to have priority accorded to. The renewed lease, despite having ‘its origins in a right conferred by a registered instrument’, therefore evolved from the right of renewal. Despite these difficulties, Gibbs concluded, that 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 ’. His Honour came to this conclusion on two primary grounds. First, that the drafters of the Torrens legislation could not have intended the inconvenience and injustice that would flow from a conclusion that a right to renew, a valuable and common incident of a lease, could be defeated by the subsequent registration of a mortgage. Second, the legislation itself strongly supports the view that rights of renewal contained within a lease should be protected. In this respect, the legislation expressly set out that any ‘right or covenant of renewal’ of any lease agreement shall be valid where included within an unregistered one-year lease given to a tenant in possession and any longer term registered lease, against a subsequent purchaser of the reversion, lessee, mortgagee or encumbrance where that lease has been registered’. In light of this, Gibbs J concluded that it would be ‘an extraordinary anomaly’ if a right to renew contained within a five-year registered lease was not intended to receive the same express protection as that conferred on a oneyear unregistered lease. See also Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at [8] per French CJ who stated: ‘At common law an option to renew a lease is “an incident of the lease”. It is a present interest running with the land and is “intertwined with the lease itself ”’. See also Pyrmont Point Pty Ltd v Westacott [2016] 693

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NSWCA 33 at  [40] per Ward JA. The lease in Mercantile Credit was a registrable lease. Where the lease is either unregistered or not capable of being registered, the right to renew is still regarded as an incident of the lease and may gain protection as a paramount interest. In Alcova Holdings Pty Ltd v Pandarlo Pty Ltd (1988) 15 NSWLR 53, Bryson J held that a lease created pursuant to a right of renewal, where no formal grant had been made, amounted to an equitable leasehold interest and was protected as a paramount interest. Registration of a mortgage will not necessarily result in the validation of all the terms in the mortgage. In order to determine the enforceability of any particular term it is necessary to distinguish between the personal contractual obligations of the mortgagor, which do not constitute land interests, and the terms of the mortgage that, in the words of McCallum J in Australian Regional Credit v Mula [2009] NSWSC 325 at [10], ‘delimit or qualify the estate or interest or are otherwise necessary to assure that estate or interest to the registered proprietor’. As outlined by Kunc J in Winau Aust Pty Ltd v LCC Property Development Pty Limited [2020] NSWSC 434 at [157], ‘the question as to whether an obligation within a mortgage gains the benefit of indefeasibility is one of proper construction of the relevant instrument in a given case’. See also Chandra v Perpetual Trustees Victoria Ltd [2007] NSWSC 694 at [31], where AJ Bryson cited Giles J in PT Ltd v Maradona Pty Ltd (1992) 25 NSWLR 643 at 679B. In this respect, it has been held that where the amount secured by the mortgage is not specified, the existence and scope of the debt may not be established through the registration of the mortgage and must be proven in another way: Yazgi v  Permanent Custodians Ltd [2007] NSWCA 306; 13 BPR 24,567 at [24] per Beazley JA, Ipp and Tobias JJA agreeing. Consider the following question and answer example. EXAMPLE Question Joe Bloggs is the registered proprietor of land. Joe Bloggs gives his duplicate certificate of title to his solicitor, Crudwell, for safekeeping. Crudwell fraudulently takes the duplicate CT and forges Joe’s name on a transfer that transfers the land to Crudwell. Crudwell then takes this ‘forged’ transfer along with the duplicate certificate of title off to SillyBank and obtains a mortgage over the property. SillyBank registers the transfer as well as the mortgage. This means that Crudwell becomes the registered proprietor subject to a registered mortgagee in favour of SillyBank. The duplicate CT is held by SillyBank. Crudwell does not pay the mortgage instalments and SillyBank seek to enforce their security and sell the property to Jane Proper on 15 July 2011 with settlement to occur on 15 August 2011. On 1 August 2011, Joe Bloggs lodges a caveat to prevent Jane from becoming registered and seeks an order from the Registrar amending the title to have it transferred back into his name without the registered mortgage encumbrance. Advise Joe Bloggs, SillyBank and Jane Proper.

EXAMPLE Answer Crudwell is the registered proprietor and SillyBank holds a registered mortgage. Crudwell has been fraudulent in taking the duplicate CT and forging Joe’s signature and his registered title is clearly defeasible against Joe Bloggs. SillyBank became registered

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without participating in the fraud so while there is fraud in the transaction, that fraud has not been brought home to SillyBank. However, the mortgage instrument executed with SillyBank is void because the signature of Joe Bloggs was forged. Following Barwick CJ in Breskvar v Wall, registration of a void mortgage instrument will confer a good title. The only exception to this is Gibbs v Messer where the void mortgage resulted from a dealing with a fictitious person. This decision does not apply to the facts because SillyBank took their title from Crudwell, and not a ‘fictitious person’. In the absence of any other exceptions, SillyBank will be able to enforce their registered interest. Joe Bloggs may therefore have the title transferred back into his name subject to the registered mortgage in favour of SillyBank. If, however, Joe Bloggs waits until Jane Proper is registered, he will be unable to have the title retransferred because Jane Proper has herself acquired an indefeasible title and s 44(2) of the Victorian provisions specifically protect a bona fide purchaser who has acquired a registered title from a proprietor who is subject to fraud.

11.17  Revision Questions 1. What is the difference between ‘deferred’ and ‘immediate’ indefeasibility? 2. What is the meaning of a system of ‘title by registration’? 3. In Breskvar v Wall, Barwick CJ held that ‘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’. Does this approach promote consistency and security at the expense of equity and fairness? 4. What is the difference between the approach of Barwick CJ and the approach of Gibbs J in Mercantile Credit v Shell Australia Co on the issue of whether a right of renewal should be protected as part of the lease agreement?

Statutory Exceptions to Indefeasibility Statutory fraud 11.18  Fraud is an express exception to indefeasibility in all jurisdictions (see paramountcy

provisions extracted above). In all states apart from Queensland and the Northern Territory, fraud is not defined in the legislation other than to state that mere notice of the existence of a prior interest does not, in itself, constitute fraud: Real Property Act 1886 (SA) s 187; Land Titles Act  1980 (Tas) s  41; Transfer of Land Act  1958 (Vic) s  43; Transfer of Land Act  1893 (WA) s  134; Land Titles Act  1925 (ACT) s  59; Real Property Act  1900 (NSW) s 43; Land Title Act 2000 (NT) s 191; Land Title Act 1994 (Qld) ss 178(3) and 184(2)(a). See also Carvita Holdings Pty Ltd v Mitsubishi Bank of Australia Ltd (1993) 6 BPR 13,327 and Bahr v Nicolay (No 2) (1988) 164 CLR 604 (extracted below). Forgery is only included as a specific exception to indefeasibility in South  Australia: Real Property Act  1886 (SA) s 69(b), which sets out that a certificate of title that has been obtained by forgery or by means of an insufficient power of attorney or from a person under some legal disability shall not be absolute and indefeasible, but this does not apply if the registered proprietor is bona fide and has given valuable consideration or has obtained title from a person under a disability or from a person who has committed a forgery. For a broader discussion on the range and scope of statutory fraud see: P Carruthers and N Skead, ‘Fraud Against the Registrar — 695

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An Unnecessary, Unhelpful and Perhaps, No Longer Relevant Complication in the Law on Fraud under the Torrens System’ (2014) 40(3) Monash University Law Review 821. The broader question of what does constitute fraud has been left for judicial determination. Under general law, fraud has both legal and equitable manifestations. Common law fraud requires proof of deceit whereas equitable fraud can be committed wherever it is clear that an unfair consequence may arise. In Nocton v Lord Ashburton [1914] AC 932, Lord Haldane LC concluded that equitable fraud is: … used in Chancery in describing cases which were within its exclusive jurisdiction, it is a mistake to suppose that an actual intention to cheat must always be proved. … What it really means in this connection is, not moral fraud in the ordinary sense, but breach of the sort of obligation which is enforced by a court that from the beginning regarded itself as a court of conscience’: at 954.

In the context of the Torrens system, the Privy Council in Assets Company Ltd v Mere Roihi [1905] AC 176 adopted a broader approach to the interpretation of fraud, an approach that was akin to equitable fraud. In this regard, for the purposes of the Torrens legislation, the Privy Council concluded that fraud will exist ‘in circumstances where a registered proprietor intends to deceive, where his or her suspicions were aroused or where he or she abstained from making inquiries for fear of learning the truth’. However, where a registered proprietor honestly believes that a document, which is forged or improperly obtained, is genuine, no statutory fraud will be committed. The Australian High  Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [192] concluded that ‘fraud means actual fraud, moral turpitude’. The different forms of statutory fraud are explored within the following case extracts. 11.19 In Loke Yew v Port Swettenham Rubber Co [1913] AC 491, the Privy Council dealt with the issue of whether a registered proprietor, which had given an express assurance that it would not disturb the possessory title of an occupier following registration, would be acting fraudulently by subsequently refusing to uphold the assurance. The case is extracted below.

  Loke Yew v Port Swettenham Rubber Co  [1913] AC 491 Facts: Port Swettenham Rubber Co bought land from a registered proprietor and agreed, prior to the sale, that they would not disturb the occupation of Loke Yew on the land after becoming registered. Subsequently, Port Swettenham sought to remove Loke Yew from the land claiming an indefeasible title. Lord Moulton: The negotiations between the plaintiff company and Haji Mohammed Eusope were carried on by a certain Mr Glass as agent on behalf of the company. The evidence shews that Haji Mohamed Eusope recognised 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 to sign, 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 696

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purchase price. But Haji Mohamed Eusope would not proceed without an assurance that the lands of Loke Yew and Sz Who 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 … It is clear therefore, from the amount actually paid that Loke Yew’s lands were not included in the sale. … 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 to do so 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 …

Commentary 11.20  The conclusions of the Privy Council in Loke Yew v Port Swettenham Rubber Co

make it clear that actual fraud will be committed where a registered proprietor fails to uphold an express assurance prior to registration. On the facts, the failure of the registered proprietor to uphold the assurance was treated as a part of a fraudulent scheme to acquire the land and the registered proprietors had been intentionally deceitful in their behaviour up to and beyond their registration. The representation given by Mr Glass was false from the outset and therefore came within the scope and range of the statutory fraud exception. It is interesting, however, to consider whether an undertaking, honestly given at the point when it is made, which has the effect of inducing an execution of a transfer, and which is subsequently denied following registration, for the purpose of defeating the prior interest, could constitute statutory fraud.

11.21  This particular issue was examined by the High  Court in the decision of the

Australian High Court in Bahr v Nicolay (No 2) (1988) 164 CLR 604. An extract of this decision is set out below.

  Bahr v Nicolay (No 2)  (1988) 164 CLR 604 Facts: The vendors (the Bahrs) sold their land to the purchaser (Nicolay) who agreed to lease it back to them for a period of three years. The contract further set out that when the lease expired, the Bahrs could elect to repurchase the land. Nicolay subsequently sold the land to third parties, the Thompsons, who knew of the agreement with the Bahrs and who expressly agreed to uphold this contractual right. Following registration, however, when the Bahrs purported to exercise their option to repurchase, the Thompsons refused to honour their contractual promise, arguing that upon registration, their title became indefeasible and could not be set aside merely because they had knowledge of the existence of a prior title. The High Court considered the relevance of the fraud exception and the in personam exception on the facts. The extract from the judgment of Mason CJ and Dawson J examines the scope of statutory fraud, concluding that it has a broad equitable application to include deceit, dishonesty and moral turpitude. On the facts, their Honours concluded that fraud must include a dishonest repudiation of a prior interest which a registered proprietor had agreed to recognise in order to obtain title. The fact that the actual repudiation occurred after registration made no difference to 697

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this conclusion because their Honours felt that there was no reason why statutory fraud should not include post registration conduct particularly where it was connected to activities leading up to the registration. The extracts from the judgments of Wilson and Toohey JJ and Brennan J concerning the application of the in personam defence are extracted at 11.30. Mason CJ and Dawson J: … 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 pp 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 p 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 p 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 p 106) the following passage of the remarks of Lord Lindley in the earlier decision (Assets Co v Mere Roihi (1905) AC 176, at p 210): ‘Fraud … means actual fraud, dishonesty of some sort, not what is called constructive or equitable fraud …’ Lord Buckmaster went on (at pp 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 pp 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 p 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 p 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 pp 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 pp 90, 97; Stuart v Kingston, at pp 329, 356. However, from the appellants’ point of view the examples may not 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 698

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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  p  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 p 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 interpretation. Indeed, 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 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 recognise as a basis for obtaining title, as well as fraudulent conduct which enables him to obtain title or registration. 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 unregistered 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 p 136.

Commentary 11.22  The conclusions of Mason CJ and Dawson J in Bahr v  Nicolay indicate the preparedness of the court to find in favour of statutory fraud in circumstances where notice of the existence of a prior interest is coupled with an express assurance or acknowledgment on the part of the registered proprietor that the prior interest will be upheld. Wilson and Toohey JJ found that this conduct constituted an in personam defence in the nature of a trust rather than fraud. By contrast, Mason CJ and Dawson J felt that the refusal of the registered proprietor is treated as fraudulent because it indicates that the registered proprietor acquired the title under false pretences. This implies an active dishonesty that goes beyond mere notification of the existence of the prior interest. In this respect, their Honours adopted an expansive view of fraud and did not see that fraud for the purposes of the Torrens provisions was confined to fraud in the obtaining of a transfer or in securing registration. Their Honours stated at [615]: ‘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 recognise as a basis for obtaining title, as well as fraudulent conduct which enables him to obtain title or 699

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registration’. It will not, however, constitute a fraud, in the absence of any clandestine behaviour, to give proper notification that a legal obligation is at  an end: White City Tennis Club Ltd v  John Alexander’s Clubs Pty Ltd [2008] NSWSC 1225 per Young CJ at [102]. The conclusions of Young CJ were subsequently upheld by French CJ, Gummow, Hayne, Heydon and Kiefel JJ in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1, where their Honours at [101] upheld the conclusions of Judge Learned Hand (James Baird Co v Gimbel Bros Inc (1933) 64 F 2d 344 at 346) who stated: ‘in commercial transactions it does not in the end promote justice to seek strained interpretations in aid of those who do not protect themselves’. Their Honours added: ‘And where interpretations, strained or otherwise, will not help, assistance to those persons by a strained application of equitable ideas does not promote justice either’. The statutory definition of fraud will include some aspects of equitable fraud. This idea was specifically endorsed by Mason CJ and Dawson J in Bahr v Nicolay where their Honours concluded that it was inappropriate to hold that ‘all species of equitable fraud stand outside the concept of fraud’. On the facts of Bahr v Nicolay, Mason CJ and Dawson J also held that an express trust arose that reflected the intention of the parties to the sale contract between Mr Nicolay and the Thompsons. This raised the in personam exception, which is discussed later in this chapter. Their Honours stated at [618]–[619]: 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.

Subsequent cases have upheld the idea that some elements of equitable fraud are included within the concept of statutory fraud. In Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (2007) 64 ACSR 31, Young CJ considered what was needed, in addition to knowledge of the existence of an unregistered interest, for conduct to amount to statutory fraud. His Honour concluded that there would be fraud if the designed object of a transfer was to cheat a person out of a known existing right or if there was a deliberate and dishonest trick causing an interest not to be registered. In El-Kazzi v Kassoum [2009] NSWSC 99, Ward J held that a contract which had been entered into on the same date as the transfer, with no negotiation between the parties on price, with the deposit clause struck out and the price defined by a very specific valuation some six months earlier for stamp duty purposes and where the parties were closely related may have been ‘colourable’ but it did not constitute a species of equitable fraud sufficient to attract statutory fraud. In HL (Qld) Pty Ltd v Jobera Pty Ltd [2009] SASC 165 Layton J concluded that the refusal by a registered mortgagee to uphold a priority agreement, whereby the mortgagee had agreed to register a second mortgage before a first mortgage, constituted statutory fraud. See also: Thorpe v Lochel and Ors [2005] WASCA 85; In the Matter of An Application By Police Association of South  Australia [2008] SASC 299; Credit Connect v  Carney Credit Connect v Smit [2010] NSWSC 910 at [69]; Gunns Ltd v Balani [2011] FCA 431 at [87]. Another form of statutory fraud is that of forgery and, in some cases, attestation errors. As outlined above, South Australia is the only state to have specifically legislated forgery as an exception to indefeasibility: Real Property Act  1886, s  69(b). In the other states, forgery and general errors involving the attestation of documents must be examined as constituents of statutory fraud. While a forged document will generally constitute fraudulent behaviour, the registration of an inaccurate or void document will not, in itself, 700

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amount to fraud because it lacks the requisite intention. By contrast, the registration of an inaccurate or void document, in circumstances where the registered proprietor knew or should have known of the error, may be held to amount to statutory fraud. 11.23  Where it can be established that the acts of the registered proprietor in registering

the faulty document were a genuine accident, statutory fraud may not be established. This issue was examined in Russo v Bendigo Bank [1999] 3 VR 376. The case is extracted below.

  Russo v Bendigo Bank  [1999] 3 VR 376 (CA) Facts: A mortgage in favour of Bendigo Bank was forged by the son-in-law of the registered proprietor. A young law clerk for the bank’s solicitor, Miss Gerada, falsely witnessed this forged signature and was subsequently unable to recall having done so and was unaware that the mortgage had been forged. It was clear, however, that the solicitors she clerked for had instructed her not to witness any signature other than that of the mortgagor who had actually signed the document. The registered proprietor, Mrs Russo, argued that the registered mortgage in favour of Bendigo Bank was defeasible because Miss Gerada, as agent for the registered mortgagee was fraudulent. Ormiston J: For this purpose it is necessary to say something about what constitutes ‘fraud’ for the purposes of the Transfer of Land Act. The exception in one form or another has appeared in the Torrens system legislation since it was first enacted in South Australia on 27 January 1858 as the Real Property Act 1857–1858 (‘the Torrens Act’) (cf s 39 — ‘the case of frauds’) and since the equivalent statute was first enacted in Victoria as the Real Property Act 1862. The exception as to fraud appeared in both Acts but, so far as I have been able to discover, there was little discussion at the time as to the nature of the ‘fraud’ (or ‘frauds’) which was intended to be excepted from the concept of indefeasibility of title. Little was said about the exception by Sir Robert Torrens who, it must be remembered, was not a trained lawyer. It was mentioned in his first reading speech without further elaboration: 1857 SA Parliamentary Debates 203 (see  also Robinson: Transfer of Land in Victoria, p 3). Thus, to attribute to him a sophisticated understanding of the difference between fraud at common law and fraud in equity may be presuming too much. However he knew enough to base much of his complaint against the English land law on the fierce and lengthy disputes as to priority of estates in the courts of Chancery: see Torrens’ Printed Speeches at p 7 (and see Robinson at pp 2–4). 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: see one recent view in an article entitled ‘Muddying of the Torrens Waters with the Chancellor’s Foot?; Bahr v Nicolay’ by JG Tooher (1993) 1 Aust Property LJ 1. It is desirable to look at some of the decisions which have dealt with the meaning of the word ‘fraud’, but there are now so many that it is impossible to look at other than a few of the more authoritative. The starting point, according to almost every subsequent authority (cf Bahr v Nicolay at 614 and 630), is the decision of the Privy Council in Assets Co Ltd v Mere Roihi [1905] AC 176, albeit that it dealt with the transfer of native lands and was decided almost fifty years after the 701

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passing of the original Torrens Act. In a passage which was cited in full by the learned trial judge, Lord Lindley on behalf of the Board said (at p 210) that: ‘… by fraud … 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.’ His Lordship continued by describing the kind of dishonesty which might satisfy the exception by saying 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.’ So it was said that it was not merely a matter of showing that the transferee might have been more vigilant and had failed to make further enquiries, for that would not in itself prove fraud: ‘… but if it be shewn that his suspicions were aroused, and that he abstained from making enquiries for fear of learning the truth, the case is very different, and fraud may properly be ascribed to him.’ Finally the important distinction between persons acting honestly and dishonestly was emphasised by his Lordship’s description of the consequences of presenting a forgery for registration, as occurred in the present case (ibid): ‘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.’ The same view seems to have been well entrenched by the time the High  Court first considered the issue in Australia, namely in Butler v Fairclough (1917) 23 CLR 78. So Griffith CJ found it sufficient to say (at 90): ‘It is settled that the term “fraud” as used [in s 72 of the Transfer of Land Act 1915] imports personal dishonesty or moral turpitude.’ Likewise Isaacs J, in whose reasoning Barton J agreed, stated (at 97) that ‘fraud’ is ‘actual fraud, moral turpitude’, which had been settled finally by the Assets Co Case, and he referred also to an earlier Full Court decision to the same effect in this State in Gregory v Alger (1888) 19 VLR 565. Similar views were expressed by Starke J in Stuart v Kingston (1923) 32 CLR 309 at 356 where he said that actual fraud ‘… is “fraud in the ordinary popular acceptation of the term”, ie “dishonesty of some sort”, “fraud carrying with it grave moral blame and not what has sometimes been called legal fraud, or constructive fraud, or fraud in the eye of a court of law or a court of equity”.’ The principle stated in those cases, indeed the attitude of the courts generally to the interpretation of the word ‘fraud’, seemed consistent for many years and it is only in recent years that some argument has arisen as to whether the term connotes more than was originally thought. What might be seen as a broader approach to defining the term ‘fraud’ arguably goes back to the judgment of Kitto J in Latec Investments Ltd v  Hotel Terrigal Pty Ltd (In Liquidation) (1965) 113 CLR 265 at 273–274 (with whose judgment on this issue Taylor and Menzies JJ agreed), albeit that his Honour referred back in turn to another earlier Privy Council case of Waimiha Sawmilling Co v Waione Tin Co Ltd [1926] AC 101, especially to the observations of Lord Buckmaster at 106. In dealing with an argument that fraud requires some misrepresentation in order that a transaction be set aside Kitto J said (at 273–274): ‘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 702

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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 … .’ It was those words which were expressly approved by four members of the Court in Bahr v  Nicolay. They were directly cited for that purpose by Wilson and Toohey JJ and were referred to by Mason CJ and Dawson J at  614 for the purpose of establishing that some kinds of equitable fraud come within the concept of ‘fraud’ for the purposes of the Torrens legislation. Indeed, whereas Wilson and Toohey JJ had referred to what Lord Buckmaster had said in the Waimiha Sawmilling Case in detail and with approval (see  their judgment at 630–631), Mason CJ and Dawson J appeared to give only qualified approval to what Lord Buckmaster had said: see  at  613–614. Although accepting that there can be no fraud by taking a registered estate or interest merely with notice of an existing unregistered interest, they proceeded to say  (at 614) of both Lord Buckmaster’s discussion and Lord Lindley’s earlier description of fraud in the Assets Co Case (see  above at  para 24), that: ‘These comments do not mean all species of equitable fraud stand outside the statutory concept of fraud. Far from it.’ It was at  this point that they discussed the observations of Kitto J (above) with approval, although, lest it be thought that they were accepting all kinds of equitable fraud as coming within the concept, they then reiterated (ibid): ‘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; Stuart v Kingston.’ The opinions expressed by Mason CJ and Dawson J on this issue may be seen to be a minority view, at least to the extent that they appeared to countenance the possibility of acts subsequent to a transfer of an interest as amounting to fraud for the purposes of the Act. In the complex factual circumstances of that case they were prepared to find fraud on that basis, but the other members of the Court (Wilson, Brennan and Toohey JJ) were not and they found for the appellants on the basis that they were enforcing personal rights against persons whose interest was subject to a constructive trust. Brennan J dealt only briefly with fraud and expressed no views contrary to accepted lines of authority, but Wilson and Toohey JJ examined the matter in greater detail but likewise appeared not to express views contrary to accepted authority, explicitly citing one passage from Lord Buckmaster’s speech in the Waimiha Sawmilling Case as a ‘convenient starting point’ for an understanding on the concept of fraud: at  630–631. They reiterated that fraud referred to in the Torrens Acts is ‘actual fraud, involving some act of dishonesty on the part of the person whose title is sought to be impeached’ (at 630), concluding that the transfer in favour of the second respondent was not one ‘to cheat the appellants of a known existing right’: at 636–637. The precise factual circumstances and the conclusion in Bahr are of no present consequence but it is significant to note that in the most recent discussion of the concept of fraud by the High Court in this context, Bank of South Australia Ltd v Ferguson (1998) 192 CLR 248, a brief statement of principle relevant to that case was expressed in these terms (per Brennan CJ, Gaudron, McHugh, Gummow and Kirby JJ at  255): ‘Not all species of fraud which attract equitable remedies will amount to fraud in the statutory sense.’ Although the Court went on to observe that registration of a transfer is not fraudulent merely because a transferee knows that registration will defeat an antecedent registered interest of which that transferee has notice (ibid), on its face this statement of principle, if it were so intended, seems almost the reverse of the formulation by which Lord Lindley expressed the rule in the Assets Co Case at 210. 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 703

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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 mere deceit, nor in its wider 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, 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 para 40. … 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 acknowledged that the inquiry 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 office of Title 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 704

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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 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 para 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 705

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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 basis for this contention was said to be found in the judgment of the Privy Council in Royal Brunei Airlines 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 indefeasibility 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 (ibid): ‘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 consistently 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. … 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 706

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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 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 pp 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. 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, insofar as the bank’s agent had been engaged to act 707

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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 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) 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 p 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 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.’ 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. 708

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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 characterised 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. I would therefore dismiss the appeal.

Commentary 11.24  Ormiston JA concluded in this decision that the intention of the drafters of the

Torrens legislation was to include ‘actual’ rather than equitable fraud and felt that courts: … 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 principal reasons Sir Robert Torrens had for introducing the concept of indefeasibility of title was to overcome the sophisticated use of equitable principles to hold up and defeat claims to title.

His Honour made it clear that in his opinion, statutory fraud must involve some form of dishonesty that can be brought home to the person whose registered title is impeached or to his or her agents. His Honour held that the ‘most satisfactory definition of the concept of fraud’ was that given by Salmond J in Waimiha Sawmilling Co Ltd v Waione Timber Co Ltd [1923] NZLR 1137, which set out: The term ‘fraud’ is not here used in its most restricted sense as including merely deceit, not 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.

This approach is consistent with the definition adopted by the High  Court in Farah Constructions v Say Dee Pty Ltd (2007) 230 CLR 89 at [173], where Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ stated: As a matter of ordinary understanding, and as reflected in the criminal law in Australia, a person may have acted dishonestly, judged by the standards of ordinary, decent people, without appreciating that the act in question was dishonest by those standards.

In Papas v  Co [2018] NSWSC 1404, Hallen J at  [369]  upheld the conclusions of Ormiston  JA in Russo, concluding that the ‘critical elements of  statutory fraud  are dishonesty, moral turpitude, a want of probity, and a wilful and conscious seeking to defeat or disregard another’s rights’. See also: Hoh v Ying Mui Pty Ltd [2019] VSCA 203 at  [351]–[352] per Beach, Hargrave JJA and Sifris AJA. The weakness on the facts of the Russo case was that there was no direct evidence of dishonesty or moral turpitude on the part of the bank clerk. Neither was there any evidence at  all to suggest that she was involved in the forgery. While it was unfair that the documentation had been registered, the circumstances lacked the requisite element of conscious impropriety that was vital to the establishment of statutory fraud. The Russo decision also raises issues concerning the extent to which the fraudulent actions of an agent can be imputed to the principal. This was further examined in Schultz v  Corwill Properties [1969] 2 NSWR 576. In that case, the New  South  Wales Supreme 709

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Court concluded that a solicitor had acted fraudulently in registering a forged mortgage and discharge of mortgage. Street J made the following comments at 582: 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.

The conclusions of the court in Russo v Bendigo Bank can be directly contrasted with those of the court in AGC v De Jager [1984] VR 483, where Tadgell J felt that AGC was guilty of statutory fraud when it presented for registration a document that contained the forged signature of Mrs De Jager. His Honour concluded that even though the fraud had not been committed by AGC or one of its employees, AGC did not take the necessary protocols to ensure that the mortgage was properly executed and this resulted in them presenting a document for registration that was forged. Tadgell J focused upon the importance of prioritising proper processes for the execution of important documents. He concluded that: If there is currency in the notion that the signature of an attesting witness to a document to be registered under the Transfer of Land Act 1958 is no more than a formality, then the sooner it is dispelled the better. Nothing, in my opinion, could be more unwarrantable. A system of land title by registration, such as the Torrens system is, plainly depends on the good faith of those presenting instruments for registration.

In circumstances where the fraud is not actually committed by the registered proprietor, it is necessary to consider what level of ‘conscious impropriety’ the registered proprietor may be held responsible for. If the registered proprietor wilfully ignores a fraud, dishonesty may be inferred. However, in cases where the registration has occurred as a direct result of a simple failure to discover fraud or forgery, statutory fraud may not be established. In Macquarie Bank v Sixty-Fourth Throne [1998] 3 VR 133, Tadgell JA, considered whether the failure by Macquarie Bank to detect forged signatures upon a mortgage, by checking the attesting signatures and matching them up to those obtained via a company search, amounted to statutory fraud. His Honour concluded that the ‘simple aggregation of the knowledge of a number of persons, individually unaware of fraud or facts which ought to disclose it’ could not create ‘a notional person with a dishonest intent’. Tadgell JA held that in the absence of proof that the bank had registered the mortgage with actual knowledge of the forgery or with a calculated and wilful ignorance, the failure to detect a forgery in the process of becoming registered did not constitute statutory fraud. See also the comments of Winneke P in that case who stated: It is, I concede, logically attractive to argue that legitimate equitable claims should not be emasculated by setting the threshold level of conduct, short of statutory fraud, too high; on the other hand, it is, in my view, an argument of equally compelling force that the threshold should not be set so low as to defeat the concept of indefeasibility which is entrenched in and central to the Torrens system of registration of interests in land: at 136.

In Young v Hoger [2001] QCA 453 mortgage documents were sent to the mortgagor for execution and return. The solicitor sought certified documentation to verify the identity of the mortgagor, but received uncertified photocopies of passport pages and other documents. 710

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The solicitor proceeded, despite not having appropriate identifying documentation. The Court of Appeal concluded that while the solicitor was guilty of wilful blindness, this did not constitute actual dishonesty or establish that he actually had a suspicion that the mortgagor’s signature on the mortgage had been forged. See also Overseas Chinese Banking Corporation v Malaysian Kuwaiti Investment Co Sdn Bhd [2003] VSC 495; Royalene Pty Ltd v Registrar of Titles [2008] QSC 64; J Wright Enterprises Pty Ltd (in liq) v Port Pallidu Pty Ltd [2010] QSC 213; Strata Management Pty Ltd v Nirta [2015] VSC 187 at [88]. 11.25  A further issue relevant to both forgery and attestation inaccuracy is whether, for the purposes of statutory fraud, it must be established that the conduct has actually caused a detriment to the defrauded party. This issue was raised by the High Court in Bank of South Australia v Ferguson (1998) 192 CLR 248. The case is extracted below.

  Bank of South Australia v Ferguson  (1998) 192 CLR 248 Facts: In 1990, Mr Ferguson entered into a mortgage with the aim of using the money to develop his land for the purpose of growing potatoes. 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 particular bank forms known 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’, 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. The mortgage was subsequently approved. When the venture failed, Mr Ferguson argued that the bank, via Mr McMellon, had fraudulently forged his signature to the ‘Statement of Position’ and that this should result in the mortgage being set aside on the grounds of fraud. The trial judge held that the bank had committed a fraud. The Full Court of the Supreme Court of South Australia dismissed an appeal by the bank (Bollen and Millhouse JJ dissenting). The bank appealed to the High Court who upheld the appeal. Brennan CJ, Gaudron, McHugh, Gummow and Kirby JJ:

Fraud ‘… 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.’ In his further amended defence, Mr  Ferguson had met the Bank’s claim by an allegation that, pursuant to s 69 of the Act, the Mortgage was void. By his further amended counterclaim he had sought a declaration to that effect. It appears that a claim by Mr Ferguson for breach of fiduciary duty was abandoned during the trial. In any event, Legoe AJ said he considered ‘no basis for such a duty has been established on the evidence’. By what was described as a counterclaim to that counterclaim, the bank sought various relief including ‘repayment’ of $506,169.79. Legoe AJ also dismissed the Bank’s counterclaim. An appeal by the Bank was dismissed by the Full Court (Bollen and Millhouse JJ; Matheson J dissenting) and the Bank brings this appeal against that order. It submits that the declaration 711

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and relevant orders of the primary judge should have been set aside by the Full Court, and that an order for possession should have been made in its favour. The Bank also seeks a declaration as to the indebtedness of Mr Ferguson. The Full Court also dismissed a cross-appeal by Mr Ferguson. In this Court, in the course of the hearing of the Bank’s appeal, Mr Ferguson sought special leave to appeal against this dismissal by the Full Court of his cross-appeal. It will be necessary to return to that aspect of the matter later in these reasons. There were lengthy pleadings and the trial proceeded over a number of days. There appears to have been some fluctuation in the formulation by Mr Ferguson of the legal foundation for his defence and counterclaim. However, in his written submissions to this Court, Mr Ferguson submitted that his case had been one of entitlement to rescission in equity of the Mortgage, the rescission being justified by what was said to be fraudulent conduct by certain officers of the Bank. Mr Ferguson asserted such entitlement to rescission without the imposition upon him of terms as to repayment of principal and payment of interest. However, both the primary judge and the majority in the Full Court appear to have treated the conduct of the Bank officers in question as founding rights directly derived from s 69 of the Act in respect of that ‘fraud’ which had the consequence of rendering void the Bank’s security. As Millhouse J put it, the primary judge ‘refused the [B]ank the relief it originally sought and left everything else to lie’ and the effect of the judgment ‘was to leave [Mr] Ferguson in possession of his land and without an obligation to repay any of the debt to the [B]ank’. 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 69 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. Section 69 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. 712

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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.’ The result, his Honour found, was that Mr  Ferguson was a ‘defrauded person’ within the meaning of s 69 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. 713

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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 [S]tatement of [P]osition (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.’ … Upon the appeal by the Bank, the order dismissing its appeal to the Full Court should be set aside. In place thereof, the appeal to the Full Court should be allowed.

Commentary 11.26  The conclusions of the High  Court in Bank of South  Australia v  Ferguson set out that in order for fraud to come within the application of the statutory provisions, there must be some clear and obvious detriment to the defrauded party. Where a bank forges a signature for the purpose of assisting a loan application, it cannot be said that the defrauded party has suffered detriment. As outlined by the majority, ‘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 on the facts because the forgery did not have the effect of cheating, harming or being otherwise dishonest to Mr  Ferguson. The statement of position was a purely internal record and no public injury had been committed to Mr Ferguson. The forgery had not increased the liability of Mr Ferguson nor had it injuriously affected his legal obligations. A forgery per se will be insufficient to constitute a statutory fraud. While most forgeries are carried out for a deceitful purpose, it may be possible to prove that the forgery was purely accidental or, that the forgery was done with proper motivations, with the aim of supporting rather than injuring the parties. Where this can be proven, statutory fraud will not be made out. Further, if the forgery has not tangibly damaged or injured the defrauded party and caused detriment it will not be established. In this respect, the High Court made it clear that not all forms of equitable fraud come within the application of statutory fraud. Their Honours noted at 256 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 714

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remedies of the complainant if the land in question were held under unregistered title’. See also: Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10 at [372]; El Kazzi v Kassoum [2009] NSWSC 99 at [239]; Super 1000 v Pacific General Securities Ltd (2008) 221 FLR 427 at [162]. 11.27 In Gerard Cassegrain & Co Pty Ltd v  Cassegrain (2015) 254 CLR 425, the High Court considered whether a fraud committed by one joint tenant could be brought home to the other joint tenant to thereby make the co-owned title fully defeasible. The trial judge, Barrett J, held that Claude had acted dishonestly but Felicity had not. The New South Wales Court of Appeal upheld an appeal and found that Claude had acted as Felicity’s agent, which meant that the fraud could be brought home to her and her title was therefore defeasible. This conclusion was rejected by a majority of the High Court on appeal.

  Cassegrain Pty Ltd v Gerard Cassegrain  (2015) 254 CLR 425 Facts: A statutory derivative action was brought on behalf of Gerard Cassegrain & Co Pty Ltd (GC & Co) against Claude Cassegrain and his wife, Felicity. Claude was a director of GC & Co. GC & Co’s claim related to $4.25M that on 31 October 1993 was credited to Claude’s company loan account. GC & Co alleged that Claude had fraudulently debited that amount to the loan account in breach of his fiduciary duty to the company. Claude drew on the loan account for personal and other expenses and had utilised the credit balance in the loan account in purported satisfaction of the purchase price of a farming property (the Dairy Farm), which GC & Co had transferred to Claude and Felicity as joint tenants. Although the transfer of the Dairy Farm was dated 14 September 1996, the bookkeeping entry recording the debit was made on 30 June 1997. On 24 March 2000, Claude executed a transfer of his interest in the Dairy Farm in favour of Felicity as transferee for the nominal consideration of $1. This subsequent transfer was effected to Felicity by himself and accepted by the Registrar-General for registration despite the fact that Felicity was not directly involved. The issue was whether the fraud that Claude had perpetrated in executing a transfer of jointly owned property could be brought home to Felicity. It was argued that because Claude had procured the first transfer through deception, which amounted to statutory fraud, its registration did not grant the joint tenants indefeasible title and was recoverable pursuant to s 118(1)(d)(i) and (ii) of the Real Property Act 1900 (NSW), which allows proceedings for the recovery of land against a registered proprietor in circumstances where the registration has occurred through fraud or a person deriving title from a person registered through fraud unless that person is a bona fide purchaser for value without notice. The trial judge, Barrett J upheld GC & Co’s claim against Claude, finding that Claude had dishonestly breached his fiduciary duty to GC & Co. His Honour dismissed GC & Co’s claim against Felicity, finding that Felicity’s title was indefeasible. GC & Co appealed against this finding alleging that Felicity was privy to the fraud committed by Claude. The New South Wales Court of Appeal upheld the appeal, with Beazley P concluding that Claude had breached his fiduciary duty to the company by using its loan account to purchase a dairy farm for himself. His Honour concluded that Claude had acted as Felicity’s agent with regard to this transfer and that consequently, the registered title of Felicity, as a joint tenant was tainted by the fraud that Claude had committed. The trial judge had argued that the evidence was too sparse to establish an agency however, Beazley P disagreed, finding that there was documentary evidence that could impute an agency from the dealings with the solicitor and that the conduct by Claude in his dealings was clearly fraudulent, this fraud could be brought home to Felicity. Further, it was suggested that Felicity could be tainted by the fraud because of her status as a joint tenant. This meant her title was defeasible. The High Court declined special leave to appeal from Claude to 715

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the High Court but allowed it for Felicity. The majority (French CJ, Hayne, Bell, Gageler, Keane J dissenting) held that the first transfer was tainted by fraud but that Felicity Cassegrain held a half interest in the property on trust for Cassegrain Pty Ltd, and ordered that she transfer her half of the property to the company. The majority rejected, however, the decision of the Court of Appeal that Felicity’s title was defeasible due to Claude’s fraud on the basis that in committing the fraud he had not acted as her agent. The interest in the land that Felicity gained from or through Claude could be recovered by the respondent company because Claude had become the registered proprietor through fraud but Felicity retained half of her interest, as she was not an agent for Claude and the fact that she was registered as a joint tenant did not mean that her interest was tainted by fraud. In this regard, Keane J in dissent dismissed the appeal, and treated the registration of Felicity and Claude as joint proprietors (and without any separate title being acquired by Felicity) as defeasible on the grounds of fraud. French CJ, Hayne, Bell and Gageler JJ: 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’. 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’. 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 Real Property Act  1900 (NSW) 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 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. 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. 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. 716

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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. 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. Did her registration as joint tenant bridge that gap?

Joint tenancy 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’. 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 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. 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. 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. 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 717

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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. 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. 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. 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 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. 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)? 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. 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 718

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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. 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. 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. There remains for consideration the operation of s 118.

Section 118 of the RPA 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). 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 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. 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. 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). 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 719

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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.

Improvements to the land On the hearing of the appeal to this Court, Felicity sought to adduce evidence that the land had been improved in various ways since 1997. She submitted that if GC & Co could recover an interest in the land as tenant in common as to half, the matter should be remitted to the Court of Appeal to determine what orders should be made and, in particular, whether some allowance should be made to her for the improvements. Hitherto, Felicity has made no claim for allowances on account of improvements to the land. No evidence was led at trial about improvements. It is now too late for her to make such a claim. The principles discussed and applied in cases like Suttor v  Gundowda Pty Ltd and Coulton v Holcombe preclude her from doing so.

Conclusion and orders 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. 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. 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 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 limited success in her appeal to this Court, she should have her costs of the appeal.

Commentary 11.28  The facts of this case concerned a fraud, perpetrated by one joint tenant, which was

alleged to have been brought home to the other joint tenant. The High Court considered three issues. First, whether Claude had been Felicity’s agent, which effectively meant that her interest was tainted by fraud. Second, if agency did not exist, whether Claude’s fraud applied to the entire joint tenancy. Third, whether the exception set out in s 118(1)(d)(ii) of the Real Property Act 1900 applied to fraud occurring during the registration process or to other circumstances. The majority held that Felicity was a passive recipient of the joint tenancy interest in the dairy farm and committing fraud to acquire that interest was not within the scope of any authority that Felicity may have conferred on Claude. Hence, Claude’s fraud could not be

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imputed to Felicity as the principal on the basis of any agency. In relation to the second issue, Cassegrain Pty Ltd had argued that the effect of s 100(1) of the Real Property Act 1900 (NSW) deemed joint tenants to be treated as one so that where fraud was committed by one party it could infect the other joint tenants without them having been directly involved in the fraud. The majority disagreed with this, arguing that the purpose of s  42 of the Act was to ensure that any statutory fraud was brought home to the person whose title was impeached, and if one joint tenant was not involved or aware of the fraud then their title could not be impeached. Keane J in dissent disagreed and saw no reason why the title of other joint tenants should not be affected by the fraud of one joint tenant because they acquired, together, a single title to the dairy farm as joint tenants. In relation to the third issue, the High Court agreed with the Court of Appeal and held that s 118(1)(d)(ii) did apply meaning that Felicity’s interest under the second transfer was defeasible and Cassegrain Pty Ltd was entitled to recover, pursuant to s 118(1)(d)(ii), half of the property. The conclusions of the majority on this issue were outlined at [59]–[62] as follows: 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 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. 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. 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). 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.

The conclusions of the majority have been upheld by subsequent courts. See, for example, Anderson v Anderson [2016] NSWSC 1204 at [380], where Hallen J held that fraud must be brought home to a registered interest holder or his agent for the title to be impeached and that this raises questions of whether the joint tenant was involved or knew about the 721

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fraud that was committed. See  also Australian Securities and Investments Commission v Cassimatis (No 8) [2016] FCA 1023 at [588], where Edelman J held that the decision in Cassegrain made it clear that academic discussions whereby joint tenants are regarded as a single and undivided whole, should not be taken as ‘the premise for further deductive reasoning regarding the effect of a joint tenancy’ because ultimately if liability is a product of legislation, the focus must be on the ‘text, context, and purpose of the statutory provision’. In Boyd v Thorn (2017), 96 NSWLR 390, McFarlan AJ at [31], in the New South Wales Court of Appeal held that it is ‘clear from these authorities that the fact that a joint tenancy may give rise to a “mutual … relationship to the same right of property” is insufficient to make joint tenants privies for each other’ in circumstances involving fraud. In Anderson v  Anderson (2017) 94 NSWLR 59, Leeming AJ at  [33], the New  South  Wales Supreme Court, referring to the judgement of the High Court in Cassegrain, concluded that in order to establish fraud within the meaning of s 42 of the Real Property Act 1900 (NSW), it was ‘necessary to establish fraud in the sense of moral turpitude which was brought home to the registered proprietor’. Moreover, such fraud by persons from whom a registered proprietor claims, ‘does not affect [the registered proprietor] unless knowledge of it is brought home to him or his agents’. Hence, a fraud committed by one joint tenant will not infect the rights of the other unless it has been brought home to that other. The scope, range and effect of statutory fraud, particularly in the context of improper attestations and documentary alterations, has been discussed by a number of academic commentators. See: S Rodrick in ‘Forgeries, False Attestations and Imposters: Torrens System Mortgage and the Fraud Exception to Indefeasibility’ [2002] 7 Deakin Law Review  97; S Grattan, ‘Recent Developments Regarding Forged Mortgages: The Interrelationship between Indefeasibility and the Personal Covenant to Pay’ (2009) 21 Bond Law Review 43; S Grattan, ‘Forged but Indefeasible Mortgages: Remedial Options’ in Bennett, Moses, Edgeworth and Sherry, Property and Security: Selected Essays (2010) at p 171; R F Croucher, ‘Inspired Law Reform or Quick Fix: Well Mr Torrens What Do You Reckon Now?’ (2009) 30 Adelaide Law Review 291; K F Low, ‘The Nature of Torrens Indefeasibility: Understanding the Limits of Personal Equities’ (2009) 33(1) Melbourne University Law Review 205; L B Moses and B Edgeworth, ‘Taking it Personally: Ebb and Flow in the Torren’s Systems In Personam Exception to Indefeasibility’ (2013) 35 Sydney Law Review 107; E Bant, ‘Statute and Common Law: Interaction and Influence in the Light of the Principle of Coherence’ (2015) 38 University of New South Wales Law Journal 367; T Gorton, ‘Until Fraud Do Us Part: Reconciling Joint Tenancy and the Torrens Land System in Cassegrain v Gerard Cassegrain Pty Ltd’ (2016) QUT Law Review 14.

In Personam Exception 11.29  The in personam action is a qualification rather than an express statutory exception

to the indefeasibility provisions. In essence, it means that registration will not change or affect the personal legal or equitable obligations that registered proprietors may be subject to. Thus, a registered proprietor who owes contractual obligations towards the land will remain contractually bound despite becoming registered. Further, any equitable obligations that a registered proprietor may be subject to will not be removed by registration. This was made clear by Lord Wilberforce in Frazer v Walker [1967] 1 AC 569 who stated that the title that the Torrens legislation confers upon a registered proprietor, ‘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’.

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The potential scope of the in personam defence is, however, extensive, when consideration is given to the fact that a range of equitable actions may be available against a registered proprietor on the basis of the doctrine of notice. The difficulty, however, with holding a registered proprietor responsible for these personal equitable actions is that the Torrens legislation expressly exempts registered proprietors from the effect of the doctrine of notice. This has created a situation where the dividing line between the enforcement of equitable rights and the scope of registered title is increasingly ambiguous and unclear. As outlined by McMurdo J in White v Tomasel [2004] 2 Qd R 438 at [72] (see also Bli Bli 1 Pty Ltd v  Kimlin Investments Pty Ltd [2008] QSC 289 at  [34]): ‘… in many cases, an obligation which the general law, and in particular a doctrine of equity, would have imposed upon the registered proprietor has had to give way to the indefeasibility of the registered interest’. Hence, actions that are recognised within the equitable may be excluded in their application to registered proprietors because of the scope and nature of indefeasibility. In this respect two clear principles are apparent. In the words of Mahoney  JA in Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32 in the absence of a comprehensive definition of a ‘personal equity’, it is possible to ‘discern in the authorities two suggestions: 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’. See also: P Butt, ‘Indefeasibility and Knowing Receipt of Trust Property’ (2002) 76 ALJ 606; J Moore, ‘Equity, Restitution and In Personam claims under the Torrens System: Part 2’ (1999) 73 ALJ 712; L Griggs, ‘In Personam: Barnes v Addy and the High Court’s Deliberations in the Farah Constructions Pty Ltd v Say-Dee Pty Ltd’ (2008) 15 Australian Property Law Journal 268; A Low, ‘The Nature of Torrens Indefeasibility: Understanding the Limits of Personal Equities’ (2009) 33 Monash University Law Review 205; TH Wu, ‘Beyond the Torrens Mirror: A Framework of the In Personam Exception to Indefeasibility’ (2008) 32(2) Melbourne University Law Review 672; K F Low, ‘The Nature of Torrens Indefeasibility: Understanding the Limits of Personal Equities’ (2009) 33(1) Melbourne University Law Review 205; L B Moses and B Edgeworth, ‘Taking it Personally: Ebb and Flow in the Torren’s Systems In Personam Exception to Indefeasibility’ (2013) 35 Sydney Law Review 107. 11.30  One of the most significant decisions setting out the scope of the in personam

exception is that of Bahr v Nicolay (No 2) (1988) 164 CLR 604. In that case, Wilson and Toohey JJ considered whether, in refusing to uphold an assurance that he would honour an option to purchase, a registered proprietor was bound by the equitable consequences of his actions. This decision has already been extracted in the context of statutory fraud: see 11.21. The following extract from the judgments of Wilson and Toohey JJ sets out the in personam discussion.

  Bahr v Nicolay (No 2)  (1988) 164 CLR 604 Facts: The Bahrs sold their land to Nicolay who then agreed to lease it back to them for three years with an option to repurchase the land at the expiration of the lease. Nicolay then sold the property to the Thompsons and this contract of sale specifically acknowledged the right of the Bahrs to repurchase the land at the expiration of the lease. The Thompsons agreed to the terms of the contract and subsequently became the registered proprietors. Subsequently, after registration, the Thompsons refused to honour the option held by the Bahrs claiming that their indefeasible title was not affected by this prior right.

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Wilson and Toohey JJ: Can it be said, using the language of Waimiha Sawmilling Co v Waione Timber Co., at p 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 p 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 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 pp 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 Land transfer Act (Vic). 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 p 563 that it may arise from conduct of the registered proprietor before registration. 724

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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 p 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 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. Brennan J: (After rejecting the notion that mere notice of the existence of a pre-existing right can constitute statutory fraud his Honour went on to discuss other equitable implications …) 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 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 pp 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 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 725

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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 pp 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. …

Commentary 11.31  The judgments of Wilson and Toohey JJ suggest that mere notice is not enough to

attract in personam rights in equity in the form of a remedial constructive trust. However, their Honours felt that notice coupled with other inequitable conduct, such as a positive assurance that a registered proprietor will be bound, may be sufficient. Their Honours felt that the fact that the Bahrs were not privy to the contractual assurance did not alter this conclusion. The fundamental point was that registration cannot protect or immunise a registered proprietor from the consequences of their own actions, particularly where those actions give rise to a personal equitable relief. In the words of Brennan J: ‘… 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’. On the facts, this was achieved via the imposition of a remedial constructive trust. Mason CJ and Dawson J (who also concluded that statutory fraud could be raised on the facts as discussed earlier), concluded that it was not necessary to rely upon the remedial jurisdiction of the equity jurisdiction because the circumstances were sufficient to establish that Thompson intended to hold the promise pursuant to an institutional express trust. The circumstances in which fraud may arise do not include a situation where notice is coupled with action that was not the product of action induced by the other party, but rather the consequence of unilateral action: David Alan Thomson v  Golden Destiny Investments Pty Limited [2015] NSWSC 1176 at [328].

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11.32 In Macquarie Bank v Sixty-Fourth Throne [1998] 3 VR 133, a mortgage was forged and Macquarie Bank failed to pick up the forgery by checking the attesting signatures on the mortgage document with those of the company directors via a company search. One of the issues in the case, apart from statutory fraud, was whether the ‘constructive’ knowledge of the bank, that the company was a trustee company not owned by the person who had committed a forgery in executing the mortgages, raised any equity against them. The extract from the judgment of Tadgell JA in Macquarie Bank v Sixty-Fourth Throne discusses the unusual nature of the transaction and the fact that the company searches obtained by the bank disclosed the fact that the persons with whom the bank was dealing, were no longer directors and did not, in the circumstances, have the authority to act on behalf of the company. The question the court had to consider was whether the ‘constructive notice’ raised an enforceable equity against the registered proprietors. The case is extracted below.

  Macquarie Bank v Sixty-Fourth Throne  [1998] 3 VR 133 Facts: Macquarie Bank lent money to Michael Kandy. The loan was guaranteed by SixtyFourth Throne Pty Ltd (a trustee company). Sixty-Fourth Throne Pty Ltd then took a mortgage from Macquarie Bank to provide security for this guarantee. Macquarie Bank registered the mortgage. Prior to executing the mortgage, Macquarie Bank undertook a company search of Sixty-Fourth Throne but did not check that the attesting signatures on the mortgage were the same as those of the directors of Sixty-Fourth Throne Pty Ltd even though this should have been usual practice given that Macquarie Bank knew that the company was a trustee company. As it turned out, Michael Kandy had been a previous director of Sixty-Fourth Throne and the Tafts were the new directors. The bank therefore knew or should have known that Michael Kandy could not execute the mortgage because he was not authorised by the company to act on its behalf. Sixty-Fourth Throne subsequently sought to have the mortgage removed on the grounds of fraud or, alternatively, on the grounds of in personam. Macquarie Bank had constructive knowledge of the misrepresentation to the effect that the bank should have known that a mortgage was given over property held by Mr and Mrs Kandy, for the benefit of a company in which neither Mr nor Mrs Kandy were directors. It was argued that this raised a constructive trust against the registered interest of the bank. Tadgell J: … 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  384–5; Bahr v  Nicolay (No 2), supra, at  637–8, 652–3. Along with these authorities it is useful to consider, for contemporary illustration 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  735–7 per Gleeson, CJ, and Pyramid Building Society (In Liq) v  Scorpion Hotels Pty Ltd, so far unreported, 4  February  1997. In the last of these this Court, at  p 15, 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 222–3, per Powell JA. In Garafano v Reliance 727

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Finance Corporation Ltd (1992) NSW Conv R 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 circumstances become a constructive trustee for the respondent. … 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. 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 $4m 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 SixtyFourth 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 728

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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. Notwithstanding 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 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 SixtyFourth Throne held the property on trust with no apparent benefit in the transaction, lead me to the conclusion 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, 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 729

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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. … 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 & Ors [1997] 2 VR 368, JD 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. As I understood him, counsel for the appellant did not seek to argue that the doctrine of constructive notice, as applied in O’Brien’s Case, could never be applied to defeat a title acquired under the Transfer of Land Act by registration in the absence of fraud. Rather, he contended that what was known by the appellant and by its solicitors in the present case about the respondent was not sufficient to amount to constructive notice of any equitable right of the respondent to have the mortgage set aside. Before examining that submission I wish to say that it is by no means clear to me that the equitable doctrine of constructive notice is readily available to defeat a claim to title arising under s 42 of the Transfer of Land Act 1958. By ‘constructive notice’ I mean that which is sometimes called ‘strict constructive notice’ — notice of a fact with which a person is fixed although he has no subjective knowledge of it. Strict constructive notice is to be distinguished from (a) knowledge which is attributed to a person who knows all the facts relevant to a given matter but fails to appreciate their factual or legal significance or unreasonably fails to infer it on account, for example, of what Gibbs J in Consul Development Pty Ltd v  DPC Estates Pty Ltd (1975) 132 CLR 373 at 398, called ‘moral obtuseness’; (b) imputed knowledge — when a principal having no actual knowledge of a fact is treated as if he did because his agent has it (as to which see Espin v Pemberton (1859) 3 De G & J 547, at 554, 44 ER 1380, at 1382–3, per Lord Chelmsford, LC, and Ashburner’s Principles of Equity, 2nd ed, 59–60); and (c) what is attributed to a person guilty of wilful blindness or a wilful and reckless failure to inquire. The distinction between knowledge and notice, by reference to the categories I have mentioned, is usefully discussed by Charles Harpum, ‘The Stranger as a Constructive Trustee’ (1986) 102 LQR 114, at 120–126. The doctrine of constructive notice is a purely equitable doctrine, developed from equity’s preparedness to intervene in dealings with a legal estate on the ground of fraud: Ashburner, op cit, 61–2; Harpum, op cit, 123–4; and it is central to the equitable concept of the bona fide purchaser for value without notice: Meagher, Gummow & Lehane, Equity Doctrines & Remedies, 3rd ed, paras 851–6. At paragraph 859 of the same work the opinion is offered that: ‘As far as land under Torrens title is concerned, there is very little scope for the doctrine of “bona fide purchaser of the legal estate for value without notice”, because the 730

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scheme of the legislation requires that, with very few exceptions, a purchaser who becomes the registered proprietor of an interest in land under Torrens title takes [free] from all unregistered interests, whether he has notice of them or not … .’ This seems to be consonant with the observation of Lord Wilberforce, speaking for the Judicial Committee in Frazer v Walker [1967] 1 AC 569, at 582 that: ‘In all systems of registration 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 … .’ Of that statement, Dr Stanley Robinson, in Transfer of Land in Victoria (1979), at  35, has commented that, if it be correct: ‘… and it is suggested that it cannot be otherwise, as to treat it as otherwise would destroy the Torrens system as a system of title to estates in interests in land by registration, then it is a fundamental cornerstone on which to exclude general law principles of classification and of priorities.’ The rules with respect to priorities of competing estates and interests in land under the general law — where no system of title by registration obtains — are dependent on and unworkable without the doctrine of constructive notice; but the doctrine ‘cannot work in a system of title to estates and interests by registration and the Act expressly abolishes it …’: ibid. So much seems to have been long accepted as a matter of general principle for systems of land title by registration. The point was made in the old case of Agra Bank Ltd v Barry (1874) LR 7 HL 135, concerned with the Irish Register Act and referred to by Lord Wright, speaking for the Judicial Committee, in Abigail v Lapin [1934] AC 491, at 505–6. In the Agra Bank Case the House of Lords held that a legal mortgagee did not have constructive knowledge of a prior equitable mortgage by deposit of title deeds notwithstanding that the mortgagee’s solicitor had failed to require production of the title deeds. Production of title deeds would have been a routine requirement under the general law but, as Lord Selborne observed, at 157–8: ‘It would … be quite inconsistent with the policy of the Register Act … to hold that a purchaser or mortgagee is under an obligation to make any enquiries with a view to the discovery of unregistered interests. But it is quite consistent with that, that if he or his agent actually knows of the existence of such unregistered instruments when he takes his own deed, he may be estopped in equity from saying that, as to him, they are fraudulent.’ There is of course ample room in the Torrens title firmament for the application of equitable principles. I know of no decision, however, that would authorise application in the Torrens system of the doctrine of constructive notice which applies under the general law to determine priorities as between legal and equitable interests. Hedigan J appears to have been of the same view for, at p 121 of his reasons, he said: ‘The equitable doctrine of constructive notice is not the determinant for the ordering of priorities under the Torrens system whereby registration creates title. Whether it might, in some circumstances, provide a basis for supporting “in personam” right is a question that has to be considered here.’ 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. 731

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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 registration. 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 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) 88 WN (Pt 1) (NSW) 549, a case of a forged mortgage in which registration was achieved under the New South Wales Torrens title legislation and, as in this case, without dishonesty on the part of the mortgagee. Street J pointed out, at 558, that: ‘There may well have been personal equities available to Mrs Mayer [the registered proprietor of the subject land] to prevent the forged mortgage to Mr Coe [the mortgagee] being lodged for registration, if she had become aware of it prior to registration. Prior to registration of the mortgage Mrs Mayer’s property rights were threatened by a forged memorandum. Equity may well have intervened in personam to prevent that threat materialising into actual damage, and might well have restrained the lodging or the registration of the forged memorandum of mortgage. These would be true proceedings in personam. But once the memorandum had been registered its efficacy as a mere forged document became translated into a statutory operation as a registered instrument. Mr  Coe’s statutory rights under the Real Property Act derived from the fact of registration and not from an event antecedent thereto. Consistently with the Privy Council’s decision in Frazer v Walker, it became immaterial that the instrument which had led to his being registered was void. That of itself would not give rise to any personal equity against Mr Coe.’ Ratcliffe v Watters [1969] 2 NSWR 146 was another case of a forged mortgage. The registered proprietor of the subject land sought to challenge the validity of the mortgage on the ground that the mortgagee’s solicitor was recklessly indifferent, so far as concerned the identification of the registered proprietor and the transferor, thus rendering the mortgagee liable for what was tantamount to a fraud on the registered proprietor. Street J characterised the solicitor’s conduct as incautious but not such as to render him party to a course of conduct so reckless as to be tantamount to fraud, and applied his decision in Mayer v Coe. The correctness of the application in Mayer v  Coe and Ratcliffe v  Watters of Frazer v  Walker was affirmed by Barwick CJ in Breskvar v Wall at 387; and Windeyer J (at 399) and Owen J (at 400) specifically agreed with him. Mayer v Coe must therefore be regarded as good law (as to which see Mercantile Mutual 732

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Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32, at 51, per Meagher JA, dissenting) and in my opinion it applies here. 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 195–6 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 — ie 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, op cit, 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: 195. The contention that the respondent derived a claim in personam by virtue of the principle applied in Barclay’s Bank Plc v O’Brien depends on a misapprehension of that case and should in my opinion fail.

Commentary 11.33  Tadgell JA and Winneke P in Macquarie Bank v Sixty-Fourth Throne concluded

that it would be inconsistent with the ‘received principle of indefeasibility’ to treat a registered proprietor in receipt of trust property liable as a constructive trustee on the basis of knowing receipt. By contrast, in Tara Shire Council v Garner [2003] 1 Qd R 556 Atkinson  J suggested that the equitable jurisdiction would hold a registered proprietor liable under a first limb Barnes v Addy constructive trust where trust property is acquired 733

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with knowledge that would indicate to an honest and reasonable person that the receipt was in breach of trust (see the five categories of knowledge summarised in Baden Delvaux v Société Generale [1993] 1 WLR 509 per Peter Gibson J). Atkinson J went on to conclude that this type of trust went beyond mere knowledge of the existence of another interest and constituted knowledge that the property was trust property and that its receipt was in breach of trust. Where such knowledge can be established, Atkinson J felt that it was appropriate and fair to bind registered proprietors to principles arising out of the independent operation of the equitable jurisdiction. The exclusion of ‘knowing receipt’ constructive trusts purely on the ground of statutory interpretation is difficult to justify. While it is clear from the Torrens legislation that mere notice does not constitute fraud, the process of receiving trust property knowing that it constitutes a breach of trust does amount to a species of fraud which equity will protect. This protection occurs through the imposition of a constructive trust that is a well-established action. To exclude ‘knowing receipt’ trusts from this category is contrary to the very nature of in personam responsibilities and arguably misconstrues the relationship between the equitable jurisdiction and the Torrens system. Registration cannot and did not intend to eradicate personal equitable responsibility. This was clearly set out in Tara Shire Council v Garner [2003] 1 Qd R 556 at [90], where Atkinson J made the following comments: The Land Title Act expressly preserves the operation of equitable rules, where an equity is created by the registered proprietor. In this sense, the provisions of the Land Title Act are clearer in their formulation than their predecessors in the Real Property Acts. The provisions of the Land Title Act, in ss 184 and 185, make the rules about actual or constructive notice subject to any equities created by the registered proprietor. This is not to say that the Land Title Act has altered the law in this respect. It has always been the case that indefeasibility is subject to certain equitable principles. As outlined above, under the Land Title Act, some equities will not prevail over the registered title of a transferee. What must be kept steadily in mind, however, is that the Torrens system does not fundamentally alter the nature of equitable rights or in personam remedies. For instance, dishonesty is not an element of a cause of action based on the first limb of the rule in Barnes v  Addy and, contrary to the majority view in Macquarie Bank v Sixty-Fourth Throne, it would be improper to introduce that element by virtue of a Torrens system statute. The Land Title Act was not intended to protect a registered proprietor who had gained title by knowingly participating in a breach of trust.

The dissenting judge, Davies JA, in Tara Shire Council v  Garner, reached a different conclusion however and made the following comments at [33], which were subsequently approved by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd, which is extracted below: There is no authority, binding or persuasive, for the proposition that the interest of a purchaser of land who becomes registered as owner with knowledge that the transfer to it was in breach of trust by the vendor, let alone that of such a purchaser who becomes registered after the making of no more than an unsubstantiated assertion that an unregistered person is the owner of part of the land, is defeasible. Nor is there any basis in principle, for the purpose of the application of s 185(1)(a), for distinguishing an assertion of equitable ownership in an unregistered person from an assertion in such person of some lesser equitable interest. If it were otherwise, the fundamental proposition that the interest of a registered proprietor is not affected by his or her prior knowledge of unregistered interests would need to be modified to accommodate different results depending on the nature of the prior unregistered interest.

11.34 In LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291 the West Australian Supreme Court followed the approach of Tadgell JA in Macquarie Bank. In LHK Nominees, 734

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Anderson and Steytler JJ concluded that a constructive trust could only be binding upon a registered proprietor where fraud or dishonesty going beyond mere knowledge of a breach of trust could be established. Their Honours concluded that a first limb Barnes v  Addy constructive trust arising purely on the basis of receipt of trust property would not be enforceable against a registered proprietor as it would be inconsistent with the received principle of indefeasibility to treat the holder of the registered title as subject to such a trust. An extract of the conclusions of Anderson and Steytler JJ is set out below.

  LHK Nominees Pty Ltd v Kenworthy  [2002] 26 WAR 517 Facts: The respondent held land as a registered proprietor. The appellant argued that the respondent had received title knowingly in breach of trust because the property was sold at an undervalue. There was, however, no evidence that the respondent knew of the ValuerGeneral’s assessment of the property. The transferor had offered the respondent a justification for the sale and whether the respondent knew or should have known of the undervalue was found to be speculative on the facts. Anderson & Steytler JJ: … That leaves the alternative claim pleaded in par 9 which, as it was developed in argument, was that Mr Kenworthy was either a knowing recipient of trust property or a knowing participant in a breach of trust. He was said to have become a constructive trustee and to be liable accordingly and, as we understand the claim, the first respondent as administratrix of Mr Kenworthy’s estate to whom the property has passed in that capacity, is also said to be liable. These claims are said to depend on an application of the two so-called ‘limbs’ of Barnes v Addy (1874) LR 9 Ch App 244. In that case, Lord Selborne made the following statement at 251–2: ‘… 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 [the first “limb”], or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees [the second “limb”] … I apprehend those who create trusts do expressly intend, in the absence of fraud and dishonesty, to exonerate such agents of all classes from the responsibilities which are expressly incumbent, by reason of the fiduciary relation, upon the trustees.’ As to the first of those limbs (the so-called ‘recipient liability’ limb), the equity thus arising is defeated by registration of Torrens title in favour of the recipient. Like Pullin J, we prefer the reasoning of Tadgell JA and Winneke P to this effect in Macquarie Bank Ltd v  Sixty-Fourth Throne Pty Ltd to that of Ashley AJA in that case and also the decision of the majority in Tara Shire Council v  Garner [2002] QCA 232. Critical to this preference is the fact that, as was pointed out by Tadgell JA at 157 (and also by Street J in Mayer v Coe [1968] 2 NSWR 747 at 754), because the Torrens system is one of title by registration and not one of registration of title, the proprietary rights of a registered holder of Torrens title land derive ‘from the fact of registration and not from an event antecedent thereto’. While Tadgell JA was referring to a registered mortgagee, the position is, of course, the same in the case of the registered owner of the land. Consequently, where registration of title is not dishonestly obtained, it is, to use the words of Tadgell JA (ibid), not possible, consistently with the received principle of indefeasibility as it has been understood since Frazer v Walker [1967] 1 AC 569 and Breskvar v Wall (1971) 126 CLR 376, to treat the holder of the registered title to property that is subject to a trust as having received trust property. We should also mention that, in Koorootang Nominees, above, which was a case in which the defendant bank had actual knowledge that land mortgaged to it was held on trust and, by 735

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reason of its wilful and reckless failure to make inquiries, had at least constructive knowledge that the property was being misapplied, Hansen J held that this was sufficient for the trustee to establish an in personam claim against the bank in respect of the mortgaged property and to impeach the indefeasibility of the bank’s title under the Transfer of Land Act  1958 (Vic). However, as has been pointed out by Tadgell JA in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd, at 157, the bank really was found by Hansen J to have acted dishonestly. Furthermore, it would appear that the bank did not seek to rely on indefeasibility. It is clear from the judgment of Hansen J at 75 et seq, that the bank did not argue that the indefeasibility of title conferred by s 42 of the Transfer of Land Act 1958 (Vic) protected the bank from a claim that it held its registered interest on constructive trust for the plaintiff. As Hansen J said, this relieved him of the need to consider the question whether the plaintiff’s equity survived registration. He said that ‘the bank did not seek to argue that the immediate indefeasibility conferred upon its interest by s 42(1) of the TLA rendered it immune from a claim that it held its interest in the subject land on constructive trust for the plaintiff under either “limb” of Barnes v Addy.’ Because of these features of the case, we do not consider that Koorootang Nominees is persuasive authority for the proposition that the Court may impose or enforce a constructive trust upon a registered proprietor who has obtained his title without fraud or dishonesty, simply because he knew that the transfer was in breach of trust by the vendor. We should also recognise that in Doneley v Doneley [1998] 1 Qd R 602, De Jersey J (as his Honour then was) appears to have held registered lessees and a registered mortgagee bank constructive trustees of their respective interests over freehold property because, when they took those interests, they knew that the property was held upon a trust and knew facts which established that the lease and mortgage respectively were in breach of trust. However, as was pointed out by Davies JA in Tara Shire Council at [36], no reference was made in that case to the principle of indefeasibility or to the statutory provisions or authorities relevant thereto and it is unclear whether they were referred to in argument, perhaps because the lessees and the bank did not wish to rely on indefeasibility. Like Davies JA in Tara Shire Council, at [33], we are unaware of any other authority, binding or persuasive, for the proposition that the registered interest of a purchaser of Torrens system land is defeasible simply because he became registered with knowledge that the transfer was in breach of trust by the vendor. As to the second limb in Barnes v Addy (the so-called ‘accessory liability’ limb), this has come to be understood as requiring a finding of dishonesty, either in the sense of knowledge by the defendant that what he was doing would be regarded as dishonest by honest people (Royal Brunei Airlines Sdn Bhd v Tan Kok Ming [1995] 2 AC 378 and Twinsectra Ltd v Yardley [2002] 2 WLR 802 [HL], [6], [8], [20] and [36]), or, perhaps, knowledge on his part of circumstances which would indicate to an honest and reasonable person that a fraud is being committed (Consul Development Pty Ltd v  DPC Estates Pty Ltd (1975) 132 CLR 373, per Barwick CJ (at 376, agreeing with Stephen J (at 412) and Gibbs J (at 398)). Dishonesty of either kind would be fraud for the purposes of s 68(1) and s 134 of the Transfer of Land Act 1893, ‘fraud’, in that context having traditionally been said to mean ‘actual fraud’ (Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 630) or ‘actual fraud, moral turpitude’ (Butler v Fairclough (1917) 23 CLR 78 at 97) or ‘something more than mere disregard of rights of which the person sought to be affected had notice’ (Wicks v Bennett (1921) 30 CLR 80 at 91). Of course, indefeasibility provisions of the kind found in s 68(1) and s 134 of the Act have never been regarded as ‘destroying the fundamental doctrines by which courts of equity have enforced, as against registered proprietors, conscientious obligations entered into by them’ (Barry v Heider (1914) 19 CLR 197 at 213, per Isaacs J). In Frazer v Walker, above, at 585, the Privy Council made it clear that the indefeasibility principle ‘in no way denies the right of a plaintiff to bring against a registered proprietor a claim, founded in law or in equity, for such relief as a court acting in personam may grant’. As is pointed out by Butt, Land Law, 4th ed, 736

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at 676–677, this is why a beneficiary can compel performance of a trust despite the trustee’s status as registered proprietor (Sistrom v  Urh (1992) 40 FCR 550) and a right in personam may be enforced against a registered proprietor so as to set the title aside where the proprietor became registered under a dealing which his or her own conduct made voidable, or through his or her own breach of trust or fiduciary obligation (see, for example, Corozo Pty Ltd v Total Australia Ltd [1988] 2 Qd R 366). In Bahr v Nicolay (No 2), above, the Court was prepared to find a sufficient personal equity where there was not only the acquiring of title with notice of an existing interest (which would not be enough to overcome the indefeasibility provisions), but also an agreement to recognise and be bound by the unregistered interest (see, in particular, the judgment of Wilson and Toohey JJ, in that case, at 638ff). However, it has often been said that the expression ‘right in personam’ or, as such rights have also come to be known, ‘personal equities’, encompasses ‘only known legal causes of action or equitable causes of action’ (Grgic v ANZ Banking Group, above, at 222–3; Pyramid Building Society (In liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188; Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd, above, and see also Butt, above, at 677). The expressions ‘personal equity’ and ‘right in personam’ do not supply a blank canvas on which a plaintiff can paint any picture. As we have observed, there is no plea in this case of any breach of duty on the part of Mr Kenworthy, nor was there an allegation to that effect at trial. It was not pleaded or argued that Mr Kenworthy stood in a fiduciary relationship to the trust or to the appellant or that he knowingly misrepresented the value of the property to the appointed directors of the appellant (as to which, cf Loke Yew v Port Swettenham Rubber Company Ltd [1913] AC 491). It was not the appellant’s case that Mr Kenworthy took the transfer of the property intending to do so on trust for the beneficiaries of the LHK Trust, or that he otherwise agreed to recognise and be bound by any unregistered interest or that he dishonestly repudiated an interest which he had agreed to recognise.

Commentary 11.35  The conclusions of the Full Court of the Supreme Court of Western Australia in LHK Nominees Pty Ltd v Kenworthy upholding the non-application of a knowing receipt constructive trust against a registered proprietor and preferring the approach of Tadgell JA and Winneke P in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd to that of the majority in Tara Shire Council v  Garner were subsequently upheld by the High  Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] 81 ALJR 1107, where Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ jointly held that a knowing receipt constructive trust, arising under the first limb of Barnes v Addy could not affect the indefeasible status of a registered proprietor in the same way as other constructive trusts because recipient liability was based upon the dual elements of a receipt of trust property and notice and to hold a registered proprietor to such a trust would undermine the aims of the registration system. 11.36  The case is extracted below.

  Farah Constructions Pty Ltd v Say-Dee Pty Ltd  [2007] 81 ALJR 1107 Facts: The decision involved an appeal against orders of the New South Wales Court of Appeal (Mason P, Giles and Tobias JJA) setting aside the orders of the trial judge, Palmer J in the Supreme Court of NSW. Farah Constructions Pty Ltd, and five other appellants appealed against the decision by the Court of Appeal declaring constructive trusts over property located at  number 13 and number 15 Deane Street, Burwood, Sydney in favour of a partnership 737

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between Farah and Say-Dee for the development of land located at number 11 Deane Street. Farah was controlled by Mr Elias, a property developer. The other appellants were: Lesmint Pty Ltd, a company controlled by Mr and Mrs Elias and their daughters, Sarah and Jade Elias. The respondent, Say-Dee was a company controlled by Dalida Dagher and her daughter, Sadie Elias. In 1998, Ms Dagher and Ms Elias decided to become involved in real estate development. They contacted Mr Elias, who was the brother-in-law of Ms Elias’s uncle. Mr Elias proposed buying No 11 which was comprised of four run-down units, for redevelopment. Farah Constructions Pty Ltd and Say-Dee Pty purchased the property as tenants in common pursuant to a joint-venture agreement, with Say-Dee advancing $225,000 and the balance of funds being borrowed by the joint venture, and secured by a mortgage over No 11. Farah prepared a development application for the Burwood council but the council indicated that the site was too narrow and should be amalgamated with the adjoining properties to achieve its maximum development potential. Subsequently, Mr Elias, Mrs Elias and their two daughters each entered a contract to buy one of the four units located at No 15. Lesmint entered into a contract to buy No 13, Mr Elias then attempted to buy No 11 from Say-Dee who refused. Mr Elias then sought an order that a trustee be appointed over No 11 and that it be sold pursuant to the statutory trusts for sale in the Conveyancing Act 1919 (NSW). Say-Dee cross-claimed, arguing that the appellants held their interests in Nos 11, 13 and 15 on constructive trust for the partnership between Say-Dee and Farah Constructions. The trial judge, Palmer J, found in favour of Farah Constructions and ordered statutory trusts for sale. The Court of Appeal allowed an appeal by Say-Dee; finding that Farah had breached fiduciary duties to Say-Dee and that Mr Elias, Mrs Elias and the two daughters held the titles under a first limb Barnes v Addy constructive trust and this was an ‘in personam’ equity enforceable against a registered proprietor. Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ: 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 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 [178]: ‘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 [179]: ‘[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 [180]: ‘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 738

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not suggested by Farah that indefeasibility of title prevents a declaration that Mr Elias and Lesmint hold their interests in Nos 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. 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 739

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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 indefeasibility [sic] 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.’ 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. 740

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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.

Commentary 11.37  The High  Court in Farah Constructions overruled the findings of the

New South Wales Court of Appeal, which had concluded that Mrs Elias, her daughters, Mr Elias and Lesmint Pty Ltd, held their respective interests in the properties at No 13 and No 15 under a constructive trust. The only authority cited by the Court of Appeal in favour of the application of the in personam action was Frazer v Walker, where the Privy Council noted 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’: [1967] 1 AC 569 at 585. The High Court concluded that the Court of Appeal ‘ought to have followed’ the decision of the majority in Macquarie Bank v  Sixty-Fourth Throne and the conclusions of Anderson and Steytler JJ in LHK Nominees. Gleeson CJ, Gummow, Callinan and Crennan JJ held that the type of equities raised in cases like Bahr v Nicolay and Baumgartner v Baumgartner could be fundamentally distinguished from knowing receipt cases because in the former the registered proprietor was the primary wrongdoer whereas in the latter, the registered proprietor was merely the recipient of trust property. Their Honours did not, however, provide a clear justification for why knowing receipt constructive trusts could not be enforced against registered proprietors. The fact that notice cannot constitute statutory fraud does not, in itself, mean that notice combined with other factors rendering a recipient liable to a first limb Barnes v  Addy constructive trust should be precluded where the recipient is a registered proprietor. The High  Court in Farah Constructions made it clear that the first limb of Barnes v Addy was not made out on the facts anyway because the ‘fiduciary information’ did not constitute trust property and Mrs  Elias and her daughters did not receive it with notice. The information was not confidential and there was no ground upon which the information held by Mr  Elias could be imputed to his wife and daughter. The conclusions of the High  Court have significantly narrowed the scope of the knowing receipt constructive trust and, in so doing, limited the range and scope of the in personam exception. In Super 1000 v  Pacific General Securities [2008] NSWSC 1222 at [215], White J applied the conclusions in LHK Nominees Pty Ltd v  Kenworthy and Farah Constructions Pty Ltd v  Say-Dee Pty Ltd, but noted that the conclusions regarding the enforceability of knowing receipt constructive trusts against registered proprietors were derived from ‘the principles of priorities between the holder of an equitable interest in property and a later acquirer of the legal interest’ and felt that, given that these priorities ‘have no role to play in the Torrens system’ it was ‘unfortunate’ that they have ‘influenced the course of decision on whether liability as a constructive trustee under the first limb of Barnes v Addy is inconsistent with the Torrens system’. See also Bli Bli Pty Ltd v Kimlin Pty Ltd [2008] QSC 289 at 36, where Daubney J concluded that post-Farah Constructions, ‘A claim for a constructive trust as a result of the operation of the first limb of Barnes v  Addy cannot be sustained in the face of the registration of title’: see  also Ciaglia v  Ciaglia [2010] NSWSC 341 741

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at [115]; Burrup Fertilizers Pty Ltd (Receivers and Managers Appointed) v Oswal (No 2) [2011] FCA 731; BreakFast Investments Pty Ltd v Giannopoulos (No 5) [2011] NSWSC 1508; Grimaldi v Chameleon Mining NL (No 2) (2012) 287 ALR 22 at [245]; Westpac Banking Group v  The Bell Group (in Liq) (No 3) (2012) 44 WAR 1 at  [2187]; Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2013) 247 CLR 149 at [31]; Nicholson v Morgan (No 3) [2013] WASC 110 at [72]; Sze Tu v Lowe (2014) 89 NSWLR 317, 361 [240]; P Butt, ‘Indefeasibility and Knowing Receipt of Trust Property’ (2002) 76 ALJ 606; A Moore, ‘Equity, Restitution and In Personam Claims Under the Torrens System: Part 2’ (1999) 73 ALJ 712; H Atkin, ‘Knowing Receipt Following Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 29(4) Sydney Law Review 713; M Harding, ‘Barnes v Addy Claims and the Indefeasibility of Title’ (2007) 31(2) Melbourne University Law Review 15; K F K Low, ‘Of Horses and Carts: Theories of Indefeasibility and Category Errors in the Torrens System’ in (E Bant and M Harding (eds), Exploring Private Law 2010 at 446. In Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732 at  [45], Leeming JA held that a person receiving trust property, otherwise than as a bona fide purchaser for value without notice, but nevertheless innocently, and thereafter acquires notice of the trust and deal with it in a manner inconsistent with the trust may also be liable as a constructive trustee. Such a trust is similar to the first limb Barnes v Addy trust, but conceptually distinct because it is the subsequent dealing rather than the receipt of property that forms the foundation for liability. It is to be presumed that such a trust, grounded as it is in notice, would not be enforceable against a registered interest holder. For a discussion on this see  generally J Dietrich and P Ridge, Accessories in Private Law, Cambridge University Press, United Kingdom, 2015, at 203; R Havelock, ‘Reconciling Equitable Claims with Torrens Title(2019) 41(4) Sydney Law Review 455. It has been held that indefeasible title may be set aside where a registered proprietor has been registered by mistake. In White v Tomasel [2004] 2 Qd R 438, the Queensland Court of Appeal concluded that a registered title can be set aside where a decision entitling registration has been overturned. Williams JA made the following comments at [59]: Here, the respondents could not become registered proprietors without the assistance of the court; they needed an order from the court empowering the Registrar to sign the transfer before they could become registered. By seeking the assistance of the court, the respondents, in my view, submitted to the jurisdiction of the court and that meant that their rights and obligations were subject to any order made by the court, including an order on appeal. By securing registration through the aid of a court order the respondents impliedly accepted that their rights were conditional upon the validity of that order. It followed that if that order were to be set aside, the court could order the respondents to restore the appellant’s rights to the property in question. The obligation which the court would enforce by making an order for restoration of property rights would be one made in personam. That would, in my view, not infringe the doctrine of indefeasibility of title recognised by s 184 of the Act. The statements quoted above from Frazer v Walker, Breskvar v Wall, and Bahr v Nicolay indicate that the type of claim which might defeat the indefeasibility of the registered proprietor’s title is not necessarily limited to claims of an equity in the strictest sense. Here, as I have said, the circumstances were unusual. The respondents’ title was dependent upon the court making an order in favour of the respondents, an order without which they could not have become registered. A consequence of that is that the respondents were burdened with the validity of that court order; once that order was set aside the very foundation of their claim to registration was lost. Having submitted to the jurisdiction of the court, the court had power to make necessary orders to achieve restitution in integram on setting aside the original order 742

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though that involved ordering a registered proprietor to convey land. Indefeasibility of title does not prevent a court from ordering the registered proprietor to deal with the land in a particular way if, as a result of litigation, it is established that the register should be altered or varied in some way. See also Bli Bli Pty Ltd v Kimlin Investments Pty Ltd [2008] QSC 289 at [22].

In establishing an in personam action, the elements will often involve unconscionable behaviour; however, this is not a prerequisite to the enforcement of an equity against a registered proprietor. As outlined by Brereton J in Harris v  Smith [2008] NSWSC  454 at  [67], ‘in many cases, establishing a personal equity will involve establishing unconscionability, that is because unconscionability is an element of the relevant equitable cause of action. But it is not an element of every equitable cause of action. Where it is not, there is no superadded requirement to establish unconscionability in order to establish a “personal equity” for the purposes of that exception to indefeasibility’. In a case where unconscionable dealing is an element of the action and it proven against a registered proprietor, the registered proprietor may be regarded as the ‘primary wrongdoer’ and not merely as ‘someone who had notice of an earlier interest or notice of third party fraud’: Permanent Mortgages Pty Ltd v  Vandenburgh [2010] WASC 10 at  [375]–[379]. Hence, in Spina v Conran Associates Pty Ltd (2008) 13 BPR 25,435, Austin J concluded that the plaintiff had a personal equity that arose out of an improperly exercised power of attorney and that allowed her to obtain an order for a removal of the mortgage from the Register. During the course of the judgment, Austin J stated: It follows that if the holder of the registered interest has engaged in unconscionable or unconscientious conduct ‘personally’ (including conduct through an agent) which gives rise to a cause of action in equity, then that equity may be asserted against the registered interest holder. For reasons set out below, my view is that Conran Associates has engaged in unconscionable conduct giving the plaintiff a remedy in equity. That conduct gives the plaintiff a personal equity permitting her to set the Conran Associates mortgage aside notwithstanding that it has been registered.

It has been suggested that the intention of the Torrens legislation is not to arbitrarily exclude equitable actions, particularly where they cohere with established doctrinal orthodoxy. The only equitable actions that should be excluded are those that are expressly inconsistent with the objectives of the Torrens legislation and this must be assessed by reference to the express language of the Act: see B Edgeworth and L Moses, in ‘Taking It Personally: Ebb and Flow in the Torrens System’s In Personam Exception to Indefeasibility’ (2013) 35 Sydney Law Review 107 at [117]–[118]: We argue below that Torrens statutes should be interpreted according to the language used and that, accordingly, registered proprietors are only protected from some types of claim that are expressly or impliedly excluded by the wording of the legislation. Registered proprietors are protected from some claims as a result of the wording in section 42 (interpreted in light of section 43) as well as section 45, and their equivalents in other jurisdictions. In particular, section 43 and equivalents ensure that receipt with notice of an unregistered interest does not render a registered proprietor liable for equitable fraud. In all other respects, equitable and common law doctrines should be enforced fully against registered proprietors whose conduct or other circumstances bring them within those doctrines. To balance the bijural origins of the legal principles in this way would both consistent with the legislative intent (and therefore parliamentary sovereignty), but it would also preserve the important policies which those doctrines advance, namely to impose broad standards of fair dealing in interpersonal and commercial affairs. 743

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11.38  Revision Questions 1. Do you think that registered proprietors should be liable for the equitable consequences of their behaviour, despite their registered status? To what extent should the aims of the registration framework undermine the enforceability of equitable obligations held by a registered proprietor? 2. Do you think that statutory fraud should arise in circumstances where an inadvertent error has occurred in the process of executing transfer documents? 3. In Bahr v  Nicolay the High  Court took different views as to the applicability of statutory fraud and in personam to the post-registration repudiation of a contractual agreement to honour an option to purchase. Do you think this type of behaviour should attract fraud or trust obligations and why? 4. Do you think that it is appropriate to invoke the equitable jurisdiction to validate an in personam claim in the absence of any clearly articulated unconscionable conduct? Compare the two views: (i) McMurdo J in White v  Thomasel who concluded at [72]: ‘… to constitute an “equity” within s 185(1)(a), the interest must derive from a recognised right of action, at law or in equity, which arises from the acts of the registered proprietor and which is not inconsistent with the policy of a Torrens system of title’ and (ii) Davies JA (in dissent): ‘This brief survey of the cases demonstrates, in my opinion clearly, that, for an equity to arise from the act of the registered proprietor within the meaning of s 185(1)(a), some act of the registered proprietor must make it unconscionable for him or her to obtain or retain the registered interest free of the interest contended for’ (see also the case note on this decision: ‘Torrens Title: Indefeasibility Affected by “Equities” — What is an Equity?’ (2005) 79 ALJ 30). 5. In Farah Constructions Pty Ltd v  Say-Dee Pty Ltd the High  Court draws a distinction between constructive trust scenarios where: (i) the registered proprietor is the primary wrongdoer because of a failure to convey land or comply with an obligation to share; and (ii) the registered proprietor is a third party who ‘merely had notice of an earlier interest or notice of third party fraud’ (quoting from Pullin J in LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517 at 571) and concludes that the latter situation should have no effect upon indefeasibility of title. Do you agree with this distinction? Does registration justify the per se exclusion of first limb Barnes v  Addy constructive trusts against registered proprietors?

Volunteers 11.39  A volunteer is a person who gives no valid or recognisable consideration for

title. Where a volunteer becomes registered, the Victorian courts have argued that the Torrens provisions did not intend to confer the full benefit of an indefeasible title. By contrast, the New South Wales and Western Australian Supreme Courts have rejected this interpretation. The first Victorian Supreme Court decision to uphold the ‘volunteer exception’ was that of King v Smail [1958] VR 273. In that case, Adam J concluded that the conferral of immunity from the consequences of notice, ordinarily bestowed upon a registered proprietor, should not be given to a registered ‘volunteer’. This means that in Victoria, a registered volunteer will take subject to any prior equity he or she has notice of. The rationale for this ‘exclusion’ is that such protection would be ‘illusory’ as a volunteer

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is, on well settled rules of equity, amenable to all equities affecting his or her predecessor in title. 11.40  The decision in King v Smail is extracted below.

  King v Smail  [1958] VR 273 Facts: Mr Gordon Charles King transferred to his wife, the applicant, his estate in the land by way of a gift. The transfer was expressed to be subject to a mortgage in favour of Colonial Mutual Life Assurance Company. Subsequently, Mr King and his business partners executed a deed of arrangement, pursuant to Pt XII of the Bankruptcy Act 1924–1955, in favour of the respondent as trustee for their creditors. The property assigned was described as ‘all the property specified in the first and second parts of the first schedule’ thereto ‘and all other property of which the debtor … is possessed or to which he … is entitled legally or equitably in possession …’. The interest of the husband in the land in question was not included in the first schedule to the deed, which referred only to particulars of the partnership estate. By 6 September 1956 this deed of arrangement was duly registered in compliance with s 193 of the Bankruptcy Act on 14 September 1956. A search on behalf of the respondent on 28 September 1956 disclosed that the land in question was registered in the joint names of the applicant and her husband. Subsequently on the same day, the transfer dated 24 July 1956 to the applicant was lodged for registration. On 11 October 1956 the respondent lodged a caveat claiming an equitable estate in fee simple under the deed of arrangement in the land in question which at that point was registered in the joint names of the applicant and her husband. The caveat forbids the registration of any person as transferee or proprietor of any instrument affecting the said estate. However, because the caveat was lodged after the instrument of transfer it did not prevent registration of the applicant as transferee of the husband’s interest in the land. Mrs King became the registered proprietor of the entirety. The issue was whether the equity of the respondent was enforceable against the registered title of the applicant. Adam J: … The conclusion I reach then, on the evidence before me, is that under and by virtue of the deed of arrangement the respondent acquired, as trustee for the creditors of the husband, the beneficial estate in the moiety of the land in question of which the husband was the registered proprietor, unaffected by any claim by the applicant. The further question remains whether by virtue of the applicant on 18  September  1956, obtaining registration of the voluntary transfer of the husband’s undivided half share in the land, the unregistered estate or interest of the respondent in the land has not been over-reached. This, as fraud on the part of the applicant is not suggested, raises the far-reaching question whether by virtue of the Transfer of Land Act  1954 a volunteer who takes a transfer from a registered proprietor acquires, like a purchaser for value, a title free from equities which affected his transferor. It was, of course, not disputed that in relation to land under the general law a volunteer whether with or without notice took the legal estate subject to equities which affected his predecessor in title. In this respect a volunteer stood in the shoes of his predecessor in title. The contention of the applicant was that the provisions of the Transfer of Land Act  1954, which by s 3(1) prevail over rules of general law, were inconsistent with this conclusion and in the present case operated to confer on the applicant, although a volunteer, upon registration of the transfer a title which prevailed over the prior beneficial interest conferred on the respondent. Naturally enough reliance was placed on s 42 which reproduces s 72 of the 1928 Act. If, as suggested by Evatt J, and it would seem by Rich J, in Clements v Ellis (1934) 51 CLR 217, at  pp  268 et seq, 233, this is to be read as the key section  of the Act and effect given to it 745

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regardless of other provisions and the implications to be drawn from them, the applicant’s contention would appear to be unanswerable. For in terms and without relevant qualifications, s 42 provides that ‘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 of land shall, … hold such land subject to such encumbrances as are notified on the Crown grant or certificate of title but absolutely free from all other encumbrances whatsoever …’. In terms s  42 itself draws no distinction between persons becoming registered proprietors for value and mere volunteers. What is relevant is that a person has become the registered proprietor. The view that the section in Torrens legislation corresponding to s 42 is the key section of the Act and that other provisions of the Torrens legislation do not warrant the exclusion of mere volunteers from its benefits has been taken in the Canadian Courts — see Hogg, Registration of Title to Land, p 107, and in addition to the cases there cited, McKinnon v  Smith, [1925] 4  DLR  262, may be referred to. The same view, in effect, appears to have been taken in a recent text-book — see P Moerlin Fox’s The Transfer of Land Act 1954, at p 43. On the other hand there is the highest authority for the proposition that it is not permissible to read the enactment corresponding to s  42 of the 1954 Act in Torrens legislation in isolation, as it were, from the other provisions in that legislation. The Act is to be read as a whole and sections  which in themselves would give conclusive validity to registered title in the circumstances therein expressed, should be read subject to qualifications required of necessity or by implication to give effect to the scheme of legislation manifested from reading the legislation as a whole. The leading example, of course, is Gibbs v  Messer [1891] AC 248, in which the question for decision by the Privy Council was whether registration of a mortgage which was a nullity, conferred by reason of its registration indefeasible title to the mortgage by virtue of a section in the legislation corresponding to s  42. The reasoning in Gibbs v  Messer — both from the judgment itself as reported and from unreported judicial observations in arguendo has been fully discussed by Dixon J, in Clements v Ellis in a judgment which demonstrates the necessity, insisted upon by the Privy Council, for considering together the sections which deal with the defeasibility and indefeasibility of title in order to obtain a just view of the meaning of the legislation. Thus, for example, s 41, which gives conclusive evidentiary force to a registered certificate of title without excepting fraud, must be read with s 42. 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. Thus by s  44(2), it is provided that ‘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 proprietor through or under whom he claims was 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’. By s  52, which deals with sales and transfers by sheriffs in execution, it is provided: ‘On registration of such transfer the purchaser shall become the transferee and be the proprietor of the land in all respects as if the transfer were a transfer for valuable consideration to the purchaser by the registered proprietor …’ By s 110, which provides for indemnity from the assurance fund, it is provided by subs (3): ‘No indemnity shall be payable under this Act — (a) where the claimant … derives title (otherwise than under a disposition for valuable consideration which is registered in the Register Book) from a person who … has been guilty of such fraud neglect or wilful default …’ 746

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Provisions such as these, and s 43, to which I make specific reference hereafter, which in substance, though differently expressed, appeared in the Torrens legislation under consideration in Gibbs v Messer [1891] AC 248, provide justification for Lord Watson’s classic dictum that: ‘The object (of the Act) 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 everyone who purchases in bona fide and for value from a registered proprietor and enters his deed of transfer or mortgage in the register shall thereby acquire an indefeasible right notwithstanding the infirmity of his author’s title’. If, as is proper to assume, Lord Watson’s words were chosen with characteristic care, it is apparent that he considered that it was no part of the scheme of the legislation to confer indefeasible and paramount title on mere volunteers who procured registration. Section 43 of the Act, consideration of which I have deferred till now, affords, I consider, strong confirmation of the view that mere volunteers are outside the contemplation of the indefeasibility provisions of s  42. This section  provides that ‘Except in the case of fraud no person contracting or dealing with … the registered proprietor of any 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 …’. It has been repeatedly decided that the provisions contained in this section give protection only to persons obtaining registration — see cases collected in Wiseman, Transfer of Land Act (2nd ed), p 304. As pointed out by Dixon J, in Clements v Ellis (1934) 51 CLR 217, at pp 241–5, the Privy Council in Gibbs v Messer [1891] AC 248, treated the section corresponding to s 43 as providing guidance to the meaning of the general language used in the section corresponding to s 42. In the case of registration of title subsequent to initial registration (with which the present case is alone concerned) it is only registered proprietors who obtain protection from s 43 who gain indefeasible title under s 42. In Gibbs v Messer, and Clements v Ellis, the question was whether a registered proprietor who had not dealt with the prior registered proprietor for the interest claimed acquired an indefeasible title by registration. Such a person obtained no protection under s 43, and by the Privy Council and by Dixon and McTiernan JJ, in Clements v Ellis was accordingly held to be outside the protection given to registered proprietors under s 42. If the position be that mere volunteers, though registered, gain no protection from s  43, by parity of reasoning they should be held to fall outside the indefeasibility provisions of s 42. Are these mere volunteers then within the protection of s 43? In my opinion — clearly no. The protection given by s 43 to a registered proprietor, ie a 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. Had it been intended by s 43 to relieve a mere volunteer from equities which affected his transferor, the section  would have been differently worded as, for example, by providing that persons dealing, etc, with registered proprietors would not be affected by any trust or unregistered interest any rule of law or equity to the contrary notwithstanding. It will be observed that I have reached the conclusion that the applicant, as a mere volunteer, did not on registration obtain a title freed from the beneficial interest acquired by the respondent in the land under the deed of arrangement quite apart from direct authority binding on me. Although such direct authority in point is scanty and in its reasoning not, I think, altogether satisfying, I  consider it such as should bind me to the conclusion I have reached, even were I, personally, of a different opinion. For Victorian authority it is I think sufficient to refer to Chomley v Firebrace (1879) 5 VLR (Eq) 57, and Crow v Campbell (1884) 10 VLR (Eq) 86. 747

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In Chomley v  Firebrace  a question arose whether the transferee without consideration of a mortgage from a trustee, upon registration of the transfer obtained protection from the trusts. The judge of first instance, Molesworth J, held that s  50 of the Transfer of Land Statute — corresponding to s  43 of the 1954 Act — protected the transferee. On appeal, Stawell CJ, considered the appeal should be allowed on the ground that the transferee was affected by fraud. The other judge, Stephen J, reached the same conclusion on two grounds. The first was fraud; the other that the transfer was without consideration. The significance of this he discussed in one sentence (at p 74): ‘The case of Raleigh v Glover (1866) 3 WW & A’B (Eq) 163, is an authority for the plaintiffs, and establishes the proposition that the doctrine of resulting trusts, arising from the fact that no consideration was paid, may be applied to land held under the Transfer of Land Statute.’ Raleigh v Glover (1866) 3 WW & A’B (Eq) 163, was a case in which it was held by Molesworth J, that a person who obtained registration of a Crown lease pursuant to an arrangement with another who provided the purchase money was trustee for that other upon the ordinary principle that if a person effects a purchase with the money of another there is a resulting trust for that other. With all respect, that case appears to me to throw but little light on the present problem. In Crow v Campbell, supra, a question for decision by Molesworth J, was whether a volunteer who obtained registration of a transfer from a registered proprietor who in fact held as trustee for next of kin under an intestacy acquired a title freed from such trusts. At p 194, Molesworth J, said: ‘In Chomley v Firebrace, a trustee, being in default as to one set of persons, transferred the property which he held as trustee for another, under the Act to the first set, all of his own motion and without communicating with the principals, to compensate for his default. I held that, as the transferees were innocent, and might lawfully take, they were protected by s  50 [ie now s  43]. The other judges differed from me on appeal. I have considered their judgments and some other cases referred to in A’Beckett’s Transfer of Land Statute (2nd ed) upon that section: ‘No person contracting or dealing with or taking or proposing to take a transfer from the proprietor of any registered land shall be required or in any manner concerned to inquire or ascertain the circumstances under, or the consideration for which, such proprietor was registered, or shall be effected by notice, actual or constructive, of any trust or unregistered interest, etc’; and in deference to the views of others principally, I am prepared to decide that the section does not apply to a transaction such as this, without consideration at the time of the transfer or previous legal obligation to transfer.’ As reasoned authority for the general proposition that the Transfer of Land Act does not confer on a volunteer under a registered transfer a title free from prior equities, these decisions, although binding on me, appear to leave much to be desired. The only problem discussed appears to have been the meaning of the section which is now s 43 — discussed, as reported, somewhat in a cursory way, and without attention being specifically directed to the more troublesome section, now s 42, and the interrelation of these sections. In conclusion I should add that the view that Torrens legislation expressed in language not materially differing from the Victorian Acts does not confer a title, free from prior equities, on a registered proprietor being a mere volunteer finds confirmation in decisions in other jurisdictions. Suffice it for me to refer in particular to the persuasive judgment of Boucaut J, in Biggs v McEllister (1880) 14 SALR 86, a judgment concurred in by Way CJ. Apart from the statement by P Moerlin Fox in his text-book referred to earlier in this judgment, the text-books without exception appear to support this conclusion. Reference may be made to Hogg, Australian Torrens System, pp 832–3; Hogg, Registration of Title, pp 106–9; Wiseman’s The Transfer of Land (2nd ed), p 316; Baalman’s Commentary on the Torrens System in New South Wales, pp 149–50; Kerr’s The Australian Lands Titles (Torrens) System, p 195. I should add that it was urged upon me that the Transfer of Land Act  1954 had effected material changes from the pre-existing legislation, and that whatever the position of a volunteer under prior legislation, he should now, on a proper interpretation of this recent Act, be held entitled to the protection afforded in terms to registered proprietors, without discrimination, by 748

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the terms of s  42. In my opinion such changes as were effected by the 1954 Act were for purposes in hand of a minor character, and do not justify the view that the position of a volunteer has in relevant respects been altered in his favour. Indeed, the case against the volunteer may be considered to have been strengthened by the insertion by way of addition into s 3(1) of the recent Act of the words: ‘save as aforesaid any Act or rule relating to land, unless otherwise expressly or by necessary implication provided by this or any other Act, shall apply to land under the operation of this Act whether expressed so to apply or not’ (cf s 3 of 1928 Act).

Commentary 11.41  The conclusions of Adam J focus upon the fact that volunteers are, on well-

established rules of equity, subject to equities that affect a predecessor in title. His Honour felt that if the Victorian Torrens legislation intended to change this fundamental principle it should have explicitly set this out. The failure to incorporate such a specific change, combined with the consistent reference to protection for purchasers for value, especially within s 43 and s 44(2) of the Transfer of Land Act 1958 (Vic), indicated that volunteers were not intended to gain the protection of indefeasibility upon registration. The conclusions of the Victorian Supreme Court in King v Smail were subsequently upheld by the Victorian Supreme Court in Rasmussen v Rasmussen [1995] 1 VR 613, where Coldrey J held that the conclusions of Adam J were ‘carefully reasoned’ and consistent with the overall interpretation of the scope and effect of the indefeasibility provisions. The decision is extracted below.

  Rasmussen v Rasmussen  [1995] 1 VR 613 Facts: Paul Rasmussen wanted to use his farm land so that ultimately, each of his sons would acquire a viable farm. With this aim in mind, each of the four sons contributed their time and energy to the enterprise, forgoing other employment opportunities and profits in their labour. The two elder sons received land for farming. The two younger sons, Ernest and Billy continued farming with their father. Some of the land was registered in the father’s name and some in Ernest and Billy’s name. One of the southern properties, ‘Markeys’ was assumed to have been registered in Ernest’s name; however, it remained in the name of Paul. A dispute arose between Ernest and his son Harold concerning ownership of this property which had passed to Harold under Paul’s will. Ernest argued that constructive trusts over all four properties arose in his favour. The court concluded that it was the common intention of Paul and Ernest that Ernest would be the legal owner of ‘Markeys’. Ernest acted to his detriment in reliance on this common intention by working under the financial and employment constraints of the family enterprise. Paul acted unconscionably by the assertion through his will of sole beneficial ownership of ‘Markeys’. Accordingly there was a constructive trust of ‘Markeys’ in Ernest’s favour. However, no such trust arose in the case of the three other southern properties because of an agreement between Paul and Ernest that those properties would be left to Harold. Significantly, the court concluded that Harold could not rely on s 42 and s 43 of the Transfer of Land Act to defeat Ernest’s interest in ‘Markeys’ because the protection of those sections  was not available to a volunteer and therefore Harold would take subject to Ernest’s equitable title, which he had notice of. Coldrey J: … It was argued by Mr Connor that, even if it was accepted that a constructive trust existed, it could not be enforced because of the provisions of s 42, s 43 and s 44 of the Transfer of Land Act 1958. 749

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In essence s 42(1)(a) and s 43 bestow upon a registered proprietor (in the absence of fraud by such proprietor) an indefeasible title. Further, and again in the absence of fraud, a person taking (inter alia) a transfer of land from the registered proprietor will not be affected by notice of the existence of any trust or unregistered interest in the land. Section 44(1) of the Act whilst stating that: Any folio of the Register … procured or made by fraud shall be void as against any person defrauded or sought to be defrauded thereby … also provides in subs(2) that: … 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 purchase of the valuable consideration of land on the ground that the proprietor through or under whom he claims was registered as proprietor through fraud … The nature of such fraud was discussed in Bahr v Nicolay (No 2) (1988) 164 CLR 604. In summary the fraud perpetrated must have the character of dishonesty, moral turpitude or mala fides. The question of who must be the perpetrator of such fraud so as to lose the protection of the indefeasibility of title vouchsafed by these sections was the subject of consideration in three … Victorian cases. In Chasfild Pty Ltd v Taranto [1991] 1 VR 225 Gray J held that ‘fraud’ as used in s 44(1) was not limited to fraud on the part of the person whose interest was registered. Subsequently in Vassos v  State Bank of South  Australia [1993] 2 VR 316 and Eade v Vogiazopoulos (1993) V Conv R 154,458, Hayne J and Smith J respectively declined to follow Chasfild’s case, preferring the view that the fraud to be established is fraud by or on behalf of the party who seeks and obtains registration. I agree with respect with the conclusions enunciated by their Honours. It is not necessary to examine their reasons which were not identical. On the basis of these cases it was argued that, there being no fraud by the defendant in becoming the registered proprietor of the disputed lands, he acquired an indefeasible title to them. Moreover, even if he could be said to have knowledge of a constructive trust such knowledge cannot of itself defeat the indefeasibility of the title acquired. It may be accepted for the purposes of argument that fraud in the sense relevant to these sections cannot be established by the plaintiff in this case. In King v Smail [1958] VR 273 Adam J had occasion to consider these provisions in relation to the indefeasibility of title accorded to a volunteer as distinct from a purchaser for value. In that case the registered proprietor made a gift of his interest in certain land to his wife prior to entering into an agreement in favour of the respondent as trustee for his creditors. The respondent lodged a caveat claiming an equitable estate in fee simple under the deed of arrangement in the land in question. The caveat having been lodged subsequently to the instrument of transfer did not prevent registration of the wife applicant as transferee of the husband’s interest in the land and she became the registered proprietor of the entirety. The applicant applied to have the caveat removed. His Honour observed at 276: 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  of 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. Reference is made to s 44(2), s 52(4) and s 110(3). In discussing the operation of s 43 Adam J stated at 277–8: In the case of registration of title subsequent to initial registration it is only registered proprietors who obtain protection from s 43 who gain indefeasible title under s 42 … If the position be that mere volunteers, though registered, gain no protection from s 43, by parity of reasoning they should be held to fall outside the indefeasibility provision of s 42. Are these mere volunteers then within the protection of s 43? In my opinion — clearly no. The protection given by s 43 to a registered proprietor, ie a legal owner of land, against the consequences of 750

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notice actual or constructive of trusts or equities affecting his transferor has point where the legal owner is a purchaser for value. A purchaser of a 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. Had it been intended by s 43 to relieve a mere volunteer from equities which affected his transferor, the section  would have been differently worded as, for example, by providing the persons dealing, etc, with registered proprietors would not be affected by any trust or unregistered interest any rule of law or equity to the contrary notwithstanding. The decision of Adam J has attracted the approval of text writers (see for example Whalan, The Torrens System in Australia, 1982, 336). However, in Bogdanovic v  Koteff (1988) 12  NSWLR  472, the New  South  Wales Court of Appeal declined to follow King’s case. The court held at 480 that following the decisions of the High Court in Breskvar v Wall (1971) 126 CLR 376 (in which the decision of the Privy Council in Frazer v Walker [1967] AC 569 was cited with approval): 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 … was no longer good law. 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 operation of the relevant Transfer of Land Act sections to purchasers for value. (Again there is no reference to King v Smail). The legal and factual background of Bahr’s case may be gleaned from the headnote: Section 68 of the Transfer of Land Act 1893 (WA) provided that, except in the case of fraud, the registered proprietor of land held it subject only to encumbrances notified on the certificate of title. Section 134 provided that, except in the case of fraud, no person taking a transfer of land should be affected by actual or constructive notice of any trust or unregistered interest and that knowledge of any trust or unregistered interest should ‘not of itself be imputed as fraud’. In order to raise funds to develop his land, the registered proprietor sold it to another who leased it back to him for three years. The contract provided that upon the expiration of the lease the vendor would enter into a contract to repurchase the land for $45,000 payable by a deposit of 10 per cent and the balance within thirty days. The land was subsequently sold under a contract which contained a provision by which the purchaser acknowledged the existence of the repurchase provision in the earlier contract. The purchaser became registered as proprietor. He then told the original owner that he ‘recognised’ the repurchase clause and would agree to sell the land for $45,000 with a deposit of 10 per cent. The original owner later paid the deposit, but the registered proprietor refused to sell the land. At 613 Mason CJ and Dawson J commented upon s 68 and s 134. After quoting portion of the observations of the Privy Council in Gibbs v Messer [1891] AC 248 at 254, their Honours continued: Neither the two sections  nor the principle of indefeasibility precludes 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. Thus, an equity against a registered proprietor arising out of the transaction taking place after he became registered as proprietor may be influenced against him. So also with an equity arising from conduct of the registered proprietor before registration, so long as the recognition and enforcement of that equity involves no conflict with s  68 and s  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. Wilson and Toohey JJ stated at 637: It is nearly a century since, in Gibbs v Messer, the Privy Council described the Torrens system in these terms: ‘The object is to save persons dealing 751

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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 fight, notwithstanding the infirmity of the 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 made it clear that ‘this principle in no way denies the fight 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. Brennan J at  652–3 remarked (after quoting the classic statement of the Privy Council in Gibbs v Messer to which reference has already been made): 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, the purchaser who takes with notice of an antecedent interest but who becomes registered under the Act without fraud takes free of that interest [cases cited]. 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 … 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 my view the reasoning in the High Court decisions does not destroy the principles enunciated in King’s case. That case is a carefully 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 purchase for value as distinct from a mere volunteer. In Australian Real Property Law, (1991), Bradbrook, MacCallum and Moore, the authors (at para 5.64, at  163), after referring to the decision in Bogdanovic, remark: Despite the relative importance of the paramountcy provisions, these provisions cannot be considered in isolation and it still remains the case that a number of other provisions in the Torrens statutes imply that indefeasibility of title only attaches to the registered proprietor who is a purchaser. It is suggested that the framers of the Torrens legislation intended that only purchasers for value acquire indefeasibility and that there is no compelling reason existing now pursuant to which volunteers should obtain an indefeasible title. A contrary approach has apparently been taken in the Land Title Act 1994 (Qld) where s 165 of that Act provides that the benefits of indefeasibility of title will apply whether or not valuable consideration has been given. In discussion in ‘The Conveyancer’ column of the Australian Law Journal (1994), Vol 68, 675 at  678, it is observed: Thus it is clear that the benefits of indefeasibility are intended to attach to a registered volunteer as well as to a purchaser for value. This resolves a long-standing debate evidenced by such decisions as King v  Smail [1958] VR  273; Washington Constructions Co Pty Ltd v  Ashcroft [1982] Qd R 776 and Bogdanovic v  Koteff (1988) 12 NSWLR 472, as to whether or not the registered volunteer obtains indefeasible title. The resolution of this dispute in favour of the volunteer has attracted some criticism in Queensland but the result is in line with the decision of the Court of Appeal of New South Wales in Bogdanovic v Koteff. 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 752

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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 current 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 properties. Despite the indefeasibility doctrine the cases of Breskvar, Bahr, and Bogdanovic, all confirm ‘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’: Frazer at 585. The application of that concept to the present case was but faintly argued and, as I have already indicated, I do not regard it has having any applicability on the facts as I have found them. It was further submitted that the plaintiff’s claim was statute barred pursuant to the provisions of s 21 of the Limitation of Actions Act 1958 which reads: 21(1) No period of limitation prescribed by this Act shall apply to an action by a beneficiary under a trust, being an action — (a) in respect of any fraud or fraudulent breach of trust to which the trustee was a party or privy; or (b) to recover from the trustee trust property or the proceeds thereof in the possession of the trustee, or previously received by the trustee and converted to his use. (2) Subject as aforesaid, an action by a beneficiary to recover trust property or in respect of any breach of trust, not being an action for which a period of limitation is prescribed by any other provision of this Act, shall not be brought after the expiration of six years from the date on which the right of action accrued: Provided that the right of action shall not be deemed to have accrued to any beneficiary entitled to a future interest in the trust property until the interest fell into possession. It was argued that s 21(1) was inapplicable since, even assuming that the defendant was a trustee pursuant to s 3(1) of that Act, (which incorporates that of s 3(1) of the Trustee Act 1958, namely ‘… “trust” and “trustee” extend to implied and constructive trusts and to cases where the trustee has a beneficial interest in the trust property …’), there was nonetheless no fraud or breach of trust by the trustee. The alternative argument which related to s 21(2) of the Act was that, in so far as a common intention constructive trust was alleged, the right of action accrued upon the death of Paul on 1 March 1977 and not upon the death of his wife Elizabeth on 3 September 1991. Consequently the plaintiff’s claim was statute barred. In response, Mr  Dixon, who appeared on behalf of the plaintiff, argued that s  21(1) was applicable since not only was the defendant a trustee (as previously defined) but the actions of Paul as the original trustee constituted fraud in the relevant sense, the basis for such fraud being his insistence upon the absolute character of his title for the purpose of defeating the beneficial interest in land which belonged to another. In support of that broad concept of fraud reliance was placed (inter alia) upon the cases of Bannister v Bannister [1948] 2 All ER 133 at 136 and Bahr v Nicolay (No 2) (1987) 164 CLR 604 at 654–5. 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 …’ This passage was quoted with approval by Brennan J in Bahr v Nicolay (No 2) above. Accordingly, it was submitted no limitation period applied. Further and alternatively it was argued that, for the purposes of the proviso to s 21(2) of the Act, the interest of the plaintiff (as beneficiary) in the trust property only ‘fell into possession’ 753

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upon the death of Elizabeth on 3  September  1991. It followed that this action, which was commenced on 4 June 1992, was well within the six year limitation period. In my opinion the action brought by the plaintiff falls within s 21(1) of the Limitation of Actions Act for the reasons advanced by Mr Dixon. The actions of Paul were capable of constituting him as a constructive trustee and his consequent assumption of absolute ownership of the land may be characterised as a fraudulent breach of trust. Moreover, I am of the view that (the life interest of Elizabeth not being inconsistent with the constructive trust alleged), the action is also within time pursuant to the provisions of subs (2). In accordance with my findings I declare that the defendant Harold Rasmussen holds the legal estate in ‘Markeys’ comprising certificate of title vol 3068, folios 469, 470, 471, 472 and vol 3979, folio 711 upon trust for the plaintiff Ernest Rasmussen.

11.42  Similarly, Finkelstein in the subsequent Victorian Supreme Court decision of

Valoutin Pty Ltd v Furst (1998) 154 ALR 119 upheld the conclusions of Adam J in King v Smail. Finkelstein J held that the reasoning and conclusions of Adam J in King v Smail correctly stated the law. An extract of this decision is set out below.

  Valoutin Pty Ltd v Furst  (1998) 154 ALR 119 Facts: Ms Furst had property transferred into her name as a volunteer. One of the issues in the case was whether she took subject to any prior equities as a registered volunteer. Finkelstein J concluded that no prior equitable title existed, therefore the discussion concerning the scope of a volunteer’s title upon registration was purely dicta. Finkelstein J: … In Frazer v Walker [1967] 1 AC 569 Lord Wilberforce explained (at 580–581) that indefeasibility of title: ‘does not involve that the registered proprietor is protected against any claim whatsoever … there are provisions by which the entry on which he relies may be cancelled or corrected, or he may be exposed to claim 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.’ In other words, registration under the Transfer of Land Act gives to the registered proprietor an immediate indefeasible title subject only to those interests which are specifically mentioned in s 42(1)(a) and (b) and s 42(2) unless that registration was procured by fraud: see also Pyramid Building Society (in liq) v Scorpion Hotels Pty Ltd [1998] 1 VR 188 at 191. The argument raised by Ms Furst, assuming it to require determination, depends upon acceptance of the proposition that indefeasibility of title operates in favour of a volunteer. There is authority for the view that the indefeasibility provisions will protect a volunteer in respect of prior equities of which the volunteer has no notice. This was decided by the Court of Appeal in New South Wales in Bogdanovic v Koteff (1988) 12 NSWLR 472. It should be noticed that in that case the Court of Appeal declined to express any opinion on whether the protection that registration provides would operate in favour of a volunteer who had notice of a prior equity. Having reached the conclusion that Mr  Goldberg had no equitable interest in the Orrong Road property at the time Ms Furst became the registered proprietor it is unnecessary for me to consider the applicability or correctness of Bogdanovic. However, because this case may go further, I think that it is appropriate for me to express my opinion on the point. Before the decision in Bogdanovic it was generally accepted that the indefeasibility provisions did not protect a volunteer: see In re the Land Tax Act; Ex parte Finlay (1884) 10 VLR (E) 68; 754

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Crow v Campbell (1884) 10 VLR (E) 186; Biggs v McEllister (1880) 14 SALR 86; on appeal 8 AC 314; Hogg, Australian Torrens System at 823–3; Wiseman, The Transfer of Land (2nd ed) at 316; Baalman’s Commentary on the Torrens System in New South Wales at 149–150. The issue received detailed consideration in King v Smail [1958] VR 272. There Adam J confirmed the view that s 42 only protects a purchaser for value. The reason given was that, although s 42 does not distinguish between a purchaser and a volunteer, other sections in the Transfer of Land Act, in particular ss 43, 44(2), 52 and 110, drew such a distinction and that distinction, especially as it was made in s  43, justified the conclusion that s  42 was intended to confer benefits only on a purchaser. The position with regard to s 43, namely that it only confers a benefit on a purchaser for value was confirmed by Kitto J in IAC (Finance) Pty Ltd v Courtenay (1962–1963) 110 CLR 550 at  572. His Honour said in relation to s  43 of the Real Property Act 1900 (NSW): ‘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.’ 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.

Commentary 11.43  The conclusions of the court in King v Smail; Rasmussen v Rasmussen and Valoutin v Furst make it clear that a registered volunteer will not acquire an indefeasible title and will be subject to a prior interest that they know or should know about. The justification for this was clearly outlined by Coldrey J in Rasmussen, ‘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.’ These conclusions may be directly contrasted with those of the New South Wales Supreme Court in Bogdanovic v Koteff (1988) 12 NSWLR 472, where the court reinforced the primacy of registered title, even where the titleholder is a volunteer. In Bogdanovic v  Koteff, Priestley JA held that the absence of a specific provision, excluding volunteers from the effect of registration, meant that volunteers had to be accorded the same status as other registered proprietors. Similarly, in Conlan v Registrar of Titles [2001] 24 WAR 299 the court noted that the express protection given to purchasers for value within the legislation did not necessarily mean that a general unstated exception concerning volunteers arose. The contrasting approaches taken by the Victorian and New South Wales 755

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jurisdictions is based upon two fundamentally different perspectives: the Victorian cases assume that the Torrens system is fully amenable to fundamental equitable principles and the New South Wales that the Torrens system is a system of title registration which has reduced or removed priority principles to the extent that they undermine the perceived objectives of indefeasible title. 11.44  The decision in Bogdanovic v Koteff (1988) 12 NSWLR 472 is extracted below.

  Bogdanovic v Koteff  (1988) 12 NSWLR 472 Facts: Bogdanovic 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 Koteff. A transmission application was registered as a result of which Koteff became the sole proprietor of the land. The question on the facts was whether, as a volunteer (having taken the land under the terms of SK’s will), Koteff could claim an indefeasible title free from any equitable interest that Bogdanovic might be able to establish. The New  South  Wales Supreme  Court Priestley JA (with whom Hope JA and Samuels JA agreed) concluded that Koteff did acquire an indefeasible title. Priestley JA: The argument for the appellant recognised that on the face of s  42 and s  43 the respondent would hold his registered interest in fee simple free of any equitable rights of the appellant. It was submitted however that it appeared from other sections in the Act, and from various decisions, that s  42 and s  43 cannot be given the absolute force that in their isolation they appear to have. For this proposition Frazer v  Walker [1967] AC 569 and King v Smail [1958] VR 273 were particularly relied on. It was then submitted that it had for many years been accepted by text writers of authority that although s 42 (and its equivalents in other jurisdictions which have Torrens System statutes) makes no express distinction between the measure of indefeasibility afforded to a volunteer and to a purchaser for value, the section was not intended (this being arrived at  as a matter of construction) to give indefeasibility to the volunteer. A  number of text writers, including Baalman in his Commentary on the Torrens System in New South Wales (1951) at 149–150, have expressed that view, which is retained in the current descendant of Baalman, The Torrens System in New South Wales by Woodman and Nettle (1985) (looseleaf) at 347–348. Woodman and Nettle also retains (at those pages) Baalman’s comment (at 150): ‘… The general result is that, on registration of a voluntary transfer, the transferee (as is the case of a volunteer under the general law) occupies no better position than did his transferor. But once registered, he occupies a position quite as good; his title is indefeasible against all claims except such as would have prevailed against his immediate predecessor.’ There are certainly authorities to support the appellant’s assertion. King decided in terms that the Victorian Torrens System Act, the Transfer of Land Act  1954, did not confer upon a registered proprietor, being a mere volunteer, a title free from prior equities. Frazer also supports the appellant’s submission that there is some limitation upon the absoluteness of s 42 and s 43, but only in the sense that a person having rights in equity against a registered proprietor may procure orders against that registered proprietor which will bring about the result that the proprietor’s registered interest may be altered, as a result of equity, in acting upon his conscience, forcing him to submit to what in practical terms amounts to a correction of the register in favour of the person having the rights in equity against him. If, however, King represents the law in New  South  Wales at  the times relevant to the present case, the appellant would be entitled to succeed. The reasoning in King in summary, 756

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was that when the Victorian counterparts of ss 42, 43, 96, 124 and 135 were read together, the  references in them to a purchaser for value (taking the New  South  Wales sections  as examples, in ss 42(1)(c), 124(d), 124(e) and 135) showed a general intention not to confer the benefit of indefeasibility upon volunteers. King is the latest of the cases cited by Woodman and Nettle (at 437–348) in support of the view stated in the text. Frazer however, took the more limited view that the sections from which the general proposition was derived by those who said volunteers were not within the meaning of s 42, did not support such a general proposition, but created only such exceptions to the general operative part of s 42 as were specifically stated in the sections themselves. Speaking for the Privy Council, Lord Wilberforce said (at 580–581) that the indefeasibility of title concept: ‘… is central in the system of registration. It does not involve that the registered proprietor is protected against any claim whatsoever; … 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.’ In New South Wales, at least two decisions at first instance have held the reasoning in Frazer applicable to the Real Property Act: see Mayer v Coe (1968) 88 WN (Pt 1) (NSW) 549; [1968] 2 NSWR 747 and Ratcliffe v Watters (1969) 89 WN (Pt 1) (NSW) 497; [1969] 2 NSWR 146. In Breskvar v Wall (1971) 126 CLR 376 the High Court accepted Frazer as applicable to the Queensland Torrens System statute, the Real Property Act of 1877. Further, Barwick CJ, with whom Windeyer and Owen JJ both agreed, said that both Mayer and Ratcliffe correctly applied Frazer. None of the other four judges expressly mentioned the New South Wales decisions, but it seems implicit in their discussion of the authorities that they were proceeding on the footing that the principles in Frazer would be likewise applicable to Torrens System statutes in other Australian States unless a particular statute happened to contain some special provision requiring a different conclusion. So far as I have been able to see there is no such significantly distinguishing provision in the Real Property Act. Thus, it seems to me, the central ideas of Frazer are required by the High  Court’s decision in Breskvar to be applied by this court in dealing with the present case. 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 emphasise 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 recognises 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). In the present appeal the appellant has not been able to point to anything in the New South Wales Act preserving the rights she had in regard to the land against the registered proprietor. She could have enforced those rights against Mr S Koteff (the father) and, I would 757

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assume, against his executor. But if knowledge of the appellant’s interest by Mr N Koteff (the son) before he became registered proprietor would enable her to assert her rights against him (a matter upon which it is unnecessary in this case to express any opinion) the materials put him on notice of those rights. Thus, there was no material upon which the appellant could attempt to found an argument of any personal right against Mr N Koteff, nor was there any provision in the Real Property Act on which she could rely to prevent s 42 so operating that Mr N Koteff held his interest in the land as registered proprietor of an estate in fee simple ‘absolutely free’ from any estate or interest in her. It seems to me that the provisions of the Real Property Act and the interpretations put on equivalent legislation by decisions which this Court should follow, lead to the result that the appellant’s appeal must be dismissed with costs. [Hope and Samuels JJA agreed with Priestley JA.]

Commentary 11.45  The conclusions of Priestley JA in Bogdanovic v Koteff focused upon the fact that the paramountcy provisions contained no distinguishing provisions that specifically excluded volunteers from the effects of registration. In particular, his Honour focused upon the primacy of registration as outlined in decisions such as Frazer v Walker (1967) 1 AC 569 and Breskvar v Wall (1971) 126 CLR 376, which assert that the Torrens system introduced a new framework that was aimed at removing the old priority evaluation. The conclusions in Bogdanovic v  Koteff were subsequently endorsed by the Western Australian Supreme Court in Conlan v  Registrar of Titles [2001] 24 WAR 299, where Owen J noted that the provisions of the Torrens legislation did not intend to single out volunteers from protection upon registration and that the conclusions of the court in Bogdanovic v Koteff were ‘compelling’. See also Arambasic v Veza (No 4) [2014] NSWSC 119 per Sackville  AJA at  [164] who noted that while the reasoning in King v  Smail was ‘compelling’, he was nevertheless bound to follow the conclusions of the judges in Bogdanovic. 11.46  The decision of Conlan v Registrar of Titles is extracted below.

  Conlan v Registrar of Titles  [2001] 24 WAR 299 Facts: One of the issues for the court was whether registered title holders who were volunteers took an indefeasible title. Owen J: 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. 758

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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 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.’ 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 inevitably 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 759

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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 (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.

Commentary 11.47  The clear schism between the Victorian and the New South Wales courts concerning the applicability of indefeasibility protection to registered volunteers highlights some of the fundamental difficulties with a state-based approach to the Torrens system. Both interpretations are legitimate and while the Victorian cases focus on specific localised provisions, the New South Wales cases take a broader approach in evaluating the underlying aims of the entire system. In King v Smail the argument that a distinction between volunteer and purchaser for value should be inferred is sourced in the fact that many of the provisions in the Victorian legislation refer to a purchaser for value without notice. For example, in s 43 of the Transfer of Land Act 1958, volunteers are not given protection against the doctrine of notice in the same way as bona fide purchasers for value. On the other hand, the argument that there is no distinction between the protection conferred upon a volunteer and a purchaser is based upon the suggestion that post-Breskvar v Wall primacy must be given to all registered title holders. Bogdanovic v Koteff suggests that any ‘inferred’ interpretations must be recast in light of the emphasis the High Court has given to immediate indefeasibility. As noted by Owen J in Conlan v Registrar of Titles, ‘indefeasibility is at the heart of the Torrens system’ and ‘must be given the utmost respect’: at [196]. See also Hypec Electronics v Registrar-General [2008] NSWSC 18 at [71] where Gzell J concluded that ‘The Real Property Act 1900, s 42 applies as well to a volunteer as to a transferee for value’. In Farah Constructions v Say-Dee the High  Court, at  [198], appeared to endorse the interpretation of Bogdanovic v  Koteff and to accept that volunteers have the protection of indefeasibility, when it concluded that ‘the registered proprietors prevail over [the defendants], even if [the registered proprietors] are volunteers’. This was also upheld in Gerard Cassegrain & Co Pty Ltd v  Felicity Cassegrain [2013] NSWCA 453 at  [83]. Hence, despite localised interpretational differences, recent courts appear to favour the primacy of registration and the conferral of an indefeasible title despite the textual difference that exists within the Victorian legislation, which arguably indicates an intention to exclude volunteers from such protection. The preference, at  least in New South Wales, for conferring an indefeasible title upon a volunteer also gains support from the notion that the bona fide purchaser rule operates as a compendium and therefore should not be revived for a limited application. As Maitland has outlined, a purchaser in good faith without notice acquires, in totality, a legal right that equity cannot touch because ‘his conscience is unaffected by the trust’: (1910) at 119. Given that the Torrens legislation was intended to uphold the enforceability of a registered titleholder, reintroducing the equitable rule in a limited manner to registered volunteers appears difficult to reconcile, not only with the aims of the Torrens system, but with the original purpose of the equitable rule. 760

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11.49

11.48  Revision Questions 1. The views in King v  Smail, Rasmussen, and Valoutin on the one hand and Bogdanovic and Conlan on the other are all expressed to be based upon a specific reading of the Torrens legislation. Explain the rationale underlying the different interpretations. 2. In Rasmussen, Coldrey J noted that Priestley JA in Bogdanovic did not provide discussion of the ‘rationale for distinguishing between the indefeasibility of title of a purchase for value as distinct from a mere volunteer’. What is the rationale, if any, for such a distinction and do you think it is legitimate in the context of the Torrens framework? 3. Do you think that the interpretation of the Victorian legislation, holding registered volunteers subject to known prior equities is consistent with the approach of the Victorian Supreme Court in Macquarie Bank v  Sixty-Fourth Throne, and the High Court in Farah Constructions v Say-Dee where the court refused to hold registered proprietors subject to equities arising out of knowing receipt constructive trusts?

Inconsistent Legislation 11.49  The title of a registered proprietor may be set aside where subsequent legislation

overrides or repeals it. A registered title will only be set aside where it is very clear that the subsequent legislation was intended to apply to Torrens land and is interpreted as directly inconsistent with the indefeasibility provisions. This exception is essentially a consequence of statutory interpretation principles: subsequent legislation that is directly inconsistent with earlier legislation will abrogate earlier legislation to the extent of the inconsistency (leges posteriores priores contrarias abrogant). Where, however, subsequent legislation is general rather than specific, it may not abrogate earlier specific indefeasibility provisions (generalia specialibus non derogant): see D C Pearce and R S Geddes, Statutory Interpretation in Australia, 4th ed, 1996, para 7.9). In New South Wales, s 42(3) of the Real Property Act 1900 (NSW) seeks to deal with the difficulties associated with inconsistent legislation by introducing the following provisions: This section  prevails over any inconsistent provision of any other Act or law unless the inconsistent provision expressly provides that it is to have effect despite anything contained in this section.

The aim of this section is to reduce the difficulties connected with inconsistent legislative provisions in New South Wales. However, Parliament still has a general ability to introduce subsequent legislation that goes against the provisions set out in previous legislation. This is an inevitable product of statutory lawmaking. A statutory provision setting out that the indefeasibility provisions will prevail unless a subsequent ‘inconsistent’ provision expressly sets out that it is to have effect despite s 42(3) will undoubtedly curtail these difficulties. It has been suggested that some of the older authorities have adopted an approach to overriding legislation that has had the effect of creating distinct ‘categories of exception’ instead of promoting a rigorous process of statutory interpretation. P O’Connor in her article, ‘Public Rights and Overriding Statutes as Exceptions to Indefeasibility of Title’ (1994) 19 Melbourne University Law Review 649, argues at 668 that this was the consequence 761

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of the determination by Street J in Pratten v Warringah Shire Council [1969] 2 NSWLR 161 (the decision is extracted below). She made the following statements: In my opinion Street J’s view of s  398 is questionable because he did not approach it as a provision in conflict with the Torrens legislation and determine its effect by examining its text and purpose. He proceeded as if prior decisions on statutory interests laid down general principles applying to discrete classes of exceptions to indefeasibility. What seems to underlie his approach is the notion that statutory interests such as that of the defendant council belong to a class of inherent rights, concerning which there is an existing body of law.

11.50  An extract of the decision and judgment of Street J is outlined below.

  Pratten v Warringah Shire Council  [1969] 2 NSWLR 161 Facts: A block of land registered under the Torrens system was subsequently affected by the enactment of s 398 of the Local Government Act 1919 which vested the title to this land in the Warringah Shire Council. The council did not enter their name as registered proprietor, thus the title showed the former owner as registered proprietor. In 1967, Pratten purchased the land after searching title and receiving an assurance from the Council that it claimed no interest in the land. After Pratten was registered on title, the Warringah Shire Council sought to enforce its title under the Local Government Act 1919. The court concluded that the statutory title of the Council should prevail over the registered title of Pratten. Street J: … It has long been accepted that in the case of Real Property Act land there can exist proprietary rights which do not depend upon registration for their efficacy. Hogg on Australian Torrens System discusses the existence of these rights at p 804, et seq. Amongst the categories listed by Hogg are: ‘4. Charges in respect of rates, taxes and other public burdens, and estates created on sale or lease by way of realising the amount of these charges. 5. Estates created on expropriation of the land for public purposes under powers conferred by the general statutes.’ Earlier the learned author of Hogg said: ‘What are known as Resumption Acts constitute a class of the general statutes which must be considered as overriding, and pro tanto repealing, even the Torrens Statutes. Provision, however, is often made, sometimes in the Torrens Statutes, and sometimes in the general statutes, for having proper notice of the compulsory change of ownership entered on the register. But, in view of the scope and object of statutes under which land is expropriated for public purposes, it can hardly be doubted that the maxim, Generalis specialibus, etc, would not be held applicable so far as to exempt land under the Torrens system in the slightest degree from the operation of this class of general statutes.’ The inefficacy of a clean certificate of title to override land which was in law a public highway was upheld by Rich AJ in Vickery v Municipality of Strathfield (1911) 11 SR (NSW) 354 at 361– 364. In South-Eastern Drainage Board (South  Australia) v  Savings Bank of South  Australia (1939) 62 CLR 603, it fell to the High Court to consider whether charges on land purported to be created by the South-Eastern Drainage Act 1931 (No 2062), of the State of South Australia Act 1886 (No 380). The decision of the Court upheld the priority of the statutory charge as against a registered charge. Their Honours took the view that the problem involved a consideration of the interaction between the Real Property Act and the Drainage Act. At pp 627–628, Dixon J (as he then was), said: 762

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‘It follows, therefore, that the question upon which our decision must turn is whether in the enactments creating the statutory charges such a clear intention is expressed to include land under the Real Property Act and to give to the charges an absolute and indefeasible priority over all other interests that, notwithstanding s 6 of that Act, no course is open but to allow the intention so expressed in the later enactments be paramount over earlier Real Property Act. In my opinion this question ought to be answered that such an intention so plainly appears that no other course is open.’ Starke J said, at 621–2: ‘The claim of the respondent that it had priority over the statutory charges was based, however, upon the well-known provisions of the Real Property Act  1886, which embodies the Torrens system of registration of title to land. One of the objects of the Act, declared in s 10, was to secure indefeasibility of title to all registered proprietors except in certain specified cases. So it is enacted that the title of every registered proprietor of land, which includes a mortgage security, shall be absolute and indefeasible subject to certain qualifications, that no instrument shall be effectual to pass any land or to render any land liable as security for the payment of moneys unless registered as prescribed by the Act, that no unregistered estate, interest, right, power, contract or trust shall prevail against the title of a registered proprietor taking bona fide for valuable consideration or of any person bona fide claiming through or under him: See ss 3, 69, 67, 70, 71. But the charges in the present case are created by and take their force and effect from the statutes creating them. (The italics are my own).’ Lower down, on 622, Starke J said: ‘The charges do not depend upon registration nor upon the execution or entry of any instrument. They are complete and effective by reason of the provisions of the Acts creating them. No room so far is left for the operation of the Real Property Act 1886, and the explicit and express provision of the Drainage Act must prevail. The charges are made first charges over the land and all interests therein and have priority over all other charges.’ A similar point of apparent statutory conflict came before the Privy Council in Miller v Minister of Mines & Anor [1963] 1 All ER 109; [1963] AC 484. In that case the conflict was between the rights conferred by a mining licence issued under the Mining Act and the rights of the registered proprietor of the land under the Land Transfer Act. The Privy Council upheld the inroads made upon the registered proprietor’s estate by the licence issued under the Mining Act. At ([1963]) 1 All ER 109 at 113; [1963] AC 484 at 498), towards the end of the judgment, the Privy Council stated: ‘Their Lordships were referred to cases in New Zealand where statutory rights over land were held to exist despite the fact that they did not appear on the register. It is not necessary in their Lordships’ opinion that there should be a direct provision overriding the provisions of the Land Transfer Act. It is sufficient if this is the proper implication from the terms of the relative statute.’ The remaining case to which reference should be made is the decision of the Full Court in Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98; [1964] NSWR 1226. The facts of that case are sufficiently summarised in the headnote: ‘A certificate of title was issued on 1 November 1893. On 28 March 1929, part of the land comprised in that certificate of title was resumed for a public road. At that date the Real Property Act made no express provision for the registration of resumptions. No entry of the resumption was in fact made on the certificate of title by the RegistrarGeneral. The plaintiff acquired title in 1961.’ 763

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The plaintiff sued the Registrar-General for damages, claiming that his certificate of title contained an error, omission or misdescription, entitling him to recover damages from the Registrar-General as nominal defendant. The case was heard and determined on demurrer. Herron CJ held that the Registrar-General had no authority of his own motion to make any entry on the register of the resumption, and hence he could not be liable for damages for omitting to do so. Nagle J held that there was no duty to make any such entry as was propounded by the plaintiff. Ferguson J, who dissented, held that the statutory cause of action available against the Registrar-General did not depend upon the presence of a breach of duty. His Honour held that there was in fact a misdescription in the certificate of title, and that this was sufficient to constitute a ground for the statutory cause of action. In the course of the reasons in the judgments of the Chief Justice and Nagle J, there is some discussion of the principles of law directly applicable to the suit now before me. It was, of course, conceded — indeed, it was part of the plaintiff’s case — in Trieste Investments Pty Ltd v Watson, supra, that the resumption for the road had deprived the plaintiff of the ownership of that land notwithstanding that his certificate of title purported to include it. The case does not accordingly directly decide the point with which I am now concerned. But there are contained within the judgments of Herron CJ and Nagle J, observations that are directly relevant to the matter now before me. After referring to the concept of indefeasibility in respect of Torrens Title, Herron CJ said ([1964] NSWR, at 1229; 64 SR (NSW), at 103): ‘But the fallacy, I think, lies in asserting that the Act achieves complete indefeasibility. For the apparent indefeasibility is qualified. Section  32 contains the authority of the Registrar-General to register dealings. It empowers him to record only particulars of instruments, dealings and matters required by the Act to be registered or entered. Nothing else is to be registered. A public road or highway is not an easement and in New  South Wales could not, prior to 1930, be registered: Howell v  District Land Registrar (1908) 27  NZLR  1074. Despite the decisions of the Privy Council above referred to as to indefeasibility, the view cannot be taken that a resumption is something coming within the registration system and therefore requiring registration. In 1929 in this State the Crown did not assert its title to the road as the owner of a registered interest. Public roads prevailed notwithstanding the absence of any note of their existence from the certificate of title and a transferee took subject to public rights-ofway although not specified in the certificate: Vickery v Municipality of Strathfield (1911) 11 SR (NSW) 354.’ Nagle J similarly took the approach that a certificate of title does not import indefeasibility against interests created by statutes having the effect of overriding the Real Property Act. His Honour referred to and quoted from the judgment of Rich AJ in Vickery v Municipality of Strathfield, supra. The basis upon which the majority proceeded in the Trieste Investment Case, supra, was that the title of a registered proprietor under the Real Property Act is inherently subject to rights created by overriding statutes. In the present case, if the question be asked in the terms in which Dixon CJ stated it in the South-Eastern Drainage Board Case, supra, in the passage which I have quoted, the answer must clearly be that s 398 overrode the provisions of the Real Property Act. The vesting under that section became immediately operative regardless of the fact that the land was registered under the Real Property Act in the name of some other party. Ex parte Registrar-General; Re Council of Municipality of Randwick (1951) 51 SR (NSW) 220, is direct and binding authority establishing the operation of the section and the content of the estate so vested. Guided by these authorities, it must in my view follow that the estate which became vested in the council in September 1920 vacated any further interest in the land in question on the part of the then registered proprietor. Thereafter it did not in law have the fee simple in the land. 764

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11.51

Nor was it able by transfer to call back, so to speak, that fee simple and vest it in a transferee. The absolute indefeasibility ordinarily flowing from registration (Frazer v  Walker [1967] 1 All ER 649; [1967] 1 AC 569) will not avail where the fee simple has, by an overriding registered proprietor incapable of calling back his fee simple, but no act of the Registrar-General otherwise than consequent upon the written request of the council pursuant to s 14 of the Real Property (Amendment) Act 1921, could be recognised as effective to trench in any way upon the council’s fee simple. If, of course, the council had itself made the written request contemplated by s 14 this would have the effect, upon the Registrar-General performing the necessary ministerial functions, of putting the fee simple back into the register, whereafter registered dealings would have their normal effect and significance in accordance with the provisions of the Real Property Act. But such a step has not at any time been taken in the present case. I am accordingly of the view that upon the main contest the council’s statutory title will prevail over the registered title asserted by the plaintiff.

Commentary 11.51  The decision of Street J in Pratten v Warringah Shire Council concludes that s 398

of the Local Government Act 1919, when enacted, automatically applied to all applicable land. This had the effect of removing the fee simple from registration and automatically making the unregistered interest of the council paramount. His Honour argued that the absolute indefeasibility ordinarily flowing from registration ‘will not avail’ where it has been displaced by an overriding legislative provision. Such a provision has the effect, since enactment, of automatically removing the registered title. This decision has been criticised and academic commentators have suggested that provisions such as s 398 ‘pose the greatest single threat to the operation of the Torrens System and make such substantial inroads into indefeasibility that it is impossible to rely on the register’ (R Sackville (1973) 47 ALJ 526 at 536; and P Butt, Land Law, 2nd ed, LawBook Co, Pyrmont, New South Wales, 1988, at  532). A different construction of s  398 was taken in Quach v  Marrickville Municipal Council (1990) 22 NSWLR 55, where Young J, while feeling bound to follow the conclusions of Street J in Pratten, nevertheless suggested that an appropriate construction would be that the section only applied to vest title in the council where that title had been registered. His Honour argued that any other interpretation would necessarily constitute a ‘continuous prohibition on private persons obtaining any interest in the land’. Young J did, however, conclude that the indefeasibility provisions could not operate to defeat the statutory right of the Council because it is now established that ‘statutory and public rights will override an indefeasible title’. See  the discussion on the scope of Pratten v  Warringah Shire Council in St  Alder v Waverley Local Council (2010) 172 LGERA 147. In the Victorian Supreme Court decision of Horvath v Commonwealth Bank of Australia [1999] 1 VR 643, Ormiston JA reinforced the importance of ascertaining the existence of a ‘true inconsistency’ between the relevant provisions when determining whether the overriding legislation exception should apply. His Honour concluded at 649: … the rule that later statutory provisions repealed earlier inconsistent statutory provisions requires for practical purposes that one must find an earlier and a later statute, and a relevant inconsistency, to which the rule might apply. If parliament wishes to repeal a section it has only to do that or to say that it intends that consequence.

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Australian Property Law

11.52  The decision in Horvath v Commonwealth Bank of Australia is extracted below.

  Horvath v Commonwealth Bank of Australia  [1999] 1 VR 643 Facts: The Commonwealth Bank advanced money to a family in order to purchase Torrens title land. The loan was secured by a mortgage. The mortgagors were the couple and their son; however, unbeknown to the bank the son was a minor. The transfer to the purchasers was registered but the mortgage was not registered until after the son reached the age of majority. The mortgagors defaulted and the bank obtained judgment for possession against them. The trial judge held, that the mortgage was void against the son but that the bank was entitled to an equitable lien or charge on the land. The son appealed arguing that s  49(a) of the Supreme Court Act  1986 provided that loan contracts entered into by a minor were void and this subsequent legislation was inconsistent and therefore overrode the indefeasibility conferred under the Transfer of Land Act  1958. The Court of Appeal dismissed the appeal, arguing that there was no inconsistency between the two statutes as they dealt with different subject matters and the fact that an instrument was void did not mean that it was unaffected by the consequences of registration under the Transfer of Land Act 1958. Ormiston JA: The appeal in this matter has caused the court much difficulty, not only because difficult principles have had to be analysed and reconciled but because the appellant conducted the case for himself and was unable to give the court any real assistance in resolving those issues. In the end all members of the court are agreed, in substance, that the appeal must be dismissed and that the respondent bank had an enforceable security over the property jointly held by the appellant and his parents which the bank was entitled to enforce. The difficulty has been in identifying the nature of that right and in what circumstances, if any, the bank may have lost that right. This has thrown up difficulties relating to the nature of a security interest granted by a minor but registered under the provisions of the Transfer of Land Act 1958 (‘the Act’). In the end I have concluded that the mortgage granted by the appellant (and his parents) has, at all times since its registration, remained enforceable by the mortgagee bank notwithstanding the fact that the appellant was at the time it was granted under the age of 18 years and might otherwise have claimed the benefit of the provisions of s 49 of the Supreme Court Act 1986 whereby contracts ‘for the repayment of money lent or to be lent’ by a minor are ‘void’: see  para (a). I shall call this section the ‘relief provision’ in recognition of the fact that it is derived from s 1 of the Infants Relief Act 1874 of the United Kingdom which in turn was copied (though not precisely) in this State in s 3 of the Infants Relief Act 1909, which is the somewhat more elaborate forebear of s 49 of the Supreme Court Act. The facts and issues are set out in the judgments of the other members of the court. Their detailed analysis has relieved me of the necessity of going through many of the issues and authorities. The first principal issue is whether before registration both the appellants’ agreement to borrow and repay money and the related mortgage were made void by reason of the relief provision. The competing views are by no means simple, as the other judgments demonstrate. It is not inconceivable that a conclusion might have been reached by the courts over the years that avoidance of a loan contract would not in itself have any bearing on the validity or otherwise of a related mortgage (that is, without having regard to any consequences which might flow from registration under the Act). However, since at least 1902 it would appear that it has been accepted that the obligations under a mortgage are so closely bound up with a related agreement to borrow that, if the latter contract falls because the obligation is avoided by reason of a relief provision, or probably any other statutory provision avoiding a contract, then the related mortgage must likewise fall and cannot be enforced. iThis is what was held in Nottingham Permanent Benefit Building Society v Thurstan [1903] AC 6, albeit that in that 766

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case and in subsequent cases it was held that the lender might succeed to and enforce the vendor’s lien which the vendor otherwise would have had against the purchaser. I agree with what Tadgell JA has said about this case. The principle was recognised, although distinguished, by the House of Lords in Orakpo v Manson Investments Ltd [1978] AC 95 and in Victoria in Evandale Estates Pty Ltd v Keck [1963] VR 647. A similar conclusion, based in part on English authority, was reached by the Supreme Court of the United States at about the same time in MacGreal v Taylor 167 US 688 (1897): reference was made to this case in Coras v Webb and Hoare [1942] St R Qd 66 at 72–3. Whatever be the merits of the respective arguments I do not feel it is appropriate for this court at this time to refuse to follow such a well-known line of authority as was sought by the appellant, if not directly, at  least by inference. Indeed Thurstan was sufficiently well-known for Mr Mackey MLA on 14 October 1909 to make a direct reference to its conclusions in the course of moving the second reading of the Contracts of Infants Bill, which was passed as the Infants Relief Act 1909: see Hansard, 1909, vol II, p 1603. Effectively those conclusions have been understood for 100 years and it is in these areas, the law of contract and the law of property, that the courts should be cautious in overturning accepted principle if a principle of this kind, which has a direct bearing on parties’ title to land, is to be changed at the whim of the courts without regard to what has been accepted for so long a period, and, if changes were made, courts might be fairly criticised for undermining parties’ expectations. Such changes as are appropriate ought only to be made after careful review and by enactment of suitably expressed legislation. Admittedly the present relief provision may be said to be expressed in a not ideal form, but, if change is to be made, it should be made upon careful consideration and, for example, in the way which attracted the approval of the New South Wales legislature when passing the Minors (Property and Contracts) Act 1970. I would therefore conclude that, unless registration of the mortgage in the present case has preserved the respondent’s rights, then it was not entitled to sue on or otherwise enforce the mortgage itself. So it would only have the benefit of the rights to which it was subrogated pursuant to the deemed vendor’s lien, as was held by the learned primary judge. Consequently the second principal question is whether the relief provision conflicts with the sections  relating to indefeasibility of title in the Act to the extent that the latter cannot apply, thereby denying the respondent any rights under the mortgage. This will be resolved by determining whether the relief provision overrides the indefeasibility provisions of the Act, in particular ss 42 and 43. It must be remembered that in the present case the respondent’s mortgage has been registered, with the accepted legal consequences which flow from the present interpretation of the Act, ie, those consequences which would follow unless the relief provision prevails. Whatever sympathy one may have for the deferred indefeasibility doctrine espoused by those great jurists, Salmond J, of the New  Zealand Supreme Court in Boyd v Mayor of Wellington [1924] NZLR 1174 and Dixon J, in Clements v Ellis (1934) 51 CLR 217, the accepted consequence of Frazer v Walker [1967] 1 AC 569 and Breskvar v Wall (1971) 126 CLR 376 (if it had not previously been so) has been that a transferee, mortgagee or other person acquiring an interest in Torrens system land acquires from the moment of registration an indefeasible interest of the relevant kind in the land notwithstanding that the instrument of transfer, mortgage etc was itself void, voidable, unenforceable or illegal; that is, unless the provisions of the Act or some other statute such as the relief provision deny the unimpeachability and indefeasibility of the title intended to be so acquired. Thus the issue is whether the relief provision in s 49(a) of the Supreme Court Act would deny the conclusive nature of the respondent bank’s title as mortgagee. Is it so inconsistent with the essential provisions of the Act that it must prevail? For this purpose an anterior question must be resolved. Inconsistency would only be relevant and prevalent in its consequences if it works an implied repeal pro tanto of some statutory provision. Omitting certain presently irrelevant circumstances, one must find that the 767

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legislature has later passed some inconsistent provision with which the earlier provision cannot stand. Ordinarily, if there be an inconsistency, the later passed statute or section will prevail. The relevant principles have been expressed in a number of ways over the years and they are best summarised by Yeldham J in Re Applications of Shephard [1983] 1 NSWLR 96 at 106–7: for subsequent authorities see Halsbury’s Laws of Australia, Statutes, paras 385–670(1) and Pearce and Geddes, Statutory Interpretation in Australia, 4th ed, (1996), paras 7.9–7.14. The principles go back many years and it would seem that they are not matters only of statutory construction for, once find inconsistency of the relevant and necessary kind, the implied repeal gives priority to the latter statute as a matter of law, not as a mere canon of statutory interpretation: see per Gummow J in Suatu Holdings Pty Ltd v Australian Postal Corporation (1989) 86 ALR 532 at 546. The difficulty then is to ascertain whether the latter statute is inconsistent in the relevant sense with the earlier statutory provision. Four observations by members of the High Court will sufficiently state the principles. In Goodwin v Phillips (1908) 7 CLR 1 at 10 Barton J cited this passage from Hardcastle and Craies on Interpretation of Statutes: ‘The Court must be satisfied that the two enactments are so inconsistent or repugnant that they cannot stand together, before they can from the language of the later imply the repeal of an express prior enactment, ie, the repeal must, if not express, flow from necessary implication.’ Later, in Rose v Hvric (1963) 108 CLR 353 the court said at 360: Even before Dr Foster’s Case [(1614) 11 Co Rep 56b [77  ER  1222]] it was settled law that a later affirmative enactment does not repeal an earlier affirmative enactment unless the words of the later are ‘such as by their necessity to import a contradiction’: see per Lord Blackburn in Garnett v Bradley (1878) 3 App Cas 944, at p 966. There must be in the later provision an actual negation of the earlier. Ex hypothesi there is no negation in words, but there must be a negation as a matter of meaning. Lord Chief Baron Comyns expressed the point by saying that affirmative words do not take away a former statute but where they ‘in sense contain a negative’: Com Dig tit Parliament, R 25. Only where that occurs is the general test satisfied which has often been laid down in respect of repeal by implication, that the contrariety between the earlier and later enactments must be such that ‘effect cannot be given to both at the same time’: Kutner v Phillips [[1891] 2 QB 267, at p 272]; Hack v Minister for Lands [(1905) 3 CLR 10, at pp 23, 24]’. … Finally, a well-known passage by Fullagar J in Butler v  Attorney-General (Vic) (1961) 106 CLR 268 at  275–6, although in a dissenting judgment, has recently been restated and approved in a judgment of the majority of the court (Wilson, Dawson, Toohey and Gaudron JJ) in South Australia v Tanner (1989) 166 CLR 161 at 171: ‘The books contain, of course, plenty of examples of an implied repeal — total or partial  — of an earlier statute by a later statute of the same legislature. But it is a comparatively rare phenomenon, and it has been said again and again that such a repeal will not be held to have been effected unless actual contrariety is clearly apparent. I would say that it is a very rare thing for one statute in affirmative terms to be found to be impliedly repealed by another which is also in affirmative terms … … there is a very strong presumption that the State legislature did not intend to contradict itself, but intended that both Acts should operate.’ I should add that it does not seem on the authorities to be of consequence whether the present relief provision cast in seemingly negative terms, inasmuch as it declares certain contracts void, should be characterised as either positive or negative. 768

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Of course, the rule that later statutory provisions repealed earlier inconsistent statutory provisions requires for practical purposes that one must find an earlier and a later statute, and a relevant inconsistency, to which the rule might apply. If Parliament wishes to repeal a section it has only to do that or to say that it intends that consequence. There are cases of explicit inconsistency of which South-Eastern Drainage Board (SA) v Savings Bank of South Australia (1939) 62 CLR 603 may fairly be said to be an example. This cannot be said to be such a case. The other cases, where the issue arises, are those where it is asserted that there is an implied or implicit repeal by the passing of later inconsistent statutory provisions. There the alleged inconsistency and its consequences must be considered. That is what is here in issue. If the relief provision could be said to have been passed earlier than the Transfer of Land Act provisions, then little could be said in support of any contention that it should prevail. Here there is theoretically a problem raised by the practice of the Victorian Parliament, at least until 1958, of passing regular consolidating statutes. It is possible, as occurred here, that each relevant statutory provision has been passed a number of times. It would seem the preferred view that it is the most recent version of each provision with which one is concerned, notwithstanding that it may have been passed in identical terms many years earlier, but it is unnecessary here to examine the question: cf Bennett v  Minister for Public Works (NSW) (1908) 7 CLR 372 at 378; Maybury v Plowman (1913) 16 CLR 468: cf O’Connor: ‘Public Rights and Overriding Statutes as Exceptions to Indefeasibility of Title’ (1994) 19 Melbourne University Law Review 649 at 658–9. Whether one looks to the first Torrens statute in Victoria in 1862 and the first Infants Relief Act of this State in 1909 or whether one looks to the present provisions in the 1958 Transfer of Land Act and in the 1986 Supreme Court Act, in each case the relief provision is contained in a later statute. Assuming therefore the relief provision in the Supreme Court Act to be the later passed enactment, what ought one to conclude as to its effect on the earlier passed critical provisions of the Act, being those relating to indefeasibility of title? It must be remembered that what the court is here dealing with is not the creation of some new interest by virtue of the relief provision but what is asserted to be the statutory denial of the validity and enforceability of the respondent’s mortgage. The issue is whether the mortgage when registered gave an indefeasible interest in the land to the respondent or whether the avoidance of the mortgage instrument by virtue of the relief provision denied forever the consequences of registration under the Act. Nevertheless, in order to answer that question, one must ascertain whether there was true inconsistency between the relevant provisions. If the relief provision can be given effect to without the need to conclude that there has been an implied repeal pro tanto of the indefeasibility provisions of the Act, then the problem is resolved without the need to set at  nought those earlier provisions which would otherwise apply. It is not difficult to see such an inconsistency where a charge is created of the kind described in the South-Eastern Drainage Board case for there a charge could have been of little value to the chargee, the Drainage Board, unless it was to have immediate and continuous effect regardless of the acts of the imputed chargor, so that the charge was held to have priority over the respondent’s registered title. That conclusion was reached notwithstanding the importance placed on the indefeasibility provisions of the South Australian Act and s  6 of that Act which sought to give priority to registered interests regardless of past or future enactments. It might be said that s 3 of the Victorian Transfer of Land Act has some similar effect inasmuch as it states that inconsistent provisions shall not apply to registered land unless it is ‘expressly enacted to the contrary’. However, in my opinion it is not necessary to resolve any questions which might arise out of the application of s 3. The answer to the question posed, as I would understand it, flows from a correct characterisation of the two statutes as consistent or inconsistent one with the other. There is a strong presumption that Parliament does not intend to contradict itself but rather intends both relevant Acts to operate within their given spheres: Butler v Attorney-General (Vic) (1961) 106  CLR 268 at  276  and 290. No earlier statutory provision is to be treated as repealed or 769

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derogated from by a later enactment unless an intention to do so must necessarily be implied, and ordinarily there must be a very strong basis supporting any such implication, for the Parliament is generally presumed to intend both provisions to operate without there being any such implicit repeal or derogation: cf Saraswati v R (1991) 172 CLR 1 at 17. Here, although there can be no doubt that, if not registered, the mortgage would have been unenforceable by the respondent because it was void by reason of the relief provision, that provision says nothing as to the effect of registration or the operation of any of the indefeasibility provisions of the Transfer of Land Act. It is directed to the enforceability of certain contracts. The respondent bank has conceded that it cannot enforce the loan agreement against the appellant. Nevertheless the better view seems to be that the word ‘void’ was never intended to mean that the contract in question was totally ineffective: cf Pearce v Brain [1929] 2 KB 310 and Woolf v Associated Finance Pty Ltd [1956] VLR 51 and see  Greig and Davis, Law of Contract (1987), pp 779–80. Whether or not a different construction of the word ‘void’ may have had other consequences (and the forgery cases suggest otherwise), the fact is in this case that the mortgage was registered in the conventional way under the Act. Whatever may have been the position before such registration, the legislature must be treated, subject to the presently irrelevant exceptions as to fraud and the like, as having given an immediately indefeasible title in the land to the respondent bank as mortgagee unless the relief provision should prevail as being relevantly inconsistent. In my opinion the relief provision is not inconsistent in that sense. The Act deals relevantly with the effect and consequences of registration of any document lodged purporting to deal with the title to land under the Act. The relief provision deals with the binding nature of certain agreements reached with minors. Neither deals directly with the subject matter in law of the other. They can be both left to operate within their respective spheres, unless it can be said that the latter plainly intended to repeal by implication the Act’s provisions as to indefeasibility to the extent necessary to give effect to the ‘avoidance’ of contracts with minors pursuant to that provision. If properly an attempt is to be made to read the two statutes together, then the later relief provision may be seen as confined to controlling in the relevant manner the contractual rights of the parties and the indefeasibility provisions of the earlier Act may likewise be confined to the consequences of registration of instruments under the Act. Subject to one line of authority relating to leases, there is no difficulty in identifying the broad spheres of effect of each set of provisions, which ought to be seen as mutually exclusive or at least as capable of having effect without any necessary repugnancy or contradiction. In every case where indefeasibility arises as an issue, it is because the means chosen by the parties seeking registration has been a transaction which had what is alleged to be a vitiating element of some description. The party seeking to rely on a registered title or interest has been met with a challenge that the transaction which was registered or which led to registration of such title or interest was ineffective to pass title or create the interest. Where the vitiating element is ‘fraud’, then that is recognised in the Act (see ss 42, 43 and 44) as allowing the other party to go behind the record of registration. Otherwise, but subject to the exceptions set out in s 42, the concept of immediate indefeasibility as spelled out in Frazer v Walker and Breskvar v  Wall is ordinarily recognised as defeating any claim that the transaction giving rise to the registered interest was void, voidable, unenforceable, illegal or otherwise ineffective, unless that party has a ‘personal equity’ of a kind which would entitle that person to an order requiring the registered holder to transfer or surrender up the interest so acquired. As Barwick CJ expressed it in Breskvar v Wall (at 386): ‘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.’ So, in the case of forgery of a transfer, unless the transferee was aware of the wrongdoing, registration of a document not even signed by a registered proprietor becomes indefeasible 770

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from the moment of registration: see Vassos v State Bank of South Australia [1993] 2 VR 316 at 327–8 per Hayne J, approved in Pyramid Building Society v Scorpion Hotels Pty Ltd [1998] 1 VR 188. In each case it matters not what is the vitiating factor: the policy of the Act is that, subject to the stated exceptions, registration results in a title or interest which is incapable of challenge. ‘[T]he doctrine of an indefeasible title arising by registration was seen as the very essence of the Torrens system from its beginning’: per Windeyer J in Breskvar v Wall at 400. So the Privy Council concluded in Frazer v Walker that ‘registration once effected must attract the consequences which the Act attaches to registration whether that was regular or otherwise … It is in fact the registration and not its antecedents which vests and divests title’: at  580, a passage quoted with approval by Gibbs J in Breskvar v Wall at 413. It is that critical characteristic which demonstrates why there is no relevant inconsistency in the present case. The only inconsistency which would be relevant would arise from a provision which directly or by implication denied the consequence of indefeasibility to registration either generally or in a specified circumstance. The fact that another statute declares a class of contract ‘void’ is ordinarily of no significance once the instrument is registered. Before registration, as in the present case both contract and instrument (here the mortgage) may be taken to be void, as the relief provision requires. But, except in the case of fraud, or of any of the other relevant exceptions, that does not preserve the instrument (here the mortgage) from the consequences of registration. The relief provision says nothing as to that and one may envisage many transactions where that section  operates in accordance with its terms. Before registration the appellant could have set aside both contract of loan and mortgage and restrained the respondent from registering the latter. In terms of the law of contract to which the relief provision (and the related provisions in the Supreme Court Act) were directed, both contract of loan and mortgage were void in the relevant sense and, if nothing more had occurred, the latter could not have been enforced against the appellant. Once registered, however, the mortgage took on the characteristics and had the effect of a duly executed mortgage, not because of its original contractual effects, but because as a matter of policy the Act created an immediately indefeasible interest in the land by way of mortgage in favour of the respondent. Of course registration has a number of consequential effects in that it makes the mortgage easier, or at least more certain, of enforcement but, for the purposes of the present appeal, the object of the relevant provisions of the Act is directed to certainty of title and they relate solely to the question of indefeasibility. About this latter question the relief provision had nothing to say. In those circumstances there was no relevant inconsistency, for the relief provision never purported and was never intended to deny indefeasibility to a mortgage or other document once it becomes registered in the manner prescribed by the Act. Such a conclusion is consistent with the decision which is treated as the leading exposition of the indefeasibility doctrine, namely Breskvar v Wall ((1971) 126 CLR 376), but the present issue is barely touched upon: cf per Walsh J at 406. In the more recent decision of Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1, the majority found no need to examine the issue although Gibbs J expressed himself in terms that the statutory illegality in that case infected the registered lease: at  33–5 and see  per Menzies J at  29–30. There the contractual rights were very different, being effectively an option to renew a lease, and, if it were not otherwise distinguishable, I would be inclined, with the greatest respect, to consider Gibbs J’s observations on this issue as incorrect and inconsistent with Breskvar v Wall and the later observations on indefeasibility in Bahr v Nicolay (No 2) (1988) 164 CLR 604 and Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407: see also per Gleeson CJ in Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 at 736. On these matters and on the question whether there was a ‘personal equity’ I would otherwise in general agree with the judgment of Phillips JA, although I have come to my conclusion in a somewhat different way. I would therefore conclude that the mortgage given to the respondent and registered under the Act was valid in that it bound the appellant’s interest in the land. That may have led to a simpler 771

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order than that which was necessary having regard to the learned trial judge’s conclusions. A different final order might therefore flow from my conclusions but there was no cross-appeal and, in the circumstances, as the appellant would not be advantaged by any different order, the judge’s order should stand and the appeal be dismissed. [Tadgell and Phillips JJA also dismissed the appeal.]

Commentary 11.53  Ormiston JA approached the question of whether a subsequent act was inconsistent

from a firm basis of statutory interpretation. On the facts of Horvath, his Honour held that the relief provisions within the Supreme Court Act  1986 did not conflict with the indefeasibility provisions in the Transfer of Land Act 1958 (Vic). His Honour held that the former act dealt with the binding nature of particular agreements made with minors whereas the latter dealt with the effect and consequences of registration under the Torrens framework. Significantly, his Honour concluded that neither Act dealt ‘directly with the subject matter in law of the other’. This meant that they could both be ‘left to operate within their respective spheres …’. Hence, the Supreme Court Act 1986 s 49 would invalidate a mortgage made with a minor but the Transfer of Land Act  1958 s  42 would confer an indefeasible title upon the mortgagee once the mortgage was registered. Phillips JA took a similar view although he also examined the potential consequences upon s  43 of the Transfer of Land Act 1958 (Vic) if the court had concluded that s 42 was overridden by s 49 of the Supreme Court Act 1986 (Vic). In this respect, Phillips JA made the following comments at 652: Finally, although I have not so far mentioned it when contrasting the operation of s 49 of the Supreme Court Act and s 42 of the Transfer of Land Act, there is, I think, very good reason for not concluding that s 49 overrides s 42 so completely as the argument for the appellant must suggest; for if s 49 does override s 42 in a case where both can operate, it must also override s 43 which protects the title of one dealing with the registered proprietor, and the consequences would then be considerable. Whether by the discredited notion of deferred indefeasibility or by the now preferred doctrine of immediate indefeasibility, it is generally accepted that under the provisions of the Transfer of Land Act a subsequent transferee, subject only to fraud, takes a clear and indefeasible title; nor was the contrary suggested here. Yet how could it be so if s 49 overrides ss 42 and 43 of the Transfer of Land Act? On the present hypothesis, s 49 of the Supreme Court Act strikes down not only the infant’s contract for repayment, but the whole mortgage transaction (at least so far as it purports to bind the appellant); it is void absolutely, without the need for any act on the part of the infant. If s 49 overrides s 42 and with it s 43, the invalidating effect of s  49 must endure notwithstanding the subsequent registration of the mortgage by the party with whom the infant (the appellant) has purported to deal and in consequence that party (the bank) obtains absolutely nothing by means of the registration. How then could the bank transfer title to another; how could a transferee from the bank justify title? As one cannot nowadays allow that the transferee from the bank gains title when the bank does not merely because the bank dealt directly with the infant (for that would seem to resort to the discredited doctrine of deferred indefeasibility), it seems necessary if the subsequent transferee is to have title to recognise that that result flows in favour of the bank also. It cannot be concluded, then, that s 49 prevails over either s 42 or s 43.

The decision in Horvath was expressly distinguished from the earlier decision of Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 where the High Court held that the overriding legislation exception was established on the facts. In Travinto Nominees Pty Ltd v Vlattas 772

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a registered lease over business premises contained an option to renew. The contract was proscribed by s  88B of the Industrial Arbitration Act  1940 (NSW) because it had not received the approval of any specific commission or committee. As a result, the lease was declared void. The High Court unanimously concluded that registration of the lease under the Real Property Act 1900 (NSW) did not overcome the defect; however, the court was divided as to the reason for this. Barwick CJ, McTiernan and Stephen JJ held that the option to renew, being specifically unenforceable as a result of the Industrial Arbitration Act 1940, did not create an equitable interest in land and therefore it could not be protected under the provisions of the Real Property Act 1919 (NSW). By contrast, Gibbs J in dissent (with whom Menzies J agreed) concluded that if the Industrial Arbitration Act 1940 rendered the lease void, and the Real Property Act validated the lease upon registration, the provisions in the Real Property Act were directly inconsistent with the Industrial Arbitration Act and in such a situation, statutory interpretation principles require the later Act, which in this case was the Industrial Arbitration Act, to prevail over the earlier, which was the Real Property Act. The conclusions of Gibbs J in Travinto Nominees Pty Ltd v Vlattas were subsequently described as ‘problematic’ by Young CJ (in Eq) in City of Canada Bay v Bonaccorso Pty Ltd (2007) 71 NSWLR 424 at [54] because they represent an apparent conflict with the early conclusions of the High  Court in Breskvar v  Wall (1971) 126 CLR 376. In this respect, Young CJ expressly preferred the conclusions of Ormiston JA in Horvath v Commonwealth Bank who at 659 argued that he was inclined, ‘with the greatest respect, to consider Gibbs J’s observations on this issue as incorrect and inconsistent with Breskvar v Wall’. Phillips JA in Horvath v Commonwealth Bank distinguished the facts of Horvath from those in Travinto Nominees arguing that unlike the conflict in Travinto Nominees, which was direct and explicit because one Act validated the lease and the other Act invalidated it, the conflict in Horvath was indirect at  best. His Honour argued that in Horvath v  Commonwealth Bank one act invalidated the contract to repay while the other gave effect to a mortgage, which in itself could be treated as an interest that was independent to the contract to repay. Hence, upon strict statutory interpretation principles, there was no necessary inconsistency between each of the Acts as the legislative scope of each was confined to its own ‘discrete sphere’. 11.54 In Hillpalm v  Heavens Door (2004) 220 CLR 472, the High  Court considered whether a right of way, which had been created pursuant to a subdivision, could be enforced against land held by a registered proprietor and, more fundamentally, whether this necessarily meant that the Environmental Planning Act that recognised the right was inconsistent with the provisions of the Real Property Act 1900 (NSW). The decision in Hillpalm v Heavens Door is extracted below.

  Hillpalm v Heavens Door  (2004) 220 CLR 472 Facts: In 1977 land was subdivided into two lots. This subdivision was subject to the condition that it provided for the construction of a right of carriageway from Lot 2, for the benefit of Lot 1 which was to be at least 2.5 metres wide. Thus, Lot 1 was the benefited land and Lot 2 was the burdened land. In 1978 the registered subdivision indicated the existence of a ‘proposed right of way 10 wide’. The certificates of title for both lots referred to the proposed right of way although it had not actually been created. Lot 2 was further subdivided in 1981 and the new plans of subdivision also showed the ‘proposed right of way 10 wide.’ The certificates of title for these new subdivisions did not include any reference to the proposed easement. 773

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In 1998, Heavens Door purchased Lot 1. Subsequently, Hillpalm purchased one of the further subdivisions of Lot 2. The primary issue for the court was whether Heavens Door could insist upon the creation of the right of way against the land owned by Hillpalm. The trial judge and the Court of Appeal concluded that where permission was given to subdivide land, s 76A of the Environmental Planning and Assessment Act 1979 (NSW) effectively required that subdivision to be carried out in accordance with the consent given. This meant that the right-of-way had to be constructed. As such, the Court of Appeal concluded that the Environmental Planning and Assessment Act 1979 (NSW) was inconsistent with the indefeasibility provisions of the Real Property Act 1900. A majority of the High Court (McHugh ACJ, Hayne and Heydon JJ, Callinan and Kirby JJ dissenting) disagreed with the Court of Appeal. The majority concluded that the question of overriding legislation did not arise because a condition had not been imposed and, further, even if such a condition had been imposed, it would have been a condition relating to the subdivision of land which the subsequent owner had not undertaken. Legislation enforcing the terms of a condition could not, therefore, be applied against a person who had not undertaken the subdivision and was not in breach of the Act. Extracts from the majority and dissenting judgments are set out below. McHugh ACJ, Hayne and Heydon JJ: The appellant is the registered proprietor of an estate in fee simple in the land described as Lot 529 in Deposited Plan 1003396 (‘the appellant’s land’). Its title is subject to some exceptions, encumbrances, interests and entries recorded in the Second Schedule to the Computer Folio Certificate issued under s 96D of the Real Property Act 1900 (NSW). The respondent is the registered proprietor of an estate in fee simple in land (‘the respondent’s land’) which adjoins the appellant’s land. The respondent’s land is described as Lot 1 in Deposited Plan 601049.

The issue The respondent now has no registered easement of way over the appellant’s land. None is recorded as an exception, encumbrance or interest on the title to the appellant’s land. Can the respondent compel the appellant to grant it such an easement and compel the appellant to construct a track along that easement? The respondent contends that there was a condition of the grant of approval of the subdivision recorded in Deposited Plan 601049 which it can now have the appellant fulfil by granting it a registered easement of way and constructing a track. That contention should be rejected. …

Right in rem? If the Council’s consent to the subdivision operated to create a right in rem that may be relied on by any later transferee of any lot in the subdivision, that would present a fundamental question about how the creation of such a right would be consistent with the effective operation of a system of Torrens Title. In particular, the existence of such a right would be inconsistent with s  42(1) of the Real Property Act. That provides that, subject only to the four kinds of exception specified in the succeeding paragraphs of s  42(1), and the further exception ‘in case of fraud’: ‘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)’ (None of the exceptions specified in s 42(1) was said to be engaged in the present matter.) As Barwick CJ said in Breskvar v Wall [20]: 774

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‘The Torrens system of registered title … 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 registration itself has vested in the proprietor. (emphasis added)’ It follows that, when the appellant became registered as proprietor of an estate in fee simple in the appellant’s land, it obtained the title described in the certificate of title. That title was free from any encumbrance or interest of the kind which the respondent contends it is now entitled to have created. If the consent to the subdivision did create a right in rem, that would be a right or interest in the land not shown on the Computer Folio Certificate. There 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. But those questions are not raised by this matter. That is because it was common ground that the appellant’s title was not and is not now subject to any interest of the kind which the respondent asserted it was entitled to have the appellant create in its favour. If the respondent has any such right, it is a right to have an interest in land created and that is said to be a right enforceable by personal action against the appellant, not by any action or application to rectify the Register maintained under the Real Property Act. That right, if it exists, is not a right in rem. The availability of rights in personam is entirely consistent with the Torrens system of title. The immediate indefeasibility of a title to land under the Torrens system does not deny ‘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’ and those proceedings ‘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’. If the respondent has a right against the appellant, it is a personal right, not a right in rem, and that personal right must be found, if at all, in the relevant statutory provisions. For the reasons given earlier, however, the respondent has no such right. Section 123 of the EPAA does not provide that right to the respondent in this case, the appellant not being in actual or threatened breach of that Act. No other provision of that Act was identified as founding the right asserted. That being so, the respondent’s claim to orders obliging the appellant to create an easement and construct a right of way must fail. Appeal allowed with costs. Kirby J: [in dissent] … Indefeasibility: a legal innovation: The argument that the appellant pressed most strongly on this Court, to support the construction that it urged of the EPAA, including in relation to the jurisdiction and powers of the Land and Environment Court, was based on the view it urged of the language and purposes of the RPA. There is no doubt that the RPA represents the implementation in New South Wales of one of the most important legal innovations adopted in Australia. I refer to the implementation of the Torrens system of land title by registration. Virtually from the start, the Torrens system succeeded in Australia because of its great advantages for all those concerned with interests in land. Its success has encouraged the adoption of similar laws in many other countries, modelled to some extent on the Australian precedent. Although the initial model in South Australia was probably influenced by the system of land registration operating for many years in the Hanseatic towns of Northern Germany, such as Hamburg, this provenance does not detract from the enormous influence of the Torrens reform in Australia and beyond. That influence continues to this day. I would not lightly reach a conclusion on a contested legal point that diminished the effective operation of the RPA. One of the important benefits of the RPA, from the start, has been observance of the principle that it is the register, created by that Act, that expresses the title to land brought under the Act. 775

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The register is not merely evidence of a title to land existing otherwise. It is the ‘title which registration itself has vested in the proprietor’.

The RPA and statutory burdens Concern has been expressed in some writing that has followed the decisions in the courts below that their holding undermines one of the central purposes of the RPA. Thus, it has been suggested that the decision of the Court of Appeal effectively necessitates the undertaking by conveyancers of ‘a historical search of the property of a type akin to the searches that need to be undertaken in relation to old system title land’. This, it is said, is an undesirable consequence ‘in that the Torrens system of registered title was designed to avoid the need to make such historical searches of a vendor’s title’. Clearly, there are advantages of certainty, efficiency and speed in settlements for purchasers, vendors and others interested in dealings in land being able to rely on the face of the register to discover applicable interests in the land where the land has been brought under the Torrens system. Formulating requisitions and conducting inquiries addressed to local government consent authorities add to cost and delays in transactions affecting land to the extent that it is necessary to go beyond the register. These are legitimate concerns. Any erosion or diminution of a principal objective of the RPA is not something to be accepted lightly. … There have been similar decisions of the Privy Council and of State Supreme Courts in Australia. Some of these decisions have been criticised by commentators understandably anxious about the prospect of the loss, or diminution, of one of the most important objectives of the Torrens principle of title by registration. However, for a number of reasons (which the foregoing line of decisional authority supports) I cannot accept the appellant’s submission that the fact that its title to land under the RPA was ‘clean’ (bearing no note of any easement in favour of the respondent’s land to permit the proposed right of carriageway over it) operates somehow to extinguish the legal effect of the ‘condition’ imposed on the subdivision and development of that land under planning law or on the jurisdiction and power of the Land and Environment Court to provide remedial orders under s 123 of the EPAA designed to oblige compliance with such a condition where the facts of the case warranted such an order.

Primary operation of statutory requirements It is elementary under our system of law, that if a written law is valid, clear and applicable, it must be given effect according to its terms. Where there is conflict between the commands of written laws enacted by the same legislature, courts endeavour to reconcile the texts. If they cannot do so in other ways in terms of their language, they have resort to established canons of construction. Here, these canons include obedience to the law made later in time; priority to the law on a subject classified as more specific over one regarded as more general; and precedence to public over purely private rights. The last principle affords little guidance in the present case. There is a public interest in the observance of planning laws and consent decisions and protection of the environment. However, there is also a public interest in upholding the indefeasibility principle of the RPA which transcends the private rights of parties expressed in Certificates of Title issued under that Act. However that may be, each of the stated canons of construction favour the respondent’s argument. The EPAA is later in time than the RPA. The EPAA is more specific and particular than the RPA. To any necessary extent, its provisions would take priority over those of the RPA so far as there is any conflict.

Court powers to create new rights When properly analysed, the order of the Land and Environment Court that the appellant challenges creates new rights which arise from the making of the order. They are superimposed upon the rights of the parties, by force of the EPAA. This is so notwithstanding any rights that the 776

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parties to that time may have enjoyed under the RPA. In this sense, there is no irreconcilable conflict between the two Acts. There is no ultimate need to treat the EPAA as repealing or amending the RPA pro tanto. The Acts simply operate sequentially. Until the order is made by the Land and Environment Court, the appellant’s title was indeed ‘clear’, although in this case the appellant was on notice of the respondent’s claim for relief once made and, possibly (as I shall show) much earlier.

Clean title and judicial discretion The consideration of a ‘clean’ Certificate of Title of a purchaser or assignee of land, ignorant of the breach of planning law that gives rise to the claim for relief from the Land and Environment Court, would indeed be a matter highly relevant to the decision of that Court about whether to exercise its jurisdiction and powers at all, and if so, upon what conditions. I agree with the opinion of Hodgson JA that, in such a case: ‘[P]articularly if there is no hint of this condition [of a subdivision] on the title documents … the Court may decline as a matter of discretion to order compliance with it, or may order compliance only subject to conditions, including conditions requiring payment of money by the person seeking the order if that person’s acts or omissions have contributed to the problem.’ As Hodgson JA pointed out, long before this case was decided, it had been customary for purchasers to inquire about compliance of buildings with relevant planning consents of local government consent authorities. It may not have been usual to make similar inquiries with respect to consents to subdivisions. The modification of requisitions and initiation of investigation, although new obligations, are not so substantial a burden as to cast doubt on the wide ambit in which the discretionary power of the Land and Environment Court is expressed in the EPAA.

Conclusion: the relief was lawful and justified The discretionary order was justified: Once the jurisdiction and power of the Land and Environment Court is established, the exercise of its discretionary power in the present case in favour of the respondent cannot be criticised. Contrary to submissions made for the appellant at trial, the primary judge found that the appellant did have notice of the Council’s conditional consent to the subdivision affecting its land. He found that, having regard to the way the consortium was formed to purchase the property and the corporate vehicle (Hillpalm) that was created for that purpose, the appellant company itself was on notice of the proposed right of carriageway through examination of the series of deposited plans and otherwise. He concluded that notice to the company had not been lost when the ‘guiding mind’ of the company changed. The primary judge reached the foregoing conclusions more comfortably on the footing that, although it had been foreshadowed that the appellant’s predecessor in title (who had formed the consortium and created the appellant as a corporate vehicle for the appellant’s purposes) would be called to give oral evidence at  the trial, in the event he was not. The evidentiary findings of the primary judge in this respect were not challenged before the Court of Appeal. Still less were they disturbed. They cannot be altered by this Court.

The case illustrates utility of the power Once jurisdiction and power in the Land and Environment Court is established, the foregoing factual findings reinforce the conclusions available from the course of the successive deposited plans themselves. However, they go further. They illustrate the utility and justice of providing the discretionary power to the Land and Environment Court to provide the relief which it did against the appellant in respect of the subject land, although the appellant’s Certificate of Title was ‘clear’ and although it was a purchaser of the land nearly 20 years after the original subdivision was registered upon conditions that still remained unfulfilled. 777

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In other factual circumstances, the passage of time could well give rise to other arguments for a party like the appellant acquiring the subject land much later (eg of waiver) in respect of a belated demand to conform with unfulfilled conditions imposed on a subdivision or other development of land. However, the discretion of the Land and Environment Court, and its broad powers to shape its orders to suit the particular case afford ample protection against unreasonable demands or demands that should not be met without the imposition of countervailing terms. All of these points were well made in the Court of Appeal by Hodgson JA. I agree with him.

Commentary 11.55  The approach of the High Court majority in Hillpalm v Heavens Door was based

upon a narrow statutory construction of the scope and application of each Act. The majority concluded that the Environment, Planning and Assessment Act  1979 (NSW) (EP&A Act) could not enforce the subdivision condition against the subsequent registered proprietor and this effectively meant that the two statutory schemes could not be treated as inconsistent. The reason why the subdivision condition could not be enforced was because their Honours felt that the consent to the subdivision did not create a right in rem that could constitute a right or interest in the appellant’s land that had not been shown on its certificate of title. Their Honours noted that if such a right had been created, there would have been a ‘real and lively question’ about how the two statutory schemes could have been reconciled. As it stood, however, the court was not required to examine the relationship between s 124 of the EP&A Act, which gave jurisdiction to the Land and Environment Court to remedy a breach of that Act, and the effect of that jurisdiction on s 42 of the Real Property Act 1900 (NSW) and, whether, in particular, the latter was required to yield to the former. It has been suggested that the ‘narrow’ interpretation that the majority gave to the EP&A legislation provides implicit support for the enforceability of the indefeasibility provisions: see Griggs, ‘Hillpalm Pty Ltd v Heavens Door Pty Ltd’ (2005) 11 APLJ 244. Certainly, by endorsing the primacy of title by registration, as expounded in Breskvar v Wall, the majority reinforced the scope and intent of the provisions in the Real Property Act. In  contrast, Kirby J in dissent (with Callinan J adopting a similar approach) concluded that the EP&A Act was enforceable against the appellant as a successor in title to the burdened land and therefore its effect could override that of the Real Property Act under ordinary statutory interpretation principles. Kirby J concluded however, that the EP&A Act was subject to the jurisdiction of the Land and Environment Court and therefore its impact was not immediate. This meant, according to Kirby J, that the Acts operated sequentially. Until an order was made by the Land and Environment Court, the appellant’s title remained ‘clear’; however, once the Land and Environment Court exercised its powers, those powers could not be challenged. Kirby J rationalised this approach by arguing that the provisions of the EP&A Act were more specific and particular and, that there was a continuing public interest in ensuring that the planning laws were observed. Kirby J made the following comments: It is because of the chaos that can ensue in such circumstances that the ultimate focus of planning regulation law is the land itself. It is not, as such, merely their ephemeral ownership or possession of the land. Were it otherwise, planning law could easily be circumvented by changes of ownership and possession immediately following the imposition of conditions upon proposed development of the land. This is a reason why it is a fundamental mistake to

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read [the legislation] strictly, so as to confine their application to those who owned or possess the subject land at the time applicable conditions were imposed. Yet that is what the majority do in this appeal.

A similar point was made by the High Court in Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd (2011) 243 CLR 492 at [7] where Gummow ACJ, Hayne, Crennan and Bell JJ concluded that ‘State planning legislation “is concerned with land as a topographical entity, indifferently to its proprietorship” and that this may entail interference with private property rights’. See also Tighe & Anor v Pike [2016] QCA 353 at [13] per Fraser JA. This issue was revisited by the New South Wales Supreme Court in Kogarah v Golden Paradise [2005] NSWCA 230, where s  45 in the Local Government Act  1993 (NSW), which prohibited the council from selling or otherwise disposing of land, was argued to be inconsistent with s  42 of the Real Property Act  1900 (NSW). The direct question of inconsistent legislation was not raised by counsel in Kogarah and therefore all comments relating to this issue were obiter only. Despite this fact, the discussions of Tobias JA and Basten JA highlight the fundamental tension between the primacy of a registered title and the impact of subsequent regulatory legislation. In his judgment, Tobias JA focused upon the importance of indefeasibility, and title by registration, as enunciated in Breskvar v Wall. His Honour concluded that registration of a transfer which conferred an indefeasible title upon Blakehurst Properties could not be set aside. His Honour argued that the ‘very point’ of Breskvar v  Wall was that registration rather than the ‘antecedent title’ created title. Basten JA explored in greater detail some of the ‘large questions’ associated with the application of inconsistent legislation. In particular, his Honour suggested that if the issue had been raised in the appeal, it was highly probable that a determination would have been made that the provisions in the Local Government Act had, by implication, amended s 42 of the Real Property Act. In this respect, Basten JA argued that it was not possible to confer registered title upon a transfer executed in direct breach of the provisions of the Local Government Act and that: … it would be surprising if the Parliament had withheld from the Council any power to dispose of ‘community land’ vested in it but, at the same time, enabled a disposal to be effected by means of registration under the RP Act. The possibility that this result was not intended invites attention to questions of statutory construction of two laws of the one Parliament.

11.56  The New South Wales Supreme Court subsequently examined this issue directly

in the decision of the City of Canada Bay Council v Bonaccorso Pty Ltd (2007) 71 NSWLR 424 which is extracted below.

  City of Canada Bay Council v Bonaccorso Pty Ltd  (2007) 71 NSWLR 424 Facts: The case concerned two parcels of land at  number 17 and 19 Chapman Street, Strathfield. The properties had come into the possession of the Council in 1982  and  1976 respectively pursuant to a proposal to turn the area into public open space. The predecessor, of City of Canada Bay Council, Concord Council, had the buildings on both parcels of land demolished and had the land grassed so that it gave the appearance of a single area of grassed open space land with some trees around the perimeter. Its rear and side boundaries were fenced but its front boundary was open to the street. The Council kept the grass mowed and local residents used it for various recreational purposes. Whilst the Council had erected a sign forbidding certain recreational activities, the area was expressly referred to as a ‘public reserve’. The Council’s plans for the area changed, however, and in 1989 an application was made to 779

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rezone the area to mixed commercial/residential. Then, in 2003, City of Canada Bay Council, as successor of Concord Council, contracted to sell Chapman Reserve to Bonaccorso Pty Ltd. The transfer was subsequently registered. There were three primary questions for the appeal. The first was whether the Chapman reserve was ‘community land’ within the meaning of the Local Government Act 1993 (NSW). The second was whether, if the land was community land, s 45(1) of the Local Government Act 1993 (NSW) which set out that the Council has no power to sell or dispose of community land, overrode the indefeasibility provisions in the Real Property Act  1900 (NSW). The third was whether, if this was the case, the Court should exercise its discretion to order the Registrar-General to rectify the Register accordingly. Mason P, Tobias JA and Young CJ (in Eq): As all parties acknowledged, the principle of indefeasibility was conclusively considered by the High Court of Australia in Breskvar v Wall. In that case, s 53(5) of the Queensland Stamp Act of 1894 provided that no transfer — ‘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 …’. However, a transfer not complying with that section was in fact registered. The High Court unanimously held that the registered proprietor had acquired an indefeasible title notwithstanding that the transfer was by statute rendered void and of no effect. The applicable principles are those articulated by Barwick CJ in the following well-known passage (at 385–386): ‘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 registration 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, &c., 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.’ The approach taken by the High Court in Breskvar v Wall following the decision of the Privy Council in Frazer v Walker is that upon registration the previous title is extinguished and a new title certified as if there had been a new Crown grant. Accordingly, the fact that the transfer upon which the Registrar-General acted in bringing about the registration was forged or a nullity is of no moment. Moreover, generally speaking, the Registrar-General ought not, as Jacobs J observed in Re Lehrer and the Real Property Act (1960) 61 SR (NSW) 365 at 376 (and see also Beames v Leader [1998] QCA 368; [2000] 1 Qd R 347 at 361 [59(a)]), ‘to refuse registration of an instrument because he forms the view that in law it is a void instrument, unless by registration some validity could be given to the instrument which it would not otherwise have, or some estate or interest could by registration be created beyond that purported to be dealt with in the instrument itself’. However, apart from fraud and the exceptions set out in s 42(1)(a)–(d) of the RP Act, it is clear that rights in land under the Torrens system might arise outside the RP Act and that in some circumstances those rights effectively supplant the rights under that Act. Thus, before the enactment of legislation such as the Roads Act 1993 (NSW), which vested the fee simple of public roads in a local council as the relevant roads authority (see  ss  7(4) and 145(3)), the common law right of the public to use a dedicated highway could not be defeated by the registered proprietor of the land on which the highway was located. Thus in Vickery v Strathfield Municipal Council (1911) 11 SR (NSW) 354 at 362, Rich AJ said: 780

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‘It is clear, therefore, that a registered proprietor holds his land absolutely free from all encumbrances, liens, estates, or interests whatsoever other than those notified on the grant or certificate of title, save in the cases expressly mentioned. Is this language sufficiently wide to cover public rights of highway? I am of opinion that it is not. The language of s 42 itself suggests that the interests referred to are such as are capable of existing in an individual; this is inconsistent with its applicability to public rights of user. But, apart from this, public highways appear to lie wholly outside the scope of the Act. …’ Again, in Pratten v Warringah Shire Council at 137, Street J held that a council’s statutory title under s 398 of the 1919 Act to a drainage reserve prevailed over the title of the registered proprietor of the land over which the reserve was situated. Although the land remained registered in the name of the previous registered proprietors for an estate in fee simple therein, s 398 operated on the land to divest the ownership from the registered proprietor and to vest that ownership in the council in fee simple for drainage purposes. Thus at 142 his Honour said: ‘… The absolute indefeasibility ordinarily flowing from registration (Frazer v  Walker) will not avail where the fee simple has, by an overriding statute, been in effect removed from the registration system. Moreover, not only was the then registered proprietor incapable of calling back his fee simple, but no act of the Registrar-General otherwise than consequent upon the written request of the council pursuant to s 14 of the Real Property (Amendment) Act 1921 could be recognised as effective to trench in any way upon the council’s fee simple. …’ In South-Eastern Drainage Board, the relevant legislation provided that money owed to a public authority for rates to pay for a drainage scheme was a first statutory charge on the land, the High  Court holding that despite the principles of indefeasibility, on the true construction of the statute the statutory charge took priority over a duly registered mortgage under the South Australian Real Property Act. Thus Dixon J said (at 627–628): ‘It follows, therefore, that the question upon which our decision must turn is whether in the enactments creating the statutory charges such a clear intention is expressed to include land under the Real Property Act and to give to the charges an absolute and indefeasible priority over all other interests that, notwithstanding s 6 of that Act, no course is open but to allow the intention so expressed in the later enactments to be paramount over the earlier Real Property Act. In my opinion this question ought to be answered that such an intention so plainly appears that no other course is open.’ In the same case Starke J (at 622) said that the charges were complete and effective by reason of the statutes creating them so that no room was left for the operation of the Real Property Act with the result that the explicit and express provisions of the statutes creating the charges must prevail. In the instant case, the title of the third respondent is questioned because the transfer which was registered so as to purportedly endow it with an indefeasible title was, as now appears, executed in breach of s 45(1) of the LG Act which provided that ‘a council has no power to sell, exchange or otherwise dispose of community land’. As we have already noted (at [43]), Biscoe J held (at [96]) that, in the circumstances of this case, the legislature impliedly intended s  45(1) of the LG Act to override the indefeasibility provisions of the RP Act. In Quach it was noted by Young J (at 61) that notwithstanding the difficulty of operating under the Torrens system if there were extraneous statutory rights, nevertheless in those cases where the legislation clearly so provided, the statutory rights ‘trumped’ indefeasibility. His Honour expressed the problem in the following terms: ‘It is very difficult now to contend that the mainstream indefeasibility provisions, such as s 42 of the Act, operate to defeat the statutory right of the Council. It has been well recognised, both by the textwriters and by the authorities that, although it is the weakest 781

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point in the Torrens System, statutory and public rights will override an indefeasible title. The point might be worth making that the present right claimed by the Council is, in a strict sense, not a public right. The point can be illustrated by reference to a road. Before the Local Government Act, it was quite possible for X to have a fee simple in the soil of a road, Y to have a private right-of-way over the road and for the public generally to have the right to pass and repass because the road was a public road. Y’s interest in holding a private right-of-way and the public’s interest in having a right to pass and repass were two different rights and the cessation of the public right may not necessarily interfere with the exercise by Y of his private right. In that sort of situation public rights to roads can easily be said to override private land rights because, in effect, they are supplementary rights of user, completely separate from the congeries of rights which make up a fee simple. However, when one is talking about a council not only having a right to pass drainage pipes through the land, but also owning the fee simple itself, it is very debatable whether the dichotomy between public rights in land which it overrides and private rights is maintainable. However, although that may be the philosophic position, the authorities say otherwise: see, eg, South-Eastern Drainage Board (South  Australia) v  Savings Bank of South Australia [1939] HCA 40; (1939) 62 CLR 603. It seems to me that, despite the very legitimate criticism that has been made by the textwriters (see, eg, Sackville (1973) 47 ALJ 526 at 536 and Butt, Land Law, 2nd ed (1988) at 532) that provisions such as s 398 pose the greatest single threat to the operation of the Torrens System and make such substantial inroads into indefeasibility that it is impossible to rely on the register, I feel I must follow such a strong line of authority as holds that these statutory inroads do prevail over the “ordinary” indefeasibility provisions of the Real Property Act.’ However, it must be noted that the cases in this category are few and the reported ones at least deal with situations where there was an ongoing effect of the statute found to trump indefeasibility. Thus in Vickery there was the ongoing use of a public road; in South-Eastern Drainage Board an ongoing statutory charge; in Pratten and Quach the continuous use of drainage reserves. These were not cases where there was a once and for all breach of a statute prohibiting a dealing with RP Act land. As we have noted in [42] above, Biscoe J at [91] held that the authorities concerning what might be termed the statutory exceptions to indefeasibility which he had considered were all distinguishable from the present case including decisions such as South-Eastern Drainage Board. At least so far as that line of cases was concerned, his Honour was clearly correct. More problematic is the view of Gibbs J in Travinto (at 34) to which we have referred in [34] above. In that case the statutory provision which purportedly conflicted with the indefeasibility principle was not a void instrument but rather s 88B of the then Industrial Arbitration Act which rendered void any contract under which a person leased or agreed to lease premises in which hairdressing was to be carried out unless it had been approved by the Industrial Commission or some other industrial body. In brief, the facts were that there was a lease of a hairdressing shop at Marrickville which contained an option. The plaintiff sought specific performance of its exercise of the option to renew. It succeeded at  first instance but lost in this Court. On appeal to the High  Court, four justices dismissed the appeal on the basis that the transaction was illegal and so could not be enforced by way of specific performance. However, Gibbs J distinguished Breskvar v Wall on the basis that in that case the Queensland Stamp Act and Real Property Act could stand together because whilst the transfer itself was rendered void under the former statute, the latter resulted in the registration of the void transfer being effective to pass title. However, he continued (at 34–35) in these terms: ‘In the present case the Industrial Arbitration Act renders void the lease itself and not merely some document or transaction from which the title of the lessee was derived. If 782

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the Real Property Act were held to have the effect of validating the lease, its provisions would be irreconcilable with those of s 88B which declares the lease to be void. … Although the Real Property Act is of the greatest importance in relation to land titles it is not a fundamental or organic law to which other statutes are subordinate. The question is simply whether the provisions of the later enactment, s 88B of the Industrial Arbitration Act, override the inconsistent provisions of the Real Property Act, and for the reasons I have given I consider that they do.’ At least at first blush there is a difficulty in reconciling this reasoning of Gibbs J in Travinto with what the High Court, of which Gibbs J was a member, said in Breskvar v Wall. In Travinto Gibbs J was clearly conscious of the decision in Breskvar v Wall on which he had sat, there being a clear distinction in his mind between the effect of the relevant statutory provisions in terms of their impact upon the indefeasibility provision of the Torrens legislation in Travinto compared with that in Breskvar v Wall. It would seem that he thought that the critical distinction was that the lease itself was void in Travinto, not merely some document or transaction from which the title of the purchaser was derived, as was the case in Breskvar v Wall. If this was his Honour’s line of reasoning, then in view of our analysis of the authorities, it would seem to be inconsistent with the approach taken by the majority of the judges of the New  Zealand Court of Appeal in Boyd v  The Mayor of Wellington and by the Full Court of South Australia in Palais Parking Station which have been accepted by high authority. If we had to, we would join with Ormiston JA’s observations in Horvath v Commonwealth Bank of Australia [1998] VSCA 51; [1999] 1 VR 643 at 659 with respect to the judgment of Gibbs J in Travinto … We shall assume for the moment that s 45(1) of the LG Act renders the transfer from the appellant to the third respondent void although that does not accord with its terms. On that assumption the primary judge’s conclusion (at [96]) that that provision overrode the indefeasibility provisions of the RP Act is inconsistent with the approach taken by the New Zealand Court of Appeal in Boyd v The Mayor of Wellington. In that case, s 15 of the New Zealand Public Works Act 1908, provided that certain resumptions were not to be effected without the previous consent of the Governor in Council or the consent in writing of the owner of the land resumed. The defendant Corporation resumed land without either of those consents and obtained a registered title. The question for the Court was whether that title prevailed. The majority, Stout CJ, Sim and Adams JJ held that even assuming that the resumption was void, the Corporation on registration under the Land Transfer Act obtained an indefeasible title. The Register was conclusive. Stringer and Salmond JJ dissented. As Biscoe J observed at [57] of his judgment, Boyd was significant because it was not a case where the transfer was void or forged; rather, it was the underlying incapacity of the Corporation to lawfully resume the land which brought about possible invalidity. This has a parallel in the present case where the appellant did not have the capacity to transfer the relevant land. Similarly, in Palais Parking Station, land was purportedly resumed by the Director General of Medical Services, but invalidly because the appropriate resuming authority was the Minister of Works. However, Mr Shea, who was the Director-General, became registered as proprietor. The majority of the Full Court of the Supreme Court of South Australia held that Mr Shea obtained an indefeasible title notwithstanding that the notice of acquisition was void. They applied Frazer v  Walker and Breskvar v  Wall, King CJ observing (at 220) that since Frazer v  Walker established the concept of ‘immediate indefeasibility’, the principle known as ‘deferred indefeasibility’ enunciated by Dixon J in Clements v Ellis [1934] HCA 18; (1934) 51 CLR 217 at 237 was no longer good law. The majority further held that there was no equity that would enable the former registered proprietor to upset the Director General’s title because he had done nothing unconscionable. If it were not for the indefeasibility provision of the relevant Torrens legislation the former owner would have been able to reclaim the land at law as owner, but was denied doing so by the statute. 783

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The majority in Palais Parking Station adopted the reasoning of the majority of this Court in Logue v  Shoalhaven Shire Council [1979] 1 NSWLR 537, where Hutley JA, with whom Reynolds  JA agreed, upheld (at 542–543) the indefeasibility of the transferee’s title on registration even if the purported exercise by the Council of its statutory power of sale of the relevant land for overdue rates was invalid (which their Honours held it was not). Mahoney JA, who dissented, considered that there was an equity in the former owner sufficient to enable him to regain title. We should note at this point that the Full Court in Caldwell v Rural Bank of New South Wales (1951) 53 SR (NSW) 415 came to the opposite result to that in Palais Parking Station, preferring the minority judgments in Boyd. However, that case followed the doctrine of ‘deferred indefeasibility’ to which we have referred in [61] above. It is clear from the judgments in Breskvar v Wall, that Caldwell and Clements v Ellis on which it was based, must now be considered to have been wrongly decided in the light of Frazer v Walker. Caldwell was regarded as overruled by the majority in Palais Parking Station at  221 and as ‘moribund’ by the Victorian Court of Appeal in Horvath at 649 [13], 655 [27] and 670 [66]. Whilst on the subject of the now discredited theory of deferred indefeasibility, it is appropriate to refer to the submission founded upon the remarks of Kirby J in Hillpalm at 506 recorded in [40] above, that apparently conflicting legislation can operate ‘sequentially’, that some type of deferred indefeasibility doctrine has been revived. With great respect, we do not read his Honour’s remarks as evincing such an intention. In any event, if he did so intend, his dissenting judgment is not binding upon us. Submissions also were made with respect to two other cases. The first was the decision of the Privy Council in British American Cattle Co v Caribe Farm Industries Ltd [1998] UKPC 28; [1998] 1  WLR  1529, an appeal from the Court of Appeal of Belize. Under the Belize Aliens Land Holding Ordinance 1973 (the Ordinance), aliens were not permitted to hold land without a ministerial licence. The defendant held a licence in respect of 2,000 acres but subsequently 24,000 acres were transferred into his name under a transfer certificate of title and he became registered proprietor thereof. The plaintiff, which held an equitable title to part of the land, sought a declaration that the certificate of title was void and of no effect as the 24,000 acres were not the subject of a licence. It relied on s 5 of the Ordinance which provided as follows: ‘Any deed conveyance, certificate of title … whatsoever purporting to convey, transfer, vest or evidence title to a legal or equitable estate in land to or in an alien contrary to the provisions of this Ordinance shall for that purpose be void and of no effect. (Emphasis added)’ The Privy Council held (at 1533) that whilst it was critical to keep to a minimum the number of matters which might defeat the title of the registered proprietor, the Ordinance actually provided that a certificate of title purporting to evidence title was void and of no effect. As the Ordinance was a later statute to the Law of Property Ordinance and was inconsistent with its provisions which conferred absolute and indefeasible title on the registered proprietor, it operated so as to render the certificate of title to the land void and of no effect. The Board followed its decision in Miller v The Minister of Mines [1986] UKHL 1; [1963] AC 484 where it was held that the Crown’s mining rights prevailed over an otherwise indefeasible title under the New  Zealand Torrens legislation. The following passage appears in the Board’s opinion at 1534: ‘A similar approach has been adopted by the majority of the High Court of Australia in Travinto Nominees Pty Ltd v Vlattas [1973] HCA 14; (1973) 129 CLR 1 in which Gibbs J said at p 35: “Although the Real Property Act is of the greatest importance in relation to land titles it is not a fundamental or organic law to which other statutes are subordinate. The question is simply whether the provisions of the later enactment … override [it]”.’ We will return to Travinto below, but we should note that the Board was in error to count Gibbs J in Travinto as part of the majority. He was not. 784

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The other thing to note about British American Cattle was that the Board noted that Caribe, the alien, had mortgaged the land to a bank. The bank was not an alien and the Board appears to have contemplated, without deciding, that despite the fact that the registered proprietor’s fee simple interest was invalid, the bank’s registered interest as mortgagee was unaffected by the invalidity of the title of its mortgagor. The second case to which submissions were directed was that of the Victorian Court of Appeal in Horvath. Section  49(a) of the Supreme Court Act  1986 (Vic) provided that loan contracts entered into by a minor were void. A bank advanced moneys to a married couple and their son to enable them to complete their joint purchase of Torrens title land. The son was a minor. The Court held that notwithstanding that the son was a minor and its mortgage was void as against him, the bank derived an indefeasible title to a mortgagee’s interest in the jointly owned land immediately upon registration of its mortgage. The decision is another example of the instrument which brought about registration being void rather than the underlying transaction. However, the case is significant because not only do the judgments contain a full and thorough discussion of the relevant principles but also their Honours make it clear that there was no real problem in holding that although the mortgage was void as against the son, the Registrar-General’s action in registering the mortgage created an indefeasible title in the bank with respect to the son’s interest in the mortgaged land. Of particular significance is the manner in which Ormiston JA dealt (at 659) with Travinto. His Honour said: ‘I would be inclined, with the greatest respect, to consider Gibbs J’s observations on this issue as incorrect and inconsistent with Breskvar v Wall and the later observations on indefeasibility in Bahr v Nicolay (No 2) [1988] HCA 16; (1988) 164 CLR 604 and Leros Pty Ltd v  Terara Pty Ltd [1992] HCA 22; (1992) 174 CLR 407: see  also per Gleeson CJ in Story v  Advance Bank Australia Ltd (1993) 31 NSWLR 722 at  736. The authorities to which Ormiston JA referred merely underline the sanctity of the indefeasibility principle without adding anything further to the present discussion.’ It is thus necessary to consider further Hillpalm. The majority, McHugh ACJ, Hayne and Heydon JJ, did not need to consider the question as to whether or not the indefeasibility principle under the RP Act was overridden by the provisions of a later statute. However, the minority, Kirby and Callinan JJ, in separate judgments, held that the council’s condition of development consent overrode the indefeasibility principle. Biscoe J at [69] said he agreed with Professor Butt in his note on Hillpalm in (2005) 79 ALJ 143 at  144, that a condition of a council development consent that relates to the continuing use of land can bind later registered proprietors but that a condition which involves a once only requirement and has no continuing operation only binds the proprietor who carries out the development. We are not bound by the minority views in Hillpalm and in any event, the statutory language on which Kirby J relied (at 505–506 [101]) for his conclusion that the EPAA was later in time to the RP Act and its relevant provision more specific and particular than the RP Act, is distinguishable from those with which we are concerned in the present case. The foregoing review of the authorities should not conclude without referring to the decision of this Court in Golden Paradise which directly concerned s 45(1) of the LG Act. In that case, there was a strip of land adjoining the Princes Highway at Blakehurst which was community land vested in the appellant council. The council transferred it to the respondent who became registered as proprietor. This Court held that once the land had been transferred from the council it ceased to be community land and that as the respondent had not breached the LG Act in taking the transfer, the Land and Environment Court had no jurisdiction to divest it of its land. Tobias JA indicated, obiter, that he favoured the view that the transferee’s title could not be impeached even if the transfer was void as a consequence of s 45(1) of the LG Act. Basten JA was not convinced of that and the Court considered it was better not to reach a final conclusion on the point until it had been fully and properly argued. 785

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A concern which the Court voiced during argument, but which was never properly answered was: if the title of the original transferee is defeasible, what is the position of subsequent transferees, mortgagees or lessees etc? Under New South Wales law there would not seem to be any room for applying a bona fide purchaser for value without notice test, as that only applies to equitable and not legal interests. It may be that until a possessory title is obtained, the title of any transferee etc is subject to being displaced by restoring the council to the Register in cases where the original transaction has fallen foul of s 45(1). This might appear to be the logical solution. The difficulty in otherwise answering the question is due to the rejection by the courts of the doctrine of deferred indefeasibility. 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. In this context Biscoe J cited either directly or by reference five decisions of the High Court. The earliest in point of time was Butler v  Attorney General (Vic) [1961] HCA 32; (1961) 106 CLR  268. That case involved a perceived clash between the provisions of s  10 of the Discharged Servicemen’s Preference Act  1943 (Vic) which gave preference in promotion in favour of discharged servicemen and s 32 of the Public Service Act 1946 (Vic) which provided that promotion was according to relative efficiency and relative seniority. The majority held that the later Act prevailed and impliedly repealed the earlier Act. The majority comprised Kitto, Taylor and Menzies JJ. Fullagar and Windeyer JJ dissented. Four of the justices set out tests as to when a later statute impliedly repealed an earlier statute. Fullagar J (at 275) said that the situation was a comparatively rare phenomenon but ‘such a repeal will not be held to have been effected unless actual contrariety is clearly apparent.’ Kitto J at 280, quoting Viscount Dunedin in In re Silver Brothers Ltd [1986] UKHL 3; [1932] AC 514 at 523, said: ‘The question must be whether they could stand together, “live together”’. Taylor J (at 285) spoke in terms of direct conflict and whether the competing provisions could stand together or not. Windeyer J (at 290) adopted expressions from Cleasby B in Hill v Hall (1876) LR 1 Ex D 411 at 414, which in turn were quoted from a 19th century textbook on statutes that one construes the later statute as impliedly repealing the former ‘only so far as it is clearly and indisputably contradictory and contrary to the former Act in the very matter, and the repugnancy is such that the two Acts cannot be reconciled.’ In Saraswati v The Queen [1991] HCA 21; (1991) 172 CLR 1 at 17, Gaudron J approved of what had been said in Butler observing: ‘It is a basic rule of construction that, in the absence of express words, an earlier statutory provision is not repealed, altered or derogated from by a later provision unless the intention to that effect is necessarily to be implied. There must be very strong grounds to support that implication, for there is a general presumption that the legislature intended that both provisions should operate and that, to the extent that they would otherwise overlap, one should be read as subject to the other … .’ In Shergold v Tanner at 137, five justices approved of what Gaudron J had said in Saraswati and what had been said in Butler. Again, in Dossett v TKJ Nominees Pty Ltd, the same approach was adopted. Finally, in Ferdinands v Commissioner for Public Employment at 138, Gummow and Hayne JJ said: ‘There are, however, two cardinal considerations. First, as Gaudron J said in Saraswati 786

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v  The Queen, ‘There must be very strong grounds to support [the] implication, for there is a general presumption that the legislature intended that both provisions should operate.’ Secondly, deciding whether there is such inconsistency … that the two cannot stand or live together … requires the construction of, and close attention to, the particular provisions in question.’ The primary judge referred to other cases, but in view of the high authority of the authorities to which we have referred above, it is unnecessary to refer to them. However, in Butler at 290 and, again, in a decision of Barrett J in ISPT Nominees Pty Ltd v Chief Commissioner of State Revenue [2003] NSWSC 697; (2003) 53 ATR 527 at 559 [114], a passage in the 8th edition of Maxwell on Statutes at 147 (not republished in the latest (12th) edition) was relied upon which reads: ‘A sufficient Act ought not to be held to be repealed by implication without some strong reason. It is a reasonable presumption that the Legislature did not intend to keep really contradictory enactments on the statute-book, or, on the other hand, to effect so important a measure as the repeal of a law without expressing an intention to do so. Such an interpretation, therefore, is not to be adopted, unless it be inevitable. Any reasonable construction which offers an escape from it is more likely to be in consonance with the real intention.’ The appellant submitted that although the primary judge correctly set out the test, he did not actually apply it. It is to be noted that in all the citations referred to by his Honour, a very high bar had been established for determining whether there had been an implied repeal. In particular, the appellant submitted that by applying the second cardinal principle referred to by Gummow and Hayne JJ in Ferdinands, his Honour ought to have concluded that on any reasonable construction of s  45(1) in the context of the indefeasibility provisions of the LG Act, the two were not irreconcilable but could stand together as there was, to adopt and adapt the words in Maxwell cited above, a clear opportunity to escape from a contrary conclusion. Thus although the appellant acknowledged that s  45(1) of the LG Act had the effect of invalidating the transaction between it and the third respondent, it submitted that any person could have moved the Land and Environment Court for orders restraining the third respondent as transferee from registering the transfer from the appellant and otherwise setting the transaction underlying the transfer aside. However, once the Registrar-General registered the transfer, the indefeasibility provisions of the RP Act were engaged and prevented that occurring. In our view this submission should be accepted. The authorities are clear that a court should read statutes together if it possibly can. Thus we can accept the word ‘sequential’ adopted by Kirby J in Hillpalm insofar as the statutes do have effect sequentially, that is, that up until registration the transaction or transfer is null and void but on registration, as Breskvar v Wall holds, there is virtually a new Crown grant of the fee simple in the land, so that from that moment the transferee obtains a new clean title: see [45] above. The result is that the transferee’s title is wholly derived from the act of registration by the Registrar-General and not upon the transfer or the antecedent transaction which gave rise to the transfer. The primary judge commenced his final conclusions in [93] of his judgment (see [42] above) by considering whether there was an implied repeal or inconsistency between s  45(1) of the LG Act and the indefeasibility provision of the RP Act. He held that the factors favouring an affirmative answer to that question included ‘obedience to the law made later in time; priority to the law on the subject which is more specific over one that is more general; and precedence to public rights over land to which special statutory restraints on dealings apply, over private rights’. These factors, as his Honour acknowledged, were derived directly from the judgment of Kirby J in Hillpalm at 505 [100]. However, Kirby J in Hillpalm at [101] observed, in our opinion correctly, that the last factor afforded little guidance in a case where there was a public interest both in the observance of planning laws and in upholding the indefeasibility provisions of the RP Act which transcended the private rights of parties expressed in certificates of title under that Act. However, the primary 787

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judge at  [94] concluded that LG Act accorded ‘special status’ to community land. However, in our view such a conclusion ought not to have been drawn unless the later statute creating the public right in the relevant land impliedly repealed the indefeasibility provisions of the RP Act with respect to that land so that a clear legislative intention that the two could not stand together was demonstrated. We put to one side the minority view of Gibbs J in Travinto which, with respect, we regard as irreconcilable with Breskvar v Wall. The exception to indefeasibility involving the statutory creation of public rights, the subject of the authorities referred to by the primary judge in [33] above, were correctly acknowledged by him as distinguishable from the present case. That leaves only the key question as to whether the relevant provisions of the LG Act and the RP Act can operate together. In our view the appellant’s submission that they can should be accepted. Until registration there was the opportunity to set the transaction aside and prevent registration; after registration that opportunity was lost. The primary judge did attempt to reconcile the two Acts. He said at [89] that they could be viewed as operating sequentially. However, his Honour’s approach to that issue was to hold that if an order was made to rectify the Register, that created a new right which arose from the making of the order and which was superimposed upon pre-existing right including the right to indefeasibility. One particular problem with that method of reconciliation which we do not favour is the limited power of the Land and Environment Court to ‘rectify’ the Register. More fundamentally, however, is the fact 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.

Decision on the indefeasibility issue It follows from what has been said that we respectfully differ from his Honour on the indefeasibility issue. We are of the view that the third respondent obtained an indefeasible title by registration to the land comprising Chapman Reserve, notwithstanding the breach by the appellant of s 45(1) of the LG Act. The Appeal was allowed.

Commentary 11.57  The conclusions of the New South Wales Supreme Court make it clear that some

acts set up statutory rights that effectively ‘supplant’ the rights acquired by registered interest holders under the Real Property Act and that such rights, albeit rare, will ‘trump indefeasibility’. A clear example of such rights were those acquired by the Council in Pratten v  Warringah Shire Council, which effectively amounted to continuing public rights to a drainage reserve. By contrast, other provisions, and this included s 45 of the Local Government Act, do not have this effect but may, however, generate an apparent conflict with the provisions of the Real Property Act  1900 (NSW). In such a situation, their Honours felt that the ‘critical  question to determine’ was whether the breach of later provision is ‘so inconsistent with the indefeasibility provisions of the Real Property Act  1900 that the subsequent provision must prevail’. This was the issue that had to be determined with respect to s 45(1) of the Local Government Act. Their Honours expressed it as follows: ‘did 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

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breach so inconsistent with the indefeasibility provisions of the RP Act that s 45(1) must prevail over those provisions?’ To answer this, their Honours argued that it had to be established that the legislature intended, by enacting s 45(1), that that provision was one with that the indefeasibility provisions could not stand. Their Honours held that ordinary statutory interpretation principles make it appropriate to read the statutes consistently if at all possible. As outlined by Kirby J in Hillpalm, if possible, legislation should be read ‘sequentially’ if that can be achieved. On the facts their Honours felt that it was possible to read the indefeasibility provisions of the Real Property Act and s  45 of the Local Government Act sequentially. This could be achieved by holding that up until registration the transaction or transfer is null and void and capable of being set aside, however following registration, in accordance with the fundamental precepts outlined in Breskvar v Wall, the transferee obtains a new clean title. This approach is consistent with the conclusions of Ormiston and Phillips JJA in Horvath v  Commonwealth Bank of Australia and those of Tobias JA in Kogarah v Golden Paradise. On the facts, this meant that the transferee’s title, while void prior to registration, was valid following registration because it was ‘wholly derived from the act of registration by the Registrar-General and not upon the transfer or the antecedent transaction which gave rise to the transfer’. A similar and corresponding approach was taken, in respect of s 40(2) of the Aboriginal Land Rights Act 1983 (NSW) in Koompahtoo Local Aboriginal Land Council v KLALC Property Investment Pty Ltd [2008] NSWCA 6 by the majority (Giles and Tobias JJA, with Young CJ in Eq taking a different view). Giles JA there acknowledged the importance of s 40(2), but held that its focus was upon invalidating the transaction rather than upon attacking title obtained by registration, consequential upon the relevant transaction. See also Young CJ in Eq; Sahab Holdings Pty Ltd v Registrar-General [2011] NSWCA 395 at [98]–[132] per Campbell JA and Tobias AJA; and Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2013) 247 CLR 149.

11.58  Revision Questions 1. How does the approach taken by Street J in Pratten v Warringah Shire Council to the Council’s rights regarding the drainage reserve differ from the approach taken by the Victorian Supreme Court in Horvath v Commonwealth Bank of Australia? 2. What factors do you think will be relevant to a determination of whether subsequent legislation is ‘inconsistent’ with prior indefeasibility provisions? 3. Do you think that the conclusions of Ormiston JA in Horvath v Commonwealth Bank of Australia that there is ‘a strong presumption that Parliament does not intend to contradict itself but rather intends both Acts to operate within their relevant spheres’ effectively reduces the potency of the overriding legislation exception? 4. In Hillpalm the majority concluded that the EP&A legislation did not create a ‘right in rem’ which could encumber the title so that there was no inconsistency between the EP&A and the Torrens legislation. On what basis did they reach this conclusion? What approach did Kirby J (in dissent) take? 5. In Kogarah Tobias J suggested that registration in favour of a third party who took pursuant to an unauthorised council transfer did confer an indefeasible title because title was conferred by registration. This was also the approach endorsed by Mason P, Tobias JA and Young CJ in City of Canada Bay v  Bonaccorso Pty Ltd. Other than legislation that generates public statutory rights that are immune to indefeasibility, will legislative provisions that treat a transaction as void be effective following registration? 789

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Prior Certificate of Title/Erroneous Description of Land 11.59  In all states the Torrens legislation specifically provides that a subsequent registered

proprietor’s title is defeasible against the interest or estate of prior registered proprietor who claims the same land under a prior folio of the Register: Land Titles Act 1925 (ACT) s 58(a); Transfer of Land Act 1958 (Vic) s 42(1)(a); Land Title Act 2000 (NT) s 189(1); Land Title Act 1994 (Qld) s 185(1)(e); Real Property Act 1886 (SA) s 69(e); Land Titles Act  1980 (Tas) s  40(3)(b); Real Property Act  1900 (NSW) s  42(1)(a); Transfer of Land Act 1893 (WA) s 68(1). This statutory qualification to the indefeasibility provisions makes it clear that where two titles cover all or some of the same land, the land that is included within the previous title or folio cannot also be included in a later title or folio and the indefeasibility provisions will not allow the later registered proprietor to acquire this title: National Trustees Co v Hassett [1907] VLR 404. Further, in all states, the Torrens legislation specifically provides that a subsequent registered proprietor’s title is defeasible where all or any part of land is included within the title or folio by wrong description: Land Titles Act 1925 (ACT) s 58(c); Transfer of Land Act 1958 (Vic) s 42(1)(b); Land Title Act 2000 (NT) s 189(1)(f); Land Title Act 1994 (Qld) s 185(1)(g); Real Property Act 1886 (SA) s 69(c); Land Titles Act 1980 (Tas) s 40(3)(f); Real Property Act 1900 (NSW) s 42(1)(c); Transfer of Land Act 1893 (WA) s 68(1). In all states except for Queensland and Tasmania, the ‘wrong description’ provisions will not apply where the registered proprietor is a bona fide purchaser or a person who has derived title from a bona fide purchaser. The rationale for this is that a bona fide purchaser who has relied upon the description of the land within the certificate of title or folio should not be penalised for the error. Mistakes and erroneous descriptions of land often occur when the land is surveyed. Where there is doubt as to the correct boundary of land, survey evidence may be referred to. Land boundaries should be determined by the survey pegs or natural features of the particular piece of land and not the specific measurements set out on the title deed or registered plan. In National Trustees Executors & Agency Co of A’Asia Ltd v Hassett (1907) VLR 404 at 414, Cussen J noted that while land surveying is not an ‘exact science’ where there is a discrepancy between the actual boundaries of the allotment sold, the survey will prevail over measurements and bearing shown in the grant, the map or plan. The reason for this is that the map or plan is intended merely as a picture of what is found on the ground. The scope of the Torrens provisions in each state varies. In New South Wales the erroneous description amounts to an exception to indefeasibility and while compensation may be obtained for loss flowing from misdescription, it is excluded for damage arising due to an error or miscalculation in the measurement of land: s 129(2)(e). In Sahab Holdings Pty Ltd v Registrar-General [2011] NSWCA 395, the New South Wales Supreme Court concluded that the Registrar-General has a duty to remove all unauthorised entries. Section 122(4)(b) allows the Supreme Court to review decisions of the Register-General; however, it cannot be invoked to compel the Registrar-General to exercise a discretion, only to perform a duty and the Registrar-General has no duty to remove ‘authorised’ entries. The provisions of the Land Title Act 1994 (Qld) are least favourable to the purchaser of land. Section 185(1)(g) of the Land Title Act 1994 (Qld) excludes ‘the interest of another registered proprietor if the lot described in the title wrongly includes land in which the

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other registered proprietor has an interest’. Thus, if the land specified on a certificate of title or on a registered plan is incorrect, a registered proprietor is not indefeasible in regard to land that should form part of another lot. The Registrar may correct the certificate of title under s 186, subject to the person affected having an entitlement to apply to the Supreme Court for an order to set the correction aside within one month of the written notice of the correction. As errors in boundaries amount to an express exception to indefeasibility this application would presumably be limited to a consideration of survey evidence to determine if the boundary was or was not correctly amended. Further, s 188A(3) expressly excludes compensation for loss or damage caused by the incorrectness of the register. See also P J Carruthers and N K Skead, ‘The Prior Certificate of Title and Wrong Description of Land Exceptions to Indefeasibility: Resolving the Overlap’ (2009) 17 Australian Property Law Journal 240.

Forgery, Insufficient Power of Attorney or Disability 11.60  In South  Australia the Torrens legislation specifically sets out that a registration

that is obtained by forgery, by insufficient power of attorney or from a person with a legal disability will be void: Real Property Act 1886 (SA) s 69(b). The provision is extracted below. EXTRACT Real Property Act 1886 (SA) — s 69 69  Forgery or disability The title of every registered proprietor of land shall, subject to such encumbrances, liens, estates, or interests as may be ratified on the original certificate of such land, be absolute and indefeasible, subject only to the following qualifications: (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, the certificate or other instrument of title shall be void: Provided that the title of a registered proprietor who has taken bona fide 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.

It has been held that this provision intended to confer limited ‘deferred’ indefeasibility upon title holders who become registered as a result of forged documents, documents executed with insufficient power of attorney or documents executed by a person with a legal disability: Rogers v Resi-Statewide Corporation Ltd (1991) 101 ALR 377 per von Doussa J. However, in Arcadi v Whittem (1992) 59 SASR 515, the Full Court of the South Australian Supreme Court reconsidered the meaning and effect of the legislation. Debelle  J (with whom Matheson J agreed) rejected the earlier approach of von Doussa J concluding that the ‘plain meaning’ of the provision was to: … protect a registered proprietor who acquires his title bona fide 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 bona fide for value from a person under disability, there is no protection.

According to Debelle J, this construction was justified because of the insertion of a comma after the word ‘disability’ and the disjunctive use of the word ‘or’ to indicate 791

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that the adverbial phrase ‘by any of the means aforesaid’ was intended to qualify the verb ‘obtained’. Debelle J felt this interpretation was consistent with the overall scheme of the indefeasibility exceptions that protect a registered proprietor who has taken title bona fide and for valuable consideration through a transaction tainted by fraud, error or wrongful dealing. This decision was followed in Public Trustee v  Paradiso (1995) 64 SASR 387. See also Lansen v Olney (1999) 169 ALR 49 at [87] per French J.

Paramount Interests: Adverse Possession, Easements and Tenancies 11.61  The Torrens legislation in each state protects specific rights and interests in land

against the effect of registration. For example, s 42(2) of the Transfer of Land Act 1958 (Vic) sets out the following. EXTRACT Transfer of Land Act 1958 (Vic) — s 42 … (2) Notwithstanding anything in the foregoing the land which is included in any folio of the Register or registered instrument shall be subject to — (a) the reservations exceptions conditions and powers (if any) contained in the Crown grant of the land; (b) any rights subsisting under any adverse possession of the land; (c) any public rights of way; (d) any easements howsoever acquired subsisting over or upon or affecting the land; (e) the interest (but excluding any option to purchase) of a tenant in possession of the land; (f) any unpaid land tax, and also any unpaid rates and other charges which can be discovered from a certificate issued under section three hundred and eightyseven of the Local Government Act 1958, section 158 of the Water or any other enactment specified for the purposes of this paragraph by proclamation of the Governor in Council published in the Government Gazette — notwithstanding the same respectively are not specially recorded as encumbrances on the relevant folio of the Register.

The scope and range of each of these interests is examined below.

Adverse possession 11.62  The approach taken to the protection of adverse possession under the Torrens

legislation differs according to each state. In Victoria and Western Australia, the legislation provides full protection to adverse possession interests both in terms of the title conferred during the possession as well as the title conferred once the limitation period has expired: Transfer of Land Act 1958 (Vic) s 42(2)(b) (extracted above) and Transfer of Land Act 1893 (WA) s 68(1). The provisions in these states make it clear that any rights subsisting with respect to any adverse possession of the land will remain effective notwithstanding the fact

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that such rights have not been specifically registered as encumbrances on the certificate of title. Further, ss 60–62 of the Transfer of Land Act 1958 (Vic) and ss 222–223A of the Transfer of Land Act 1893 (WA) entitle an adverse possessor to make an application to the Registrar to have their title registered. In New  South  Wales, protection will only be conferred if it can be established that a person in adverse possession of Torrens land has been registered. However, registration is only possible over the whole parcel of land: Real Property Act 1900 s 45D(1). Further, registration is only possible once the full limitation period has expired. Hence, unlike Victoria and Western Australia, the New  South  Wales legislation does not protect an accumulating adverse possessory title: Real Property Act 1900 s 45D(4). An ‘accumulating’ possessory title may only be defeated by a registered proprietor who has given valuable consideration and who has taken without fraud. It is not, however, possible, to make an application to register a possessory title that has satisfied the limitation period against any Crown land: s 45D(3). Section 45D of the Real Property Law Act 1900 (NSW) is extracted below. EXTRACT Real Property Law Act 1900 (NSW) — s 45D 45D  Application for title by possession (1) Where, at any time after the commencement of this Part, a person is in possession of land under the provisions of this Act and: (a) the land is a whole parcel of land, (b) the title of the registered proprietor of an estate or interest in the land would, at or before that time, have been extinguished as against the person so in possession had the statutes of limitation in force at that time and any earlier time applied, while in force, in respect of that land, and (c) the land is comprised in an ordinary folio of the Register or is comprised in a qualified or limited folio of the Register and the possession by virtue of which the title to that estate or interest would have been extinguished as provided in paragraph (b) commenced after the land was brought under the provisions of this Act by the creation of the qualified or limited folio of the Register, that person in possession may, subject to this section, apply to the Registrar-General to be recorded in the Register as the proprietor of that estate or interest in the land. (2) Where, at any time after the commencement of this Part: (a) a person is in possession of part only of a whole parcel of land, and (b) any boundary that limits or defines the land in the person’s possession is, to the extent that it is not a boundary of the whole parcel of land, an occupational boundary that represents or replaces a boundary of the whole parcel, the person may, unless the part of the whole parcel of which the person is in possession lies between such an occupational boundary and the boundary of the whole parcel that it represents or replaces, apply to the Registrar-General to be recorded in the Register as the proprietor of the same estate or interest in that whole parcel of land as could have been the subject of an application by the person under subsection (1) if the land in the person’s possession had been that whole parcel of land and subsection (1)(b) and (c) had been complied with in relation thereto.

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(2A) A person who: (a) is in possession of part of a residue lot that could, if it had been a whole parcel of land, have been the subject of an application by the person under subsection (1), and (b) is (or is entitled to be) the registered proprietor of an estate in fee simple in land that adjoins that lot, may apply to the Registrar-General to be recorded in the Register as the proprietor of an estate in fee simple in land consisting of a consolidated lot comprising the part of the residue lot in the person’s possession and the adjoining land. (2B) In subsection (2A), ‘residue lot’ means an allotment consisting of a strip of land that the Registrar-General is satisfied: (a) was intended for use as a service lane, or (b) was created to prevent access to a road, or (c) was created in a manner, or for a purpose, prescribed by the regulations. (3) A possessory application may not be made in respect of an estate or interest in any land, or in any part of any land, of which: (a) Her Majesty or a Minister of the Crown, (b) a statutory body representing the Crown, (c) a corporation which is constituted by an Act and of which, in the case of a corporation aggregate, at least one of the members is appointed by the Governor or a Minister of the Crown, or (d) a council or county council within the meaning of the Local Government Act 1993, is the registered proprietor. (4) A possessory application may not be made in respect of an estate or interest in land if: (a) the registered proprietor of that or any other estate or interest in the land became so registered without fraud and for valuable consideration, and (b) the whole of the period of adverse possession that would be claimed in the application if it were lodged would not have occurred after that proprietor became so registered, unless the application is made on the basis that the estate or interest applied for will be subject to the estate or interest of that registered proprietor if the application is granted. (5) A possessory application shall be in the approved form and shall be accompanied by such evidence and documents of title, and (in the case of an application under subsection (2A)) such evidence of concurrence on the part of the local council, as the Registrar-General may require. Note: With an application made under subsection (2A), it is not necessary to include a consolidated plan at first instance. (6) For the purposes of subsection  (2), a reference to an occupational boundary that represents or replaces a boundary of a whole parcel of land is a reference to:

(a) a fence, wall or other structure intended to coincide with or represent that boundary of the whole parcel, (b) a channel, ditch, creek, river or other natural or artificial feature that is itself land and is in close proximity to that boundary of the whole parcel, or (c) a give and take fence with respect to that boundary of the whole parcel. 794

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(7) Where: (a) land to which Part 3 applies has been or is being purchased from the Crown, and (b) but for this subsection, a holder of the land at any time after the commencement of the purchase would not, at that time, have had an estate in fee simple in the land, the holder shall, for the purposes of subsection (1), be deemed to have had such an estate at that time. (8) Where: (a) a limitation period for a cause of action to recover land to which Part 3 applies has commenced to run, and (b) after that commencement a folio of the Register is created in respect of the land pursuant to Part 3, the time which elapsed after the limitation period commenced to run and before the date on which the folio of the Register was created may be counted in the reckoning of the limitation period for the purposes of a possessory application in respect of the land. (9) Subsection  (8) applies to a limitation period for a cause of action to recover land notwithstanding that: (a) the limitation period commenced to run, or (b) the folio of the Register created in respect of the land pursuant to Part 3 was created, before the commencement of that subsection.

Variations 11.63  In Queensland and South  Australia the Land Title Act  1994 (Qld) s  185(1)(d)

and the Real Property Act 1886 (SA) s 69(f) make it clear that only the title of an adverse possessor who has satisfied the limitation period may be protected. The Land Title Act 1994 (Qld) protects ‘the interest of a person who, on application, would be entitled to be registered as owner of the lot because the person is an adverse possessor’. Unlike New  South  Wales, the Queensland provisions do not make it necessary for the adverse possessor to seek registration before protection can be conferred. Section 69(f) of the Real Property Act 1886 (SA) is similar and reads as follows: ‘any certificate issued upon the first bringing of land under the provisions of any of the Real Property Acts, and every certificate issued in respect of the said land, or any part thereof, to any person claiming or deriving title under or through the first registered proprietor, shall be void, as against the title of any person adversely in actual occupation of, and rightfully entitled to, such land, or any part thereof at the time when such land was so brought under the provisions of the said Acts, and continuing in such occupation at the time of any subsequent certificate being issued in respect of the said land’. In Tasmania, the Land Titles Act  1980 s  40(3)(h) makes it clear that a registered proprietor’s title is not indefeasible in so far as it ‘regards rights acquired, or in the course of being acquired under a statute of limitations’. The specific requirements for title by possession are set out in s 138V and include all the circumstances of the claim and the conduct of the parties. Section 138V of the Land Titles Act 1980 (Tas) is extracted below.

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EXTRACT Land Titles Act 1980 (Tas) — s 138V 138V  Requirements for title by possession (a) whether, during the relevant period, the applicant enjoyed possession of the land as of right; and (b) whether there is any reason to suppose that during the relevant period that enjoyment was by force or secretly or that that enjoyment was by virtue of a written or oral agreement made before or during that period unless the applicant can show that any such agreement terminated before that period; and (c) the nature and period of the possession; and (d) the improvements on the land and in particular — (i)  when they were made; and (ii)  by whom they were made; and (e) whether or not the land has been enclosed by the applicant; and (f) whether during the relevant period the applicant acknowledged ownership, paid rent or made any other payment in respect of the land — and the applicant must produce evidence from at least one other person in support of the application.

Easements 11.64  All states recognise the easement as an express exception to indefeasibility.

However, once again, the scope of the protection conferred varies according to each state. In Tasmania, Victoria and Western Australia, the protection conferred is the widest and will apply to all easements howsoever acquired that subsist upon or affect the particular land: Land Titles Act 1980 (Tas) s 40(3); the Transfer of Land Act 1958 (Vic) s 42(2)(d); and Transfer of Land Act 1893 (WA) s 68. The wording of the legislation in New South Wales, the Northern Territory, Queensland and South  Australia is different because the legislation in these states only provides protection to the ‘interest of a person entitled to the benefit of an easement if its particulars have been omitted from, or misdescribed in, the freehold land register’. The rationale for this stems from the idea that protection against the effects of registration should only be conferred upon properly created but omitted rights rather than rights sourced in implication and personal enforcement. As outlined by the High Court in Queensland Premier Mines Pty Ltd v French (2007) 82 ALJR 115 at [14], ‘the fundamental purpose of the Torrens system is to give effect to public policy whereby the Register, of itself, states the nature of the interest and not side contractual agreements which do not “run” with the land’. In Castle Constructions Pty Ltd v Sahab (2013) 247 CLR 149 the High Court held at  [24] that ‘s 42(1)(a1) both presupposes the continued existence and provides for the continued effect of that which has been omitted notwithstanding it does not appear on the relevant folio of the Register’. In Queensland and the Northern Territory, the reference to ‘omission’ is statutorily defined to mean that the easement was in existence when the lot burdened by it was first registered but particulars are no longer recorded in the land register or, the easement was

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registered but later omitted by an error of the Registrar-General: Land Title Act 1994 (Qld) s 185(3); Land Title Act 2000 (NT) s 189(3). In New South Wales, s 42(1)(a1) sets out that a registered proprietor shall take free from all encumbrances that have not been noted on the title except for those expressly set out in s  42(1) and in sub (a1) this includes an ‘omission or misdescription of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act’. This provision makes it clear that in New  South  Wales, an easement will only be protected from the effects of subsequent registration where it can be established that it has been ‘omitted or misdescribed’. In Dobbie v  Davidson (1991) 23 NSWLR 625, the New South Wales Court of Appeal held that an ‘omission’ or ‘misdescription’ in this context refers to an easement right that has been ‘left out’ and not included within the registered title. Kirby P concluded at p 632 that the reasons for this interpretation were that the: … modern approach to the construction of statutory language is to afford words which are said to be ambiguous that meaning which appears most closely to accord with the achievement of the overall legislative purpose disclosed by those words taken in their context … The general purpose of s 42(b) was clearly to protect the rights of persons in relation to unrecorded easements from the loss of those rights by the operation of the general principle favouring the conclusiveness of the register book. The achievement of that purpose should not needlessly be frustrated by adopting a secondary meaning of ‘omission’ in preference to the primary meaning.

There are two aspects to the New South Wales provision s 42(1)(a). The first applies to an easement that subsisted prior to the land being brought under the provisions of the Torrens legislation and that has been left out or not included on the title. The second applies to easements that have been recorded in the initial folio and then left off subsequent folios. Further, an easement will only come within the application of the provision where it had been ‘validly created’ and then subsequently left off title. In this context, ‘validly created’ has been interpreted to mean that the easement has been expressly created because for an easement to be ‘validly created’ it is necessary for the transfer or the plan that creates the easement to be registered. This necessarily excludes from the application of s 42(1)(a) prescriptive or implied easements so that such easements may not be enforced against later registered proprietors of the servient land. To avoid this difficulty, the holder of the dominant tenement may order the owner of the servient land to execute a grant of easement and subsequently register that grant. Alternatively, it may be possible for the implied easement to be enforced in personam against a subsequent registered proprietor. 11.65  The case of Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2013) 247 CLR

149 is extracted below.

  Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd  (2013) 247 CLR 149 Facts:

‘Omission’ of an easement 22. No doubt it is important to recognise that the primary definition of ‘omission’ is ‘[t]he action of omitting or leaving out, or fact of being omitted; failure or forbearance to insert or include; also, an instance of this’ and that the primary definition of ‘omit’ is ‘[t]o leave out, not to insert or include’. Each definition directs attention only to the action 797

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Australian Property Law described; neither directs attention to how or why the action of omitting or leaving out occurred.

23. As the reasons of Priestley JA in Dobbie demonstrate, the history of Torrens title legislation and the treatment of cases of ‘omission’ of unregistered easements point to reading ‘omission’, in the collocation ‘case of the omission or misdescription of an easement’, as according with these dictionary definitions and meaning no more than ‘left out’ or ‘not there’. Hence, in Dobbie, where an easement existing before the land was brought under the RPA was not recorded on the Register when the land was first brought under the RPA, the Court of Appeal rightly held that it was a ‘case of the omission’ of an easement regardless of what had brought about the absence of the easement from the Register. 24. On this understanding of ‘omission’, s  42(1)(a1) both presupposes the continued existence  and provides for the continued effect of that which has been omitted notwithstanding it does not appear on the relevant folio of the Register. It is an understanding capable of ready application to an easement created under a Commonwealth Act or under a State Act other than the RPA. The presupposition for  applying s  42(1)(a1) (that the easement continues to exist) is accurate. Section 42(1)(a1) then provides for its continued effect in respect of the land. It is an understanding which is also capable of application to easements created under the RPA, at least in the case of an easement created by registration of the relevant dealing under the RPA but not recorded on the folio relating to the servient tenement. The easement in that case continues to exist because it has been registered and not removed from the Register. Section 42(1)(a1) then provides for its continued effect in respect of the land. 25. Other considerations intrude when an easement created under the RPA by registration of a dealing has later been removed by the Registrar-General. When an easement has been previously recorded on the Register, but is no longer recorded because it has been deliberately removed from the Register, it could be said that the easement was ‘not there’. It is more accurate, however, to say that the easement is ‘no longer there because it has been removed’. The significance to be given to the fact of the easement’s removal from the Register requires attention to fundamental principles. The relevant exception to the paramountcy of the registered proprietor’s title is ‘in the case of the omission’ of an easement (where the hypothesis is that the easement continues to exist but is not recorded). Because the RPA provided for title by registration, the deliberate removal from the Register of an easement created by registration cannot be treated as a ‘case of the omission … of an easement’ for the purposes of s  42(1)(a1). The presupposition for the operation of s  42(1)(a1), that the easement continues to exist, is not valid. The easement has been removed from the Register.

The RPA’s provisions for the alteration of the Register 26. Section  32(6) of the RPA gave the Registrar-General power ‘to cancel in such manner as the Registrar-General considers proper any recording in the Register that the Registrar-General is satisfied does not affect the land to which the recording purports to relate’. If the Registrar-General was satisfied that the easement no longer subsisted, s 32(6) empowered cancellation of the recording of the easement on the folios relating to both the dominant and the servient tenements. The RPA gave the Registrar-General other powers in respect of the recording of easements, including power under s 49(1) to cancel the recording of abandoned easements, but the ambit of those other powers need not be examined. 798

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27. Where the Registrar-General removes an easement from the Register after giving notice under s  12A(1) to the owner of the dominant tenement, that owner would not have an action against the Registrar-General in respect of that removal. Section 12A(3) provided that where a person given a notice under s 12A(1) did not serve on the Registrar-General (or give the Registrar-General notice of) an order of the Supreme Court restraining the Registrar-General from taking the proposed action altering the Register, ‘no action by that person or by any person claiming through or under that person shall lie against the Registrar-General in respect of the taking of the action specified in the notice’. Section 12A(3) would bar a claim by the owner of the dominant tenement for any relief against the Registrar-General in respect of the removal of the easement, including any form of relief that would compel the Registrar-General to restore the easement to the Register. 28. Whether s 12A(3) would also bar a subsequent purchaser of the dominant tenement from bringing an action against the Registrar-General to compel the Registrar-General to restore the easement to the Register turns on whether the subsequent purchaser was ‘claiming through or under’ the former owner of the dominant tenement who receives notice under s 12A(1). That question need not be considered in this appeal because there is a more fundamental reason why the subsequent purchaser cannot compel the Registrar-General to restore the easement. The interest which the former owner of the dominant tenement transferred was the interest as registered proprietor of land which by then did not have the benefit of any registered easement. Because it is a system of title by registration, the subsequent purchaser only acquired that interest shorn as it then was of any recorded easement. 29. If the Registrar-General removed an easement from the Register without giving notice under s 12A(1) to the owner of the dominant tenement, that owner would readily be seen to be a ‘person who is dissatisfied’ with the Registrar-General’s decision to remove the easement and so have standing to apply to the Supreme Court for review of that decision under s  122(1) of the RPA. On review of the Registrar-General’s exercise of power under s  32(6), it would be open for the owner to submit that the Registrar-General could not have been ‘satisfied’ that the easement no longer affected the land. But this course would not be open to the purchaser who accepted a transfer of that dominant tenement. The decision to remove which the subsequent purchaser would seek to challenge did not relate to land in which that purchaser had any interest at the time the decision was made. That purchaser would not be a ‘person who is dissatisfied’ with that decision.

This appeal 30. At the behest of Castle, as registered proprietor of the servient tenement, the Registrar-General removed the easement from both the folio relating to the Strathallen land and the folio relating to the Sailors Bay land. At trial it was found, and in the Court of Appeal it was common ground, that a notice of intention to remove the easement was given to Mr and Mrs Howard as the then registered proprietors of the dominant tenement. The notice was not in evidence at trial or in the Court of Appeal and Sahab submitted that, contrary to the undisturbed finding that notice was given, this Court should find that no notice was given. Sahab offered no satisfactory basis for overturning the finding. The Registrar-General’s minute papers recorded that no objection had been received to the application for removal and the inference that notice of the application was given to the Howards is irresistible. It may also be inferred that the notice accorded with s 12A and told the Howards that the RegistrarGeneral would remove the easement at  or after the expiration of a stated period unless restrained by an order of the Supreme Court from doing so. 799

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31. The Howards made no objection to the removal of the easement. The Howards having made no objection and obtained no order restraining the Registrar-General from proceeding, s 12A(3) would have barred them from bringing an action against the Registrar-General to compel the restoration of the easement to the Register. Of course, if the Howards could have established some personal claim against Castle, they could have pursued that claim. But unless and until the Howards, by personal action, compelled Castle to procure restoration of the easement to the Register, the title the Howards held to the Strathallen land after the removal of the easement was a title which did not include any easement over the Sailors Bay land. That is, the interest which the Howards sold and transferred to Sahab was their interest as registered proprietors of land which, at  that time, did not have the benefit of any registered easement over Castle’s land. The Howards therefore did not transfer (and could not have transferred) to Sahab any easement over Castle’s land. And unless Sahab could establish some personal claim against Castle to compel it to procure restoration of the easement to the Register (a claim that Sahab has not made), it follows that Sahab does not have the easement which it claimed in this appeal. 32. The easement created by the 1921 transfer was not ‘omitted’ from the folio relating to either piece of land. The easement had been removed from the Register and the fact of its removal was apparent from the Register before Sahab bought the Strathallen land. 33. Four further points should be made. 34. First, it is to be noted that Sahab’s case was that deliberate alteration of the Register worked no change in the interests to which Castle’s title was subject. Sahab alleged that Castle’s title remained subject to an interest which had once been recorded in the Register but which had since been removed from the Register in accordance with procedures provided by the RPA, even though Sahab’s predecessor in title (the Howards) would have been barred from asserting the interest Sahab claimed. This result is properly described as odd or surprising. It is a result which points firmly against construing the RPA in the way Sahab urged. 35. Second, Sahab’s case sought to give continued effect to the easement after its removal from the Register even though the easement took effect only upon registration of the 1921 transfer. As already noted, s 41 provided that no instrument, until registered, shall be effectual to pass any estate or interest in land under the RPA. Yet an instrument effective to create rights or interests in the relevant land only on registration of the instrument was alleged to continue in effect despite removal of the interest from the Register. Again, the result urged by Sahab is odd or surprising and points firmly against construing the RPA in the way Sahab urged. 36. Third, Sahab’s argument that some or all of ss  12, 122, 136 and 138 of the RPA  provided bases for it not only to challenge the Registrar-General’s decision to remove the easement but also to obtain restoration of the easement to the Register assumed that Sahab was a ‘person who is dissatisfied’ with a decision of the Registrar-General. At first instance, in the Court of Appeal and in this Court, Sahab sought to challenge both the 2001 decision to remove the easement and the 2008 decision to refuse to restore the easement. Whether Sahab could challenge the 2001 decision in this Court without amending its notice of contention need not be examined. 37. In relation to the Registrar-General’s decision in 2008 to refuse to restore the easement to the Register, there was no omission of the easement. It had been deliberately removed from the Register. Further, Sahab had obtained title by 800

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registration of the transfer from the Howards to land which did not at that time have the benefit of a recorded easement. Sahab got what appeared on the Register. In those circumstances, Sahab cannot be dissatisfied with the decision of the RegistrarGeneral not to restore the easement in 2008.

In relation to the Registrar-General’s decision in 2001 to remove the easement, Sahab alleged that the Registrar-General should not have removed the easement because the Registrar-General could not reasonably have been satisfied that it did not affect the land. But this argument assumed, and did not demonstrate, that Sahab was a ‘person who is dissatisfied’ with the Registrar-General’s decision to exercise power under s  32(6) to remove the easement from the Register. The decision to remove which Sahab sought to challenge did not relate to land in which Sahab had any interest at the time the decision was made. Sahab, having acquired the title to the Strathallen land which the Howards had at the time of sale, did not then become a person dissatisfied with the Registrar-General’s decision to remove. Section 122 is not reached.



Fourth, and most importantly, Sahab’s reference to and reliance upon the remedial provisions of the RPA (in particular s  12(1)(d)) depended upon Sahab showing that this was a case of ‘omission’. And Sahab’s case in relation to both ss  12(1) (d) and 42(1)(a1) ultimately depended upon reading ‘omission’ in each as including a case where an easement, once registered, had been deliberately removed from the Register. As earlier explained, while it may be right to observe that, after its removal, the easement is ‘not there’, this observation provides only a snapshot of the state of the Register. It is more accurate to say that the easement is ‘no longer there because it was deliberately removed’. That is not a case of the omission of an easement.

Conclusion and orders

Because Castle’s land is no longer subject to the easement created by the 1921 transfer, the covenants which related to the easement no longer apply. The questions which Sahab sought to agitate by cross-appeal are not reached and need not be considered.



The appeal to this Court should be allowed. The application for special leave to cross-appeal should be refused. The first respondent should pay the appellant and the second respondent the costs of the appeal and of the application for special leave to cross-appeal. The orders of the Court of Appeal of the Supreme Court of New South Wales made on 5 April 2012 should be set aside and in their place there should be orders that the appeal to that Court is dismissed with costs.

Commentary 11.66  The scope of protection afforded to prescriptive easements under the Real Property

Act  1900 (NSW) has been the subject of some judicial discussion. The conclusions of Mason P in Williams v  STA (2004) 60 NSWLR 286 confirm the fact that prescriptive easements will not be regarded as having been ‘validly created’ and therefore do not receive protection under the Real Property Act 1900 (NSW). Further, it is argued that such rights should not be enforceable against a registered proprietor pursuant to an in personam action. In this respect, Mason P rejected the previous conclusions of King CJ in Golding v  Tanner (1991) 56 SASR 482, holding that the South  Australian legislation validated a prescriptive easement under the in personam exception because it was consistent with the specific wording of the provision. However, Mason P expressed ‘considerable unease’ 801

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with the application of in personam in the New South Wales context because he argued that the doctrine of lost modern grant did not: … rise in any context involving rights enforceable in personam backed up by equitable remedies. It did not lead to an order requiring the servient owner to take further steps to perfect an equitable title into a legal title. The very fiction upon which the doctrine proceeds presumes a ‘grant’, ie a deed that would (if it existed) be immediately effective to confer the relevant legal interest. But the fiction is that the deed was executed and delivered, leaving nothing more to be done for the creation of an easement at law.

A more detailed examination of the application of the relevance of the in personam exception to implied easements in New South Wales was examined by Tobias JA in McGrath v  Campbell [2006] NSW ConvR 56-159. In that case, his Honour held that an implied Wheeldon v Burrows easement could be enforceable against a registered title holder under the Real Property Act 1900 (NSW) in accordance with the in personam exception. 11.67  The judgment of Tobias JA (with whom Giles JA and Hodgson JA agreed) is set

out below.

  McGrath v Campbell  [2006] NSW ConvR 56-159 Facts: The appeal related to an implied easement. The issue for the court was whether such an easement, created in accordance with the rule in Wheeldon v Burrows [1879] 12 Ch D 31, created in personam rights which would be enforceable against the registered proprietor. Tobias JA: … The primary judge, Barrett J, answered the issue so posed in the affirmative and the appeal is against that decision. It has generally been accepted that, as a consequence of the decision of this Court in Australian Hi-Fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618, what is conveniently described as a Wheeldon v Burrows easement, although not noted on the certificate of title of the servient tenement, may be enforced against the registered proprietor of that tenement who created that easement but not against that proprietor’s successors in title. In the present case, the common owner or registered proprietor of the dominant and servient tenements who created the Wheeldon v  Burrows easement contemporaneously transferred both tenements to different parties. The decision of the primary judge is the first occasion when it has been held that, in such circumstances, the effect of Aldridge v Wright is to subject the transferee of the servient tenement to the right of the transferee of the dominant tenement to enforce that easement by requiring the servient owner to execute an instrument in registrable form for the purpose of the Real Property Act 1900 (the RP Act) granting the easement. The legal basis underpinning this right is founded upon the in personam exception to the indefeasibility provisions of the RP Act. Those provisions would otherwise result in the registered proprietor of the putative servient tenement holding the same tenement, subject only to such estates or interests as may be recorded in the Register and absolutely free from all other estates or interests, including implied easements: RP Act s 42(1). … Does a Wheeldon v  Burrows easement as extended by Aldridge v  Wright trump the indefeasibility provisions of the RP Act? The answers to the questions posed in the previous paragraphs are relevant to the critical question of whether a Wheeldon v  Burrows implied easement over Lot 12 for the benefit of Lot 6, which was a result of the simultaneous transfers of Lot 6 to the Campbells and Lot 12 to the McGraths, gave rise to an equity or right in personam enforceable against the McGraths as registered proprietors of Lot 12 on the basis that they were personally bound to recognise that equity and give effect to it as an exception to the indefeasibility provisions of the RP Act. 802

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The governing provision of the RP Act establishing the indefeasibility of the estate of the registered proprietor of land under Torrens title is s 42(1) which is, relevantly, in the following terms: ‘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 the land recorded in the 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 their folio, but absolutely free from all other estates and interests that are not so recorded except: (a1) in the case of the omission … of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act.’ It was common ground that the exception referred to in sub-paragraph (a1) above had no application to the present case. It was further common ground that if the McGraths were to take title to Lot 12 subject to the right of way claimed by the Campbells, it could only be upon the basis that the principle of indefeasibility encapsulated by s 42(1), in the words of Mason CJ and Dawson J in Bahr v Nicolay (No 2) at 613 (omitting citations), did not preclude: ‘… a claim to an estate or interest in land against a registered proprietor arising out of the acts of the registered proprietor himself … Thus, an equity against a registered proprietor arising out of a transaction taking place after he became registered as proprietor may be in force against him … So also with an equity arising from conduct of the registered proprietor before registration … so long as the recognition and enforcement of that equity involves no conflict with ss  68 and 104 [of the Transfer of Land Act  1893 (WA), equivalent to ss  42 and 43 of the RP Act]. 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.’ In the joint judgment of Wilson and Toohey JJ in the same case (at 637), their Honours referred to the fact that in accepting the general principle of indefeasibility of title, the Privy Council in Frazer v Walker (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.’ Their Honours then referred to the following statement of the Privy Council in the same case with respect to claims in personam: ‘The principle must always remain paramount that those actions which fall within the prohibition of ss 62 and 63 may not be maintained.’ The reference to ss  62 and 63 is a reference to the Land Transfer Act  1952 (NZ), which roughly corresponds to s 42 of the RP Act. Their Honours then said (at 638, omitting citations): ‘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 when those actions give rise to a personal equity in another. Such an equity may arise in conduct of the registered proprietor after 803

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registration. And we agree with Mahoney JA in Logue v Shoalhaven Shire Council that it may arise from conduct of the registered proprietor before registration.’ In Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32, Kirby P (at 36), after referring to the statement in Frazer v Walker at 580 that a registered proprietor is ‘exposed to claims in personam’, referred to the statement of Street J in Mayer v Coe [1968] 2 NSWR 747 at 754 (approved in Breskvar v Wall (1971) 126 CLR 376) that a registered proprietor is: ‘… subject to a personal obligation by which he may be bound in personam to deal with his registered title in some particular manner.’ As an equity may arise from events which occurred before registration, the Court is required to examine the pre-registration positions of the parties in equity in order to determine whether such an equity exists. Mahoney JA in Gosper also considered this issue and, after quoting extensively from the judgment of Barwick CJ in Breskvar v Wall, observed (at 41): ‘What was said in Frazer v  Walker and Breskvar v  Wall in relation to equities enforceable against the registered proprietor was further considered by the High Court in Bahr v Nicolay (No 2). In that case, all members of the court accepted that, where a registered proprietor was bound in equity by matters affecting him personally, those equities could be enforced against him notwithstanding that he was registered as a proprietor of the land and the enforcement of those equities would, subject to what I shall say, be inconsistent with the nature of the title which prima facie registration had conferred upon him.’ After referring to the passages from the joint judgment of Mason CJ and Dawson J on the one hand and Wilson and Toohey JJ on the other in Bahr v Nicolay [No 2], which I have quoted above, Mahoney JA made a number of observations arising out of those passages including the following (at 43): ‘But, thirdly, not every right which, under the general law would be enforceable against the holder of the interest which the registered proprietors hold is enforceable against it under the Act. The cases which are so enforceable have been described as “personal equities” and it will be convenient to use that term, though possibly inaccurately, to describe the rights which can in this way be enforced against a registered proprietor.’ His Honour then continued (at 45) in these terms: ‘There has, I think, been no comprehensive definition of “personal” equity for this purpose: the occasion for it has not previously arisen. The matter is, I think, to be decided upon considerations of substance rather than form or terminology. “Equity” and “equitable interest” refer, in Maitland’s sense, simply to the fact that the person involved may invoke the assistance of the equity court or equity principles to achieve the relevant relief. And every equity or equitable interest is, in a sense, personal … But this does not mean that all equities or all equitable interests are “personal” in the sense here relevant. If, then, there is to be a distinction between different kinds of equities or equitable interests, it is relevant to look to the reasons of substance behind the distinction. Two suggestions at  least emerge from the argument and the cases to which reference has been made: first, that the interests must not be inconsistent with the terms of policy of the Act; and, secondly, the “personal” equities arise only from the acts of the new owner: see Breskvar v Wall (at 384–385).’ As to the last-mentioned matter, Mahoney JA observed (at 46) as follows: ‘If it was the view of Barwick CJ [in Breskvar v Wall] that a “personal” equity may arise only from the acts of the owner himself, that view has, in my respectful opinion, not 804

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received general acceptance. The judgment of their Lordships in Frazer v Walker was delivered by Lord Wilberforce. His Lordship did not limit the “acts of a personal nature” which could be relied upon to personal acts of the registered proprietor himself. He referred merely to “a claim in personam, founded in law or in equity for such relief as the court acting in personam may grant” (at 585). And, I think, that the judges in Breskvar v Wall and Bahr v Nicolay (No 2) did not limit the matter in that way.’ Such a limitation would, in my opinion, be unsatisfactory but would result in the new owner retaining the registered estate in circumstances in which he should not. The fiduciary duty cases would, I think, provide an illustration of this. If the retention of the land by the new owner would constitute a breach of his fiduciary obligations, the registration would, I think, be set aside even if the new owner had not himself induced and procured the registration. In Gosper, Mahoney JA noted that the mere fact that the relevant instrument was void for forgery did not of itself give rise to a personal equity. He thus said (at 47): ‘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. It is therefore necessary to determine whether there is anything in the facts, other than the fact of the forgery of the document, which gives rise to such an equity against the company.’ The company in question (Mercantile Mutual Insurance Ltd) was the mortgagee of the land of which Mrs  Gosper was the registered proprietor. A forged variation of the mortgage was executed and registered. Because it was the mortgagee, Mercantile Mutual held the certificate of title, subject to the ordinary obligations affecting a mortgagee that has such possession or custody. It then produced the certificate of title to the Registrar-General for the purpose of procuring the requisition of the forged variation of mortgage. His Honour found that the company had no authority to produce or otherwise use the certificate of title for the purpose of enabling the variation to be registered. It had no implied authority as mortgagee under the valid existing mortgage standing in its name, and Mrs Gosper gave no authority for that purpose. Whether or not its production of the certificate was negligent was beside the point: the fact was that Mercantile Mutual produced the certificate of title to facilitate the registration of the forged variation of mortgage without authority to do so. His Honour held that the company used the certificate of title in breach of its obligations to Mrs Gosper and that such use of the certificate was a necessary step in securing the registration of the forged variation. Accordingly, Mahoney JA concluded (at 49) that the registration of the forged instrument that has been produced by such a breach was sufficient to create in the relevant sense a ‘personal equity’ against the company in favour of Mrs Gosper. The obligations of a mortgagee, whether strictly fiduciary or not, were in his Honour’s opinion such that the mortgagee should not be allowed to retain a benefit (the forged variation) procured by an act which constituted a breach of such obligations. The forged variation of mortgage was therefore set aside. The purpose of referring so extensively to what Mahoney JA said in Gosper is to illustrate the point that in order for a ‘personal equity’ to be created in favour of the Campbells enforceable against the McGraths, it was necessary that some conduct on the part of the McGraths (or those for whom they were responsible) constituted a breach of an obligation owed to the party seeking the benefit of the equity or was otherwise unconscionable. Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 also involved a forged instrument. Gleeson CJ, with whom Cripps JA agreed, cited (at 736–737) the following passage from the judgment of Hayne J in Vassos v  State Bank of South  Australia [1992] V Conv R ¶54-443, where (at 65–180 to 65–181) his Honour said: ‘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 … In the present case … it may well be that the bank did not act without neglect but there is in my view no material which 805

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would show that the bank acted unconscionably. There is 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.’ In Story, Mahoney JA reiterated (at 739) the opinion he had expressed in Gosper that: ‘… “personal equity” arose because the mortgagee had without proper authority made the title deed available for registration of the mortgage and that wrong enabled registration of the forged mortgage and was essential to the registration of it. In the relevant sense, the wrong allowed the registration to be effected.’ His Honour then observed that conduct on the part of the registered proprietor that would constitute unconscientious behaviour would be sufficient to give rise to a ‘personal equity’ in the relevant sense. Finally, in Grgic v  Australian & New  Zealand Banking Group Ltd (1994) 33 NSWLR 202, Powell JA, with whom Meagher and Handley JJA agreed, expressed (at 222–223) the following with respect to what constituted ‘a personal equity’ sufficient to be enforceable against a registered proprietor. His Honour said: ‘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 whose conduct he is responsible, which conduct might antedate or postdate the registration of the dealing which it has sought to have removed from the Register.’ Under the former s 42(1)(b) of the RP Act, it was apparent from the decision of this Court in Australian Hi-Fi Publications (at 627) that an easement by implication has limited enforceability under the rights in personam exception to indefeasibility of title. Such an easement was enforceable only as between the proprietors of the dominant and servient lands which were involved in the transaction which gave rise to the easement. Further, so long as the registered proprietor of the servient land at the time the easement arose remained registered as proprietor, the registered proprietor of the dominant land could seek a court order directing the servient proprietor to take all steps necessary (including executing the appropriate documents and lodging them for registration) to secure the benefit of the easement by having it registered. However, unless the easement was registered in this way, once the servient land was transferred to a new registered proprietor taking without fraud, the easement could no longer be enforced. According to Woodman and Nettle, The Torrens System in New  South  Wales at  10,245, the position under s 42(1)(a1) is the same. Sections 46 and 47 of the RP Act describe formalities for creating valid easements, the assumption behind these formalities being that easements will be reduced to writing and registered, but that until that happens an easement cannot be said to be ‘validly created’. Accordingly, by limiting omitted easements to those that are ‘validly created’ under the RP Act or some other Act, s  42(1)(a1) precludes implied easements from being enforced against a registered transferee of that land or interest. However, according to the learned authors, it does not preclude the dominant owner from enforcing the implied easement against the servient land or interest where the ownership of the servient land or interest has not changed since the circumstances that gave rise to the implication of the easement. In the 5th edition of Land Law, Professor Butt expresses a similar view (at 779). Although s 42(1)(a1) precludes implied easements from being enforced against a later registered proprietor 806

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of the servient land, it should not negate the dominant owner’s right to enforce the implied easement against the servient land if its ownership has not changed since the circumstances that gave rise to its implication. The authority for this proposition cited in footnote 515 is the decision of the primary judge in the present case. Yet the legal basis as to why a Wheeldon v Burrows easement binds in equity the registered proprietor of the retained land notwithstanding the indefeasibility of provisions of the RP Act has not always been made clear. It was not in issue in Australian Hi-Fi Publications for, as Mahoney  JA noted at  the commencement of his judgment (at 620), only one question was argued on the appeal in that case. That was, whether a Wheeldon v Burrows easement not noted on the relevant certificate of title can be enforced against a person who, after the creation of that easement by his predecessor in title, became the registered proprietor of the servient tenement under the RP Act. I have already referred to what, to me, is the true jurisprudential basis of a Wheeldon v  Burrows easement at  common law. Subject to the ultimate effect of this Court’s recent decision in Williams, it would seem that a common owner (registered proprietor) is bound by a personal equity to recognise that he or she has burdened the land retained by him or her (the servient tenement) by transferring to another that part of the land having the benefit of an implied easement which he or she has created (the dominant tenement) while both tenements were in common ownership and which it was his or her presumed intention to transfer with that benefit attached. Having impliedly granted to the transferee of the dominant tenement the benefit of that easement, it would be unconscionable for him or her to derogate from that grant. The Campbells thus submit that the implied Wheeldon v Burrows easement in favour of Lot 6 arose upon the transfer by Mrs Chiplin of that lot to the Campbells. Had Mrs Chiplin retained ownership of Lot 12, the Campbells would have been entitled to enforce that interest against her. Furthermore, it was recognised as a consequence of the decision in Australian Hi-Fi Publications that if Mrs Chiplin had retained ownership of Lot 12 and subsequently sold it to the McGraths, they would have taken the land free of the implied right of way upon the registration of the transfer. But, it was submitted, the simultaneous transfers of Lot 6 to the Campbells and Lot 12 to the McGraths gave rise both to an implied right of way in favour of Lot 6 and an implied reservation of the right of way out of Lot 12. As I have already acknowledged, the foregoing proposition may well be the case with respect to land under old system title. But in my opinion, the simultaneous transfers alone could not give rise to a ‘personal equity’ binding upon the McGraths as the registered proprietors of Lot 12 in circumstances where they have not in any way contributed to the creation of the implied easement or conducted themselves in any way which could be regarded as unconscionable. In particular, their reliance upon their strict legal rights — that is, the indefeasibility of their title to Lot 12 effected by s 42(1) of the RP Act — was in no way unconscionable. On the contrary, the position in the present case is, if anything, analogous to the forgery cases where the registered proprietor of the relevant interest in respect of which equitable relief is sought, has done nothing to contribute either to the forgery or to the registration of the forged instrument. There must, in my opinion, have been some conduct on the part of the McGraths or those for whom they were responsible which would make it unconscionable for them to retain the benefit of the servient land free from the burden of the claimed right of way. In my view, there was no such conduct. Thus the mere simultaneous transfer of the two lots by Mrs Chiplin to the Campbells and McGraths respectively, and to the knowledge of each, was, in my opinion, insufficient to give rise to an equity binding upon the McGraths. This is so notwithstanding that Mr McGrath was generally aware that the driveway over Lot 12 had been used in the past to gain access to the rear of Lot 6, due to his familiarity with the locality. I would add this. The Aldridge v  Wright extension to a Wheeldon v  Burrows easement is, as I have already noted, dependent upon the presumed intention of all three parties that the easement is to benefit the dominant tenement and to burden the servient tenement. 807

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This presumed intention is the basis for an implied term in the grant by the common vendor to the transferee/purchaser of each tenement. It arises by operation of law. But mere knowledge on the part of the transferee of the putative servient tenement that both tenements are to be transferred by the common vendor simultaneously does not involve any relevant conduct on the part of that transferee. He or she has not created the easement and he or she is not a party to the transfer to the purchaser of the putative dominant tenement. Although aware that such a transfer is to occur, the purchaser of the putative servient tenement is not only unaware of the terms of the contract between the common vendor and the purchaser of the putative dominant tenement but also has no control over those terms or, for that matter, when the transfer is to take place. There was no suggestion in the present case that the simultaneous transfers were due to any request or conduct on the part of the McGraths. As far as one can tell, it came about solely for the benefit and at the insistence of Mrs Chiplin. In these circumstances there was no conduct on the part of the McGraths to which any equity could attach to bind them personally. One further aspect of the personal equity issue should be mentioned. The relief granted by the primary judge to the Campbells was analogous to rectification of the Register. The equitable basis of the remedy of rectification of a contract is that in its executed form the contract does not represent or embody the actual common intention of the parties: Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350; Codelfa at 346. The requirement of an actual, as distinct from a presumed, common intention in the context of the equitable remedy of rectification, it seems to me, may be applied by analogy to the present case. In other words, no relevant equity arises to bind the McGraths unless it is established that it was the actual common intention of all three parties that Lot 6 should have the benefit of, and that Lot 12 should be subject to the burden of, a right of way over the driveway. In my view, even if that was the intention of Mrs Chiplin and the Campbells, it was not that of the McGraths. Finally, I come to the recent decision of this Court in Williams v  State Transit Authority of New South Wales. It is true, as the primary judge observed, that this case involved an easement by prescription. Mason P, with whom Sheller JA and myself agreed, noted (at 297) that text writers (including Professor Butt) had expressed the view that prescriptive easements based upon the doctrine of lost modern grant did not trump the registered proprietor’s indefeasible title by means of the statutory exception in s 42(1)(a1) of the RP Act. At 300 the President observed that it was: ‘… to pile fiction upon fiction to extend the doctrine of lost modern grant into the Torrens system, because (assuming no relevant exception to s  42 or its equivalents) that system contemplates title at law as arising only upon registration.’ Special leave to appeal to the High Court from this Court’s decision in Williams was refused on 29 April 2005. In the 5th edition of Land Law at 779, Professor Butt refers to Williams as requiring reconsideration of the in personam enforcement of (unregistered) implied easements. The learned author observed that this Court in Williams refused to recognise the in personam enforcement of prescriptive easements. He continued: ‘Since prescriptive easements and implied easements share a common feature arising by operation of law and without any registrable dealing, refusal to recognise the in personam enforceability of prescriptive easements must logically cast doubt on the in personam enforceability of implied easements.’ Professor Butt noted that the primary judge in the present case declined to apply this logic. However, the learned author observed that: ‘Given the relevant similarities between prescriptive and implied easements, it is difficult why it [the logic] should not apply.’ 808

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In my opinion, there is much force in Professor Butt’s observations about the effect of Williams upon implied easements of the Wheeldon v  Burrows type. As he observes, and as I have endeavoured to demonstrate, such an implied easement arises out of the common intention of the relevant parties, which is presumed by operation of law. Prescriptive easements arise in a similar way. If prescriptive easements are trumped by the indefeasibility provisions of the RP Act, logic requires that those provisions should apply to implied easements in the same way. However, it is unnecessary for me to express a concluded view on this issue. Turning to the Aldridge v  Wright exception to the second rule articulated by Thesiger LJ in Wheeldon v Burrows, which presumes an implied reservation by the grantor over the servient tenement where there is a simultaneous transfer of both the putative dominant and servient tenements by the grantor to two separate ownerships, I do not consider that it is sufficient to give rise to a ‘personal equity’ which bound the McGraths and which the Campbells were entitled to enforce against them. This is so notwithstanding the knowledge of the McGraths of the past use of the driveway over Lot 12 to gain access to the businesses conducted in the building upon Lot 6 and of their knowledge of the simultaneous transfer of Lot 6 to the Campbells. Accordingly, for the aforementioned reasons, in my view the primary judge erred in his finding that the present case came within the in personam exception to statutory indefeasibility so that the RP Act did not prevent the enforcement by the Campbells against the McGraths of an implied right of way over the driveway on Lot 12. (Appeal allowed. Giles JA and Hodgson JA agreed.)

Commentary 11.68  Tobias JA in McGrath v  Campbell held that a personal equity could not arise purely on the basis of simultaneous title transfers in circumstances where the new owners of the servient tenement had not in any way contributed to the creation of the implied easement or conducted themselves in any way which could be regarded as unconscionable. It was, however, possible for an equity to arise in circumstances where a registered proprietor transferred the dominant tenement to another, with the presumed intention of transferring the attached benefit. According to Tobias JA, where a registered proprietor intends, through words and conduct, to grant the benefit of an easement to the transferee of a dominant tenement, it would be inequitable for that proprietor to renege from that intention and derogate from the grant. The proprietor should be responsible for the equitable consequences of his or her intention and therefore bound by his in personam responsibilities. This conclusion accords with fundamental equitable principles and supports the expectations flowing from this type of transfer.

Tenancies 11.69  Leasehold interests that have not been registered or that are unregistrable will be

immune from the effects of a subsequent registration in all states. Once again, scope of the protection conferred upon a tenancy varies from state to state. The widest protection is conferred in Victoria where s 42(2)(e) of the Transfer of Land Act 1958 (Vic) sets out that protection is conferred upon the ‘interest of a tenant in possession of the land (excluding any option to purchase)’. The only requirements for coming within the application of this provision would appear to be that the interest constitutes a valid lease and that the tenant has taken that lease in possession. It has been held that the provision is broad enough to include the interest of a tenant under an agreement of a lease and any equity of rectification that a tenant may acquire from a lease. In Downie v  Lockwood [1965] VR 257, Smith J 809

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rationalised the subjection of a registered title holder to an equitable lease in the following way: In the present case there was a reason, additional to the priority in time of the plaintiff ’s equitable interest, why that interest was not affected by the making of the defendant’s contract. What the defendants contracted to purchase was not an unencumbered fee simple in possession. It was merely the fee ‘subject to a lease to Cecil Norman Downie’. And those words have reference, in my view, not to any instrument of lease, but to the leasehold interest, whatever its extent and incidents might be, that the plaintiff was then entitled to as against the vendor. The defendants, therefore, were not subsequent purchasers of the plaintiff ’s interest, nor of any interest which could include or conflict with the plaintiff ’s interest: and it follows, I consider that they were not assisted by the doctrine as to subsequent purchasers for value and were in no stronger position as against the plaintiff than their vendor had been … For these reasons, I consider that the plaintiff ’s interest, immediately before the defendants obtained registration, was an equitable leasehold interest upon terms which did not impose on him any obligation to pay rates or premiums nor confer any power of re-entry or nonpayment thereof. And by virtue of s 42(2)(e) the defendants, I consider, hold the land subject to this interest, so that, in effect, the plaintiff is entitled as against them to the benefits which would arise from an order for the rectification that he seeks.

See also Ong v Luong [1991] ANZ Conv R 596 at 599, where McClelland J noted that there is ‘no equivalent of s 42(2)(e) of the Victorian Act in the New South Wales Real Property Act, and so the chain of reasoning in Downie can have no application in New South Wales’. See also: Tanzone v Westpac [1999] NSW Conv R 55-908 at [42]; Perpetual Trustee Co Ltd v Smith (2010) 273 ALR 469 at [64]; We Are Here Pty Ltd v Zandata Pty Ltd [2010] NSW Conv 56-262 at [39]. 11.70  In New South Wales, the Real Property Act (1900) takes a more restricted approach

to tenancies. Section 42(1)(d) is extracted below. EXTRACT Real Property Act 1900 (NSW) — s 42

42  Estate of registered proprietor paramount (1) 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 the case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except: (d) a tenancy whereunder the tenant is in possession or entitled to immediate possession, and an agreement or option for the acquisition by such a tenant of a further term to commence at the expiration of such a tenancy, of which in either case the registered proprietor before he or she became registered as proprietor had notice against which he or she was not protected: Provided that: (i) The term for which the tenancy was created does not exceed three years, and (ii) in the case of such an agreement or option, the additional term for which it provides would not, when added to the original term, exceed three years. 810

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Section  42(1)(d) sets out that only tenancies which are three years or less including the option to renew, which are taken in immediate possession and which the registered proprietor takes with notice of will be protected against the effects of subsequent registration. Notice in this context includes constructive notice and was defined by Sugerman JA in United Starr-Bowkett Co-operative Building Society v Clyne [1968] 1 NSWR 134 at 142 to mean: … The result, in combination, of s 42(1)(d) and s 43A in my opinion is that, notwithstanding registration, the purchaser holds subject to a tenancy for a term not exceeding three years created by a previous registered proprietor (whereunder the tenant is in possession or entitled to immediate possession) if he had notice of that tenancy before he obtained a registrable instrument, or one which when appropriately signed by him or on his behalf would be registrable, that is, before completion of his purchase.

In Queensland, the Land Title Act 1994, s 170(1)(b) sets out that the interest of a tenant under a short-term lease will be protected against the effects of subsequent registration. A short-term lease is defined in s 4 to mean a lease for three years or less. In the Northern Territory and South Australia, the Real Property Act 1886 s 69(h) sets out that leases where a tenant is in ‘actual possession of the land under an unregistered lease or an agreement for a lease or for letting for a term not exceeding one year’ will be protected against the effects of subsequent registration. In Tasmania, the Land Titles Act 1980 s 40(3)(d) protects the interest of a tenant: … under (i) a periodic lease; (ii) a lease taking effect in possession for a term not exceeding 3 years (the fact that the tenant may be entitled to extend the period will be irrelevant) and (iii) an equitable lease, except as against a bona fide purchaser for value without notice of the lease who has lodged a transfer for registration.

In Western Australia, s 63 of the Transfer of Land Act 1893 protects ‘any prior unregistered lease or agreement for lease or for letting for a term not exceeding five years to a tenant in actual possession’. In the Australian Capital Territory, s 58(d) of the Land Titles Act 1925 confers protection upon ‘any prior tenancy for a term not exceeding three years’.

State Guarantee of Title 11.71  The concept of indefeasibility forms the foundation of the Torrens system.

Its effect, however, has the potential to deprive innocent title holders of their land. Consequently, the legislation in each state sets out a compensation regime from a stateguaranteed insurance fund. The legislation in all states provides for such compensation to interest-holders in a range of circumstances. See: Real Property Act 1900 (NSW) ss 120 and 128–35; Land Titles Act 1980 (Tas) ss 127 and 128; Land Title Act 1994 (Qld) ss 188–90; Transfer of Land Act 1958 (Vic) ss 108–11; Transfer of Land Act 1893 (WA) ss 201 and 205–11; Real Property Act 1886 (SA) ss 201–05 and 207–19; Land Titles Act 1925 (ACT) ss 143–51 and 154–55; Land Title Act 2000 (NT) ss 192–96. Most state funds were originally funded by contributions from specific users of the system. However, this practice has been abolished in some states. In New  South  Wales the ‘contribution’ style fund was replaced by the ‘Torrens assurance fund’ in 1987 (see also the Real Property Amendment (Compensation) Act 2000), and in Victoria, the ‘contribution’ style fund was abolished in 1983 and claims are now paid out of consolidated revenue. There has been academic debate about whether the assurance funds should be replaced or complemented by a private insurance scheme: see, for example, P O’Connor, ‘Double Indemnity — Title Insurance and the Torrens System’ [2003] QUTLJ 9; J Flaws, 811

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‘Compensation for Loss under the Torrens System — Extending State Compensation with Private Insurance’ (www.firsttitle.com.au); D Grinlinton, Torrens in the Twentyfirst Century (2003) at  418. If title holders were covered by private insurance schemes the potential for loss would be greatly reduced. This would be particularly advantageous given the potential problems flowing from the rapid introduction of electronic titles and computer-based conveyancing.

Bringing the land under the Act 11.72  In all jurisdictions, a person who is deprived of his or her interest and thereby

suffers loss as a consequence of bringing the land under the Torrens system is entitled to compensation. However, except in Queensland and the Australian Capital Territory, if the claimant had notice of the application and failed to do anything about it, no compensation is payable: Real Property Act  1900 (NSW) s  129(1)(d); Land Title Act  1994 (Qld) s 188(1)(b); Land Titles Act 1980 (Tas) s 152(1)(b); Transfer of Land Act 1958 (Vic) s 110(1) (a); Transfer of Land Act 1893 (WA) s 201; Real Property Act 1886 (SA) s 203; Land Titles Act 1925 (ACT) s 154(1)(b); Land Title Act 2000 (NT) s 193(1)(a)(b).

Deprivation of an interest or estate from fraud 11.73  In all jurisdictions except Victoria, a person who has been deprived of an estate

or interest in land in consequence of fraud may make a claim for compensation: Real Property Act 1900 (NSW) s 129(1)(e); Land Titles Act 1980 (Tas) s 152(1)(a); Transfer of Land Act 1893 (WA) s 201; Real Property Act 1886 (SA) s 203; Land Titles Act 1925 (ACT) s 154(1)(a); Land Title Act 2000 (NT) s 192(1)(a). In this context, fraud has been given a broad and natural interpretation to refer to behaviour that has an unfair consequence and is connected with the loss of an estate or interest in land: see Parker v Registrar-General [1977] 1 NSWLR 22 at 25, where Parker JA stated: ‘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 quasiforgery.’ See also Saade v Registrar-General (1993) 179 CLR 58; Elfar v Registrar-General of New South Wales [2010] NSWSC 539 at [197].

11.74  The scope and meaning of ‘deprivation’ was also discussed by Windeyer J in

Diemasters v Meadowcorp (2001) 52 NSWLR 572, which is extracted below.

  Diemasters v Meadowcorp  [2001] 52 NSWLR 572 Facts: The plaintiffs were mortgagees who lent money to Meadowcorp Pty Ltd on the security of land owned by Meadowcorp at  Lakesland. The sole director of Meadowcorp, Mr  Tooth, procured a discharge of the mortgage through stolen and forged cheques. The land was then sold by Meadowcorp to Chelliah and Jain. The discharge of mortgage and the transfer were lodged for registration but the mortgagees lodged a caveat to protect their interest and prevent registration. The mortgagees sought to uphold their interest against that of the purchasers, Chelliah and Jain who, in the event of that claim being successful, sought compensation from the Torrens Assurance Fund. 812

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Windeyer J: … Claim under Torrens Assurance Fund The claim of Jain is made under s 129(1) of the Act which is as follows: ‘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 Part 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. Nevertheless I should consider the matter on the basis Jain is not affected by his co-owner’s fraud. 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 RegistrarGeneral was: (a) Jain has not suffered any loss or damage ‘as a result of operation of the Act’; 813

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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: ‘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 of 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 The Registrar-General [1983] NSW Conv R 55-128. 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, paragraph 2085; Heid v Connell Investments Pty Limited (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 registration 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 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 Law Reform Commission: Report 76 (1996) Torrens Title: Compensation for Loss; and the second reading speech of the Minister: Hansard NSW LA 3 May 2000 p 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 814

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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 Robinson’s case would be decided differently under the new legislation, because the innocent mortgagee as bona fide 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 registration, 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 compensation 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 The Registrar of Titles [1902] St R Qd 78 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 circumstances 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 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. … 815

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Commentary 11.75  The judgment of Windeyer J in Diemasters sets out that fraud for the purposes

of the New South Wales legislation can include deprivation of an interest by a subsequent registration, as well as deprivation of an interest resulting from a fraudulent activity enabling a prior registered interest to sustain its indefeasibility. Deprivation was given a broad meaning to include ‘take away’, ‘keep a person from possessing or enjoying something’ and ‘keep out or debar’. This meant that, on the facts, the purchaser was entitled to argue that the impact of the prior registration upon the lodged transfer did constitute a deprivation within the meaning of the legislation. While the Victorian provisions do not contain any specific reference to fraud, the provisions may nevertheless encompass fraudulent behaviour in the other broad categories that are outlined. In Victoria, s 110 of the Transfer of Land Act 1958 lists a range of circumstances pursuant to which a person who has been defrauded may claim compensation, including loss by the registration of any other person as proprietor and loss where the party involved has not been privy to the transactions. See further Saade v Registrar-General (1993) 179 CLR 58. The implementation of electronic conveyancing (see the discussion in Chapter 12) is likely to result in a reduction in the number of claims made against the assurance fund, which were largely the product of the transposing of information (such as omitted easements, removed caveats etc) and the misplacing of dealings such as mortgages. It will also reduce the ability of ‘trusted agents’ to commit fraud because obtaining the certificate of title will be minimised given the implementation of digital signature technology and improved model participation rules. While there is always the danger that authorised third party subscribers will be amenable to security breaches and have the capacity to commit fraud, the measures implemented within the Electronic Conveyancing National Law (ECNL) are likely to reduce the incidence of this. Section 110 is extracted below: EXTRACT Transfer of Land Act 1958 (Vic) — s 110 110  Entitlement to indemnity (1) Subject to this Act any person sustaining loss or damage (whether by deprivation of land or otherwise) by reason of — (a) the bringing of any land under this Act under Division 2 of Part II or by the creation of a provisional folio under Division 3 of Part II; (aa) a legal practitioner’s failure to disclose in a legal practitioner’s certificate a defect in title or the existence of an estate or interest in land; (b) any amendment of the Register; (c) any error omission or misdescription in the Register or the registration of any other person as proprietor; (d) any payment or consideration given to any other person on the faith of any recording in the Register; (e) the loss or destruction of any document lodged at the Office of Titles for inspection or safe custody or any error in any official search; 816

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(f) any omission mistake or misfeasance of the Registrar or any officer in the execution of his duties; (g) the exercise by the Registrar of any of the powers conferred on him in any case where the person sustaining loss or damage has not been a party or privy to the application or dealing in connexion with which such power was exercised — shall be entitled to be indemnified. (1A)Section  109(2)(c) does not apply to a person entitled to be indemnified under sub-section (1)(aa) of this section. (2) Any person claiming to be so entitled may bring an action against the Registrar as nominal defendant for recovery of damages or join the Registrar as nominal co-defendant in any action brought by such person in respect of such loss against any other person and the Registrar may join any other person as co-defendant in any such proceedings. (3) No indemnity shall be payable under this Act — (a) where the claimant his legal practitioner or agent caused or substantially contributed to the loss by fraud neglect or wilful default or derives title (otherwise than under a disposition for valuable consideration which is registered in the Register) from a person who or whose legal practitioner or agent has been guilty of such fraud neglect or wilful default (and the onus shall rest upon the applicant of negativing any such fraud, neglect or wilful default); (b) on account of costs incurred in taking or defending any legal proceedings without the consent of the Registrar, except any costs which may be awarded against the Registrar, except any costs which may be awarded against the Registrar in any proceedings in which the Registrar is a party; (c) in consequence of the Registrar’s not inquiring as to whether a power of attorney was in force when anything purporting to have been done under the power and falling within its scope was done; (d) where the Registrar, under section  22(1AC) of the Subdivision Act  1988, has treated a consent or request made on behalf of the person whose consent to the registration of the plan is required as being the consent of that person, in consequence of that consent being given or that request being made without lawful authority. (4) Any indemnity paid in respect of the loss of any estate or interest in land shall not exceed — (a) where the Register is not amended, the value of the estate or interest at the time when the error omission mistake or misfeasance which caused the loss was made; (b) where the Register is amended, the value of the estate or interest immediately before the time of amendment. (5) If in any action under this section judgment is given in favour of the Registrar or the plaintiff discontinues or is nonsuited the plaintiff shall be liable to pay the full costs of the Registrar in the action, but save as aforesaid the Court may make such order as to costs as it thinks fit. (6) Any sum by way of indemnity or costs awarded against the Registrar under this section shall be paid from moneys available for the purpose.

817

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Error or misdescription in the Register 11.76  In all jurisdictions, loss suffered as a result of any error, omission or misdescription

of the Register will form the basis for a compensation claim: Land Titles Act 1925 (ACT) s  154(1)(d); Real Property Act  1900 (NSW) s  120(1)(b); Land Titles Act  1980 (Tas) s  152(1)(d); Transfer of Land Act  1958 (Vic) s  110(1)(c); Transfer of Land Act  1893 (WA) s 201; Real Property Act 1886 (SA) s 203; Land Title Act 1994 (Qld) s 188(1)(b); Land Title Act 2000 (NT) s 192(1)(b). Where it can be established that the Register lacks something that would have been expected to have been included, any loss flowing from this omission will be compensatable: Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98. In Cirino v Registrar-General (1993) 6 BPR 13,260 at 13,263, Cole J considered the scope of the old New South Wales provisions noting: … ‘omission’ where used in s 127 does not necessarily involve failure to comply with a duty. It merely means absence of a material entry (Dobbie v  Davidson) [1991] 23 NSWLR 625 (compare Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98). ‘Omission’ has the same meaning in s 42(1)(b) as it does in s 126 and where secondly appearing in s 127(1).

In Challenger Managed Investments Ltd v  Direct Money Corporation Pty Ltd [2003] NSWSC 1072, Bryson J, in discussing the provisions of the New South Wales legislation under Pt 14, broadly agreed with the conclusions of Cole J in Cirino v Registrar-General and made the following comments at [73]–[76]: An omission of the Registrar-General in the execution of performance of functions or duties (as in (a)) may involve something which could be regarded as a fault; an act of the Registrar-General in the execution or performance of functions or duties under the Act (also as in (a)) very well may not. An error or omission in an official search as in para (f) would probably involve some fault; an error, misdescription or omission in the Register referred to in para (c) might well involve some fault but very well might not, depending on how the error, misdescription or omission arose. There will be many situations of fact in which there has been no fault of any kind of the Registrar-General but a person who suffers loss or damage has an entitlement to payment of compensation. Where a plaintiff alleges that there has been some fault in an act, omission, error, misdescription or otherwise, the plaintiff may prove it in the course of proving that the loss or damage arises from one of the cases in paras (a) to (f). Paragraph (e), relating to a person’s having been deprived of land as a consequence of fraud, will usually arise in a situation where some fraud has been practised that cannot be said to involve any fault of the RegistrarGeneral, who with others was a victim of it. The overall control mechanism in subs 129(1) is that the plaintiff must have suffered loss or damage as a result of the operation of the Act; and the workings of indefeasibility will usually have a part in the plaintiff ’s rights being in a worse situation than he was entitled to have them but for the operation of the Act. To illustrate these observations by reference to s 111, deciding that he is satisfied that a Certificate of Title has been lost, mislaid or destroyed is something that subs 111(3) authorises the Registrar-General to do, and issuing a new Certificate of Title is something that subs 111(3) authorises Registrar-Generals to do if they are so satisfied. Attaining a state of satisfaction and issuing a new Certificate of Title may, in later litigation, be shown to have been wrong in the sense that it was not true that the Certificate of Title had been lost, mislaid or destroyed; and this could have arisen because Registrar-Generals have no grounds to be satisfied of that matter, or because they decided that they were satisfied on grounds that are later criticised as inadequate, or because they decided that they were satisfied on grounds which were altogether convincing but in retrospect can be shown to have been wrong. In each of these situations the 818

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person who suffered loss or damage arising from the issue of a new Certificate of Title where the Certificate of Title had not in fact been lost, mislaid or destroyed is given an entitlement to payment of compensation. The amendments operate as a wide-ranging reform of the Assurance Fund. There are several illustrations of this in Pt 14. One is the specification in s 129(2) of a number of circumstances in which compensation is not payable, including where it would not be necessary to specify if the liability to pay compensation arose under the law of negligence or principles analogous to it. Section 130 authorises ex gratia payments. Section 131 establishes administrative procedures for determination of claims without litigation. Section  135 gives the Registrar-General authority to settle claim without litigation. Provision is made in s 134(4) for fees payable for lodgment of dealings to include an amount to be paid into the Torrens Assurance Fund. Overall, where loss or damage is incurred as a result of the operation of the Act, compensation will be provided for as a part of the ordinary workings of the Torrens System, rather than being treated as an extraordinary remedy reserved for faults, blunders or enormities.

Registration of another person 11.77  In all jurisdictions, loss flowing from the registration of any other person as

proprietor will form the basis of a claim for compensation. Where it can be established that the loss has occurred as a direct result of the registration of another party as proprietor, whether or not this is a consequence of fraud, error etc, compensation may be payable. This category may overlap with one of the other compensation categories. The process of bringing a compensation claim varies from state to state. In the Australian Capital Territory, South Australia, Tasmania and Western Australia, a compensation claim may not be brought until it can be established that an action has first been brought directly against the person who is responsible for the loss: Real Property Act 1886 (SA) ss 203–05; Transfer of Land Act 1893 (WA) s 201; Land Titles Act 1980 (Tas) s 152(2)(b); Land Titles Act 1925 (ACT) s 154(1)(a). The other states no longer retain this pre-requisite. Legislation in all states specifically restricts some circumstances in which compensation may be payable and these include: loss occasioned by a breach of trust; loss flowing from a situation where the same land has been included in two or more Crown grants; loss flowing from land being included in the same certificate of title through misdescription of boundaries or parcels of land; and (in New  South  Wales, the Northern Territory, Queensland and Victoria only) loss where a substantial contribution has been the fraud or neglect of the claimant’s legal practitioner: Real Property Act 1900 (NSW) s 129(2)(b)(i); Land Titles Act (NT) s 195(1)(b); Land Title Act 1994 (Qld) s 189(1)(b); Transfer of Land Act 1958 (Vic) s 110(3)(a).

Registrar’s Power to Correct the Register 11.78  In all jurisdictions, the Register is given express power to correct the Registrar:

Real Property Act 1900 (NSW) s 12(1)(d); Land Titles Act 1980 (Tas) s 139(1); Land Title Act 1994 (Qld) s 15(1)(a); Transfer of Land Act 1958 (Vic) s 103(2)(a); Transfer of Land Act  1893 (WA) s  188(1)(3); Real Property Act  1886 (SA) s  220(f); Land Title Act  1925 (ACT) s 14(1)(e); Land Titles Act 2000 (NT) s 17(1)(a). This power has been interpreted strictly in most states. In  Frazer v  Walker it was described as a ‘slip rule’, designed to correct obvious administrative errors with no substantive importance. In State Bank of New South Wales v Berowra Waters Holdings (1986) 4 NSWLR 398, Needham J concluded that this provision did not entitle the Registrar to ‘breach the ramparts of indefeasibility’ 819

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and did not entitle the Registrar to ‘create a situation forbidden by the Act’. His Honour was inclined to the view that the provision was restricted to the correction of ‘departmental errors and omissions’, but did not reach a conclusion on this point given that the facts themselves did not constitute an error in the Register because the document in issue was a discharge of mortgage that was a registrable document, intended to be lodged over which the Registrar-General made no error in recording. In all states the power to correct is subject to the requirement that it not prejudice any rights acquired before the correction. In Re  N Jobson and the Real Property Act  1900 (1951) 68 WN (NSW) 23, a transfer was registered due to the lapsing, in error, of a caveat. The transfer entry was deleted using the registrar’s power of correction under s 12(d) of the Real Property Act 1900 (NSW). The court concluded that the lapsing of the caveat and the registration of the memorandum of transfer were part of the same overall error and therefore did not prejudice any previously acquired rights in the caveat. Further, in James v  Registrar-General (1967) 69 SR (NSW) 361, a majority of the New  South  Wales Court of Appeal concluded that the power could be used to correct the Register and restore the entry of an easement to a servient tenement that had been erroneously omitted by the Registrar and that, at the time of the correction, the registered proprietor had no knowledge of. One of the difficulties was that s 12(d) of the Real Property Act 1900 (NSW) sets out that every correction shall have the same validity and effect as if the error had not been made except as regards entries made in the registry book prior to the actual time of the correction. Wallace P and Jacobs JA in the majority concluded that ‘validly created’ easements that had been omitted were not affected by a subsequent registration and this justified the extension of the power to include a correction that effectively added an easement encumbrance. In a strong dissent, Walsh JA felt that the Registrar’s powers of correction should not be extended in such a way and that it was not intended that a person, who took with value an interest on the faith of the Register and subsequently became registered should be prejudiced by the Registrar’s power of correction. Note that s 15(3) of the Land Title Act 1994 (Qld), provides that the Registrar may correct the Register, whether or not the correction prejudices the rights of a registered interest holder where the aim of the correction is to show the details of an omitted or misdescribed easement. The decision in James v  Registrar-General is authority for the proposition that the Registrar is entitled to correct the register where an error is made by staff of the registrar and the error relates to an express exception to indefeasibility. For a more detailed discussion see  generally: M Weir, ‘Registrar’s Power of Correction — Queensland Reforms’ (1998) 6 Australian Property Law Journal 101; P J Carruthers and N K Skead, ‘The Registrar’s Powers of Correction: Alive and Well, Though Perhaps Unwelcome? Part 2: The Substantive Provision’ (2010) 18 Australian Property Law Journal 132. Ordinarily a Registrar should detect any errors within an instrument presented for registration and correct them prior to the registration proceeding. However, this process may eventually change with the introduction of a full electronic conveyancing process. Under such a system, lodgment and registration would effectively be simultaneous so that the detection process would necessarily have to occur after rather than before registration. Errors arising from any electronic network malfunction may be subject to specific statutory provisions. See, for example, s 44H of the Transfer of Land Act 1958 (Vic), which is extracted below.

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The Torrens System

11.79

EXTRACT Electronic lodgment network malfunction — s 44H 44H  Electronic lodgment network malfunction (1) The Registrar may amend the Register to correct errors in the Register and supply entries or recordings omitted to be made in the Register under this Act if the error or omission resulted from a malfunction of the electronic lodgment network. (2) The Registrar must keep a record of every correction under sub-section (1). (3) Every correction under sub-section (1) is to have the same validity and effect as if the error or omission had not occurred.

11.79  Revision Questions 1. What is the scope of the protection given to adverse possession and how does this protection differ between the states? 2. Are prescriptive easements given protection in all jurisdictions against the effects of a subsequent registration? Can prescriptive easements be enforced under the in personam exception to indefeasibility? 3. How did Tobias JA in McGrath v  Campbell [2006] NSW ConvR 56-159 rationalise the validation of some implied easements under the in personam exception? 4. What was the scope of the definition given to ‘deprivation’ by Windeyer J in Diemasters v MeadowCorp? 5. What scope does the Registrar have to correct errors in title when such corrections may impact upon the interests of registered title holders?

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Chapter 12

Electronic Conveyancing What is Electronic Conveyancing? 12.1 Regulatory Framework 12.5 Key Concepts 12.7 Acronyms 12.7 The documentary framework for PEXA 12.8 Client authorisation 12.9 Verification of identity 12.10 Digital signature 12.12 Extract: Transfer of Land Act 1958 — s 91M 12.15 Security 12.18 ECNL Fraud and the Torrens System 12.19 Extract: Electronic Conveyancing (Adoption of National Law) Act 2012 (NSW) — Appendix (s 5) 12.19 Electronic Certificate of Title 12.20 Extract: Real Property Act 1900 (NSW) — s 33AB 12.21 Summary of eCT developments in New South Wales 12.28 Developments for eCT in other states 12.29 Electronic Conveyancing and the Torrens System 12.30 Concerns and Risks Associated with Electronic Conveyancing 12.31 Benefits of Electronic Conveyancing 12.35 Conclusion 12.36 Revision Questions 12.37

What is Electronic Conveyancing? 12.1  Paper conveyancing has been prototypical within Australia since colonisation, and

the inheritance of the English doctrine of tenure and estates. The formal and ceremonial significance of the deed of conveyance, in evincing the publicly verifiable intention of a landowner to transfer that land to another has a long and venerable history. It is derived from the middle ages, when the significance of a land transfer was originally demonstrated by the passing of a clod of turf. This gradually morphed into a more formalised, streamlined process involving the execution of paper documentation by the transferor and transferee,

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a process that was subsequently regulated with the implementation of the Torrens system of land registration. Subsequently, many land registrars across the world became computerised, so that titles existed in a digital format. More recently, however, the concept, of a paperless, digital e-conveyance, has evolved; this has altered many of the formality protocols that were grounded in paper conventions. 12.2  In Australia digital conveyancing has a new regulatory framework that has been

implemented in accordance with the Electronic Conveyancing National Law (ECNL) adopted in every state. The aim of the framework was summarised as follows: Conveyancers, legal practitioners, financial institutions, mortgage processors and other players involved in conveyancing will be able to access the electronic conveyancing system online with an electronic workspace provided for each property transaction. The system will allow users to provide, secure, certify and sign documentation. Digital Signature Certificates (DSCs) will ensure authentication and prevent repudiation and various risk mitigation and fraud prevention measures will be taken. Financial settlement will occur through the Reserve Bank’s Information and Transfer System (RITS) and the State and Territory Revenue Offices will receive duty and tax payments electronically. Consumers will be able to track the progress of their transaction via Internet access … Financial institutions will be able to integrate their services and mortgage documentation systems with the system.1

12.3  The ECNL was first enacted in New  South  Wales in 2012 as an appendix to

its  Electronic Conveyancing (Adoption of National Law) Act  2012. This important new legislation was subsequently adopted in other participating states as either application legislation that adopts the NSW Appendix or corresponding legislation which is identical to the NSW Appendix.2 The aim of the ECNL is to establish a national, uniform, regulatory framework for the implementation of electronic conveyancing. The  framework was developed by the Australian Registrar’s National Electronic Conveyancing Council (ARNECC), a body comprising the Registrars in each state and territory. One of the core elements of the electronic framework is that conveyancing parties may utilise the electronic platform and devolve responsibility for the execution of paper conveyancing documents to authorised lawyers and agents who may then digitally sign the conveyancing documents using a digital certificate, on their behalf. The digitalisation of conveyancing will inevitably herald new efficiencies and remove systemic problems connected with paper documentation. It will, however, also generate new security risks for land registration that could potentially have reverberations for established principles associated with land conveyancing.

1. E Clark, ‘E-Conveyancing in Australia: An Important Step Along the Journey to E-Government’ (2011) 21 Journal of Information and Science 62 at 62; R Low and E Foo, ‘The Susceptibility of Digital Signatures to Fraud in the National Electronic Conveyancing System: An Analysis’ (2009) 17(3) Australian Property Law Journal; S Christensen, ‘A National Law for Electronic Conveyancing — New Rules and Practices for Queensland’, Conveyancing Manual Queensland, Thomson Reuters, Melbourne, 2012; S Christensen, ‘Electronic Land Dealings in Canada, New Zealand and the United Kingdom: Lessons for Australia’ (2004) 11(4) Murdoch University Electronic Journal of Law; D Weber, ‘Tech Neutrality in Australian Signature Law’ (2015/2016) 24(1) Journal of Law, Information and Science 101; M E Doversberger, ‘Conveyancing at a Crossroads: The Transition to E-Conveyancing Applications in the US and Abroad’ (2010) 20 Indiana International and Comparative Law Review 281. 2. See Victoria: Electronic Conveyancing (Adoption of National Law) Act 2013; Queensland: Electronic Conveyancing National Law (Queensland) Act 2013; Western Australia: Electronic Conveyancing Act  2014; South  Australia: Electronic Conveyancing National Law (South  Australia) Act  2013; Tasmania: Electronic Conveyancing (Adoption of National Law) Act  2013; Northern Territory: Electronic Conveyancing (National Uniform Legislation) Act  2013; Australian Capital Territory: Electronic Conveyancing National Law (ACT) Act 2020. 823

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12.4  The term ‘electronic conveyancing’ is itself a reference to a conveyancing transaction

whereby the parties and practitioners have elected to settle electronically through the electronic platform provided by Property Exchange Australia Limited (PEXA). The representatives of the parties and their financiers all participate in an electronic workspace, where the following is applied: (i) registry instruments are prepared and electronically signed. A registry instrument is defined broadly to correspond with the established definition of a conveyance and therefore includes not only instruments associated with the direct land transfer, but also instruments associated with the financing of that land transfer such as a mortgage, discharge or release of mortgage. (ii) The documents are lodged for registration and checked pre-settlement at  the relevant land titles office. (iii) At the agreed settlement date and time, provided the documents are in order for registration, the balance of purchase money is paid and proceeds of settlement are disbursed, the relevant registry instruments are electronically lodged for registration, with registration generally occurring on the same day. The settlement occurs within an online portal. Electronic conveyancing does not include the entire conveyancing transaction. The framework only applies to conveyances and therefore does not incorporate the initial land contract that remains subject to physical protocols. The reason for this is important. The vendor and purchaser of land must indicate their intention to be bound by the terms and conditions of the sale and enter the contract personally. Once contractual relations exist between the parties, the intention to transfer the land from the vendor to the purchaser is established. The conveyancing process necessarily follows this and the documents supporting this conveyancing process are a product of this contractual relationship. Electronic conveyancing therefore encompasses the preparation and lodgment of registry instruments necessary for the settlement and registration of the land conveyance. These include the land transfer, the caveat and the mortgage. All of these documents can be prepared electronically, executed using a digital signature and lodged for registration online. At the ensuing settlement, the transfer of funds and registration of title documents will occur immediately. Significantly, the virtual settlement itself involves no physical exchange of documents or a physical meeting of the parties. Rather, it is conducted within a virtual settlement room where digital registry instruments are lodged and funds are electronically transferred simultaneously. A physical conveyance involved the transacting parties lodging a caveat, executing a transfer and a mortgage (if relevant), and physically lodging the documents for registration following settlement, along with a paper duplicate certificate of title (or where the title is a computer title, the transfer is scanned and added to the computer file following lodgment). By contrast, an electronic conveyance involves no physical exchange. All registry instruments are prepared electronically and lodged by a digital subscriber. The aim of the ECNL is to ensure that as far as possible, the conveyancing process applies electronically in the same way that it would have applied physically. Modifications to the Torrens system have therefore been introduced in most states. For example, in New  South  Wales, s  3A(5) of the Real Property Act  1900 sets out that the Act applies to plans and documents lodged in electronic form in the same way as it applies to other plans and documents, subject only to modifications explicitly prescribed by that act or the Conveyancing Act 1919 (NSW). In the definition section, a ‘dealing’ is now defined to include an electronic form of any instrument, other than a caveat or a priority notice and the definition of ‘approved form’ includes an electronic data file containing a form 824

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that has been approved by the Registrar-General. Further, the conveyancing rules in s  12E of the Real Property Act have been redefined to include verification of identity and client authorisation processes. These provisions allow the Registrar to determine the classes of conveyancing transactions that must be lodged using an Electronic Lodgement Network instead of paper documents. The general powers of the Registrar under Pt 2 of the Real Property Act 1900 (NSW), to correct errors, lodge caveats and require parties to produce instruments relevant to land dealings are also applicable to electronic lodgments lodged in conjunction with the Electronic Conveyancing National Law (NSW).4 Similar transpositional provisions exist in other states.5 3

Regulatory Framework 12.5  The principal legislation, first enacted in New  South  Wales and subsequently

replicated in participating states and territories, is the ECNL. The national regulatory framework for electronic conveyancing was developed by ARNECC, a body comprised of the Registrars from all Australian states and territories. Two sets of Rules were established pursuant to the ECNL: (1) The Model Participation Rules (MPR), which govern the relationship between the electronic lodgment network operator (ELNO) and participants in the system, such as lawyers; and (2) The Model Operating Requirements (MOR), which govern the relationship between the ELNO and the land title registries. The activities and responsibilities of lawyers choosing to use electronic conveyancing are primarily governed by the ECNL and the MPR, adopted in each state and territory as required pursuant to s  23 of the ECNL. It should be noted, however, that further refinements of the MPR and MOR are continuing. 12.6  In order to be a subscriber under the ECNL, the person or partnership must be

in a position to comply with the MPR.6 All subscribers must be of good character and

3. See s 3. 4. See s 12(6) of the Real Property Act 1900 (NSW). 5. In Victoria, as in New  South  Wales, the electronic certificate of title (eCT) may be held by any PEXA Subscriber. The Transfer of Land Act 1958 (Vic) does not contain provisions authorising the creation of alternative electronic certificate of titles in the same way that the Real Property Act 1900 (NSW) does. However, following the adoption of the ECNL a ‘document’ is specifically defined to include ‘any record of information that exists in a digital form and is capable of being reproduced, transmitted, stored and duplicated by electronic means’. The same principle applies to Queensland, Western Australia, South Australia, Tasmania and the Northern Territory, which have all adopted the national law. See, for example, Transfer of Land Act  1958 (Vic) s  3, where the definition of a conveyancing transaction is given the same meaning as it has under the ECNL. Part IIIA specifically deals with electronic instruments. Section  44A sets out that the Registrar is entitled to reject an electronic instrument if it is not in the requisite form approved by the Registrar and the ECNL. Further, instruments receive priority in accordance with the date of lodgment for registration and the Registrar must ensure that this principle is complied with when dealing with electronic instruments (s 44E), and the Registrar must produce a document in writing recording information that was registered and recorded on a folio as a result of an electronic instrument. 6. See ARNECC Model Participation Rules, Version 3, Rule 3, Published September, 2015. Available at  . 825

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Australian Property Law

reputation, and must not have been insolvent within the preceding five years, have a conviction for fraud or an indictable offence, or any offence for dishonesty regarding business, professional or commercial affairs. The MPR explicitly sets out that a subscriber will act as an agent for a client when digitally signing electronic documents on their behalf.7

Key Concepts Acronyms 12.7  The ECNL contains a number of newly created terms and acronyms that need to be

understood. Some of the most important ones include:

ARNECC — Australian Registrars’ National Electronic Conveyancing Council. A body comprised of the Registrars from all Australian states and territories. ELNO — electronic lodgment network operator. This is effectively the party operating the electronic platform. The first ELNO for Australia is PEXA. MOR — Model Operating Requirements. The rules governing the relationship between the ELNO and the land title registries. MPR — Model Participation Rules. The rules governing the relationship between the ELNO and participants in the system such as lawyers. PEXA — Property Exchange Australia Limited. PEXA itself is both the company providing the electronic platform as well as the electronic platform system itself. By the end of 2016 PEXA had approximately 3403 participating members and $29 billion in transactions. PEXA was formed in 2010 to fulfil the Council of Australian Governments’ (COAG) initiative for uniform electronic conveyancing. PEXA was originally known as National e-Conveyancing Development Limited. PEXA, the company, is limited by shares and its key shareholders are: the Victorian, New South Wales, Queensland and Western Australian governments, the four major banks, Macquarie Capital, Link Group and Little Group. PEXA is essentially the platform that allows buyers, sellers, mortgagees and conveyancing agents to work in a single online space when dealing with land conveyances. A communication will occur via this online space which means, as Professor Griggs has pointed out: It will obviate the need for the parties to meet to settle, communication between stakeholders will occur within the workspace, online pre-lodgment verification should eliminate text-based errors, and electronic transfer will facilitate the exchange of monies. With possible linkages to the land title offices, registration of documents should be greatly enhanced with some of the current problems that arise between settlement and registration less likely to occur.8

Subscriber — A person or entity authorised to conduct electronic conveyancing transactions using the ELNO on behalf of a client, such as solicitors or conveyancers, or on their own behalf. Sympli — A second ELNO has received preliminary authorisation for operation in Australia. This is known as Sympli, which is a partnership between the Australian Stock Exchange and Infotrack. Sympli entered the market in 2018. In Victoria, clients can 7. Above MPR r 5.1.2. 8. L Griggs, ‘It’s a New Day, It’s a New Dawn, It’s a New Life … PEXA, Electronic Conveyancing and Consumers’ (2016) 6 Property Law Review 117. 826

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lodge caveats, withdrawals of caveats, mortgages and discharges with Sympli. Rules for interoperability (the sharing of information) between ELNOs are yet to be finalised.

The documentary framework for PEXA 12.8  The principal agreement governing the relationship between legal practitioners and

PEXA is known as the Participation Agreement. The Participation Agreement incorporates a number of other documents or policies that include: • The Service Charter; • The Security Policy; • The Pricing Policy; and • The Standard Operating Environment Requirements. The key subscriber obligations are outlined in r 3 of the PEXA Subscriber Security Policy, which sets out the following: 1. Key Subscriber Obligations 1.1 General 3.1.1 Compliance The Subscriber must comply with its security obligations as contained in this Policy and the Participation Rules. 3.1.2 Systems Security The Subscriber must take all prudent and reasonable steps to: (a) ensure that all of its systems and facilities which it uses to access the PEXA System are protected by the Logical Security measures set out in section 3.2 of this Policy and the Physical Security measures set out in section 3.3 of this Policy; (b) prevent unauthorised access, damage or interference to PEXA’s electronic systems, an Electronic Workspace or the ELN by any person employed or engaged by the Subscriber; or through any systems or access points owned or controlled by the Subscriber and through which the Subscriber can connect to PEXA, an Electronic Workspace or the ELN; and (c) ensure the integrity and confidentiality of information retrieved or received from PEXA, and information supplied to PEXA. The Subscriber must, immediately upon becoming aware, notify PEXA of any breach or suspected breach of this Policy and, to the extent permissible, of the security measures taken to deal with the breach and any potential future breaches of a similar type, method or process. 3.1.3 Supported devices The PEXA System does not currently support tablet and smartphone access. It is possible to access the PEXA System using smartphones and tablets, however Subscribers will not be able to access full PEXA functionality (e.g. no digital signing functionality). PEXA does not recommend accessing the PEXA System from smart phones and tablets and does not guarantee system functionality when accessing the PEXA System from these devices. 3.1.4 Loss Mitigation Subscribers must, immediately upon becoming aware of any theft, unauthorised disclosure or improper use of credentials and Digital Certificates used for accessing the PEXA System, ensure that they implement appropriate measures to mitigate any loss that may arise as a result of such theft, unauthorised disclosure or improper use. 827

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Australian Property Law

Client authorisation 12.9  For a subscriber to conduct the client’s conveyance using PEXA, the client must

first provide written authorisation in the form of a Client Authorisation. This authorisation is set up in accordance with the prescribed form set out in Sch 4 of the MPR. The form must be signed by the client and further, the subscriber acting as agent for the client must also sign to certify that reasonable steps have been taken to ensure that the client authorisation was signed by the named client or client agent. The scope of the client authorisation includes: land transfer documents, mortgage documents and the lodgment of caveats. The client authorisation is a particularly crucial document because it provides authority for the subscriber to sign conveyancing documents on its behalf and to then go on and lodge these documents under the ECNL. This change is fundamental. The authorisation transposes the responsibility of the client for signing on their own behalf for the purchase and sale of land to the conveyancing agent holding the client authorisation. The standard form client authorisation explicitly sets out that the attorney acts on behalf of the client to (a) sign documents on the their behalf as required for the Conveyancing Transaction(s); (b) submit or authorise submission of documents for lodgment with the relevant Land Registry; (c) authorise any financial settlement involved in the conveyancing transaction(s); and (d) do anything else necessary to complete the conveyancing transaction(s). The client acknowledges that they are bound by any documents required in connection with a conveyancing transaction that the attorney signs on their behalf in accordance with the client authorisation. The legal scope of the client authorisation is expressly regulated by the ECNL (as adopted in each state) in the following manner: 10 Client authorisations (1) A client authorisation is a document: (a) that is in the form required by the participation rules, and (b) by which a party to a conveyancing transaction authorises a subscriber to do one or more things on that party’s behalf in connection with the transaction so that the transaction, or part of the transaction, can be completed electronically. (2) The following are examples of the things that a client authorisation may authorise a subscriber to do: (a) to digitally sign registry instruments or other documents, (b) to present registry instruments or other documents for lodgment electronically, and/or (c) to authorise or complete any associated financial transaction. 11 Effect of client authorisation (1) A properly completed client authorisation: (a) has effect according to its terms, and (b) is not a power of attorney for the purposes of any other law of this jurisdiction relating to powers of attorney. (2) If a client authorisation is properly completed, the requirements of any other law of this jurisdiction relating to the execution, signing, witnessing, attestation or sealing of documents must be regarded as having been fully satisfied. (3) Subsections (1) and (2) do not limit or affect the application of any law of this jurisdiction relating to powers of attorney in relation to: (a) the execution of a client authorisation under a power of attorney, or (b) a client authorisation executed under a power of attorney.

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Electronic Conveyancing

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Verification of identity 12.10  Given the importance of the client authorisation, in addition to certifying that the client or client’s agent has signed the document, a practitioner must also satisfy what is known as a Verification of Identity Standard (VOI Standard). Compliance with the VOI Standard deems a practitioner to have taken reasonable steps to identify the client; that is, to have the benefit of a ‘safe harbour’ should it turn out that the person who has signed the authorisation is not the actual client. The advantage of safe harbour lies in the fact that the practitioner avoids the evidential burden of having to establish that he or she took reasonable steps in identifying his or her client. If the VOI Standard is established, the evidentiary burden is assumed. 12.11  The verification may be undertaken by the practitioner or may be provided by an

Identity Agent. The VOI Standard is set out in Sch 8 of the MPR. A face-to-face interview must be conducted between the ‘identity verifier’, generally the subscriber and the person being identified, generally the person signing the client authorisation. For Australian residents the minimum documents required in this interview are: passport, drivers licence, change of name or marriage certificate, birth certificate, Medicare card, another form of government identification with photographic identity and an identifiers verification. The identity verifier is required to take further steps to verify the identity in circumstances where the verifier knows or ought reasonably to know that the documents produced by the person being identified are not genuine and/or the photographic evidence does not provide a reasonable likeness.9 Once the identity verifier is satisfied that the person being identified is genuine, and that the documents provided are satisfactory and in accordance with the requirements of the MPR, an Identity Agent Certification may be issued to finalise the VOI Standard. The certification will involve the identity verifier certifying that they have witnessed the person being identified executing the completed client authorisation.

Digital signature 12.12  Documents such as the transfer and the financial settlement statement are digitally signed in the electronic workspace using a digital certificate. A practitioner must obtain a digital certificate in order to ensure that relevant documents are capable of being digitally signed. A digital signature is defined within the ECNL as encrypted electronic data intended for the exclusive use of a particular person as a means of identifying that person as the sender of an electronic communication or the signer of a document.10 A digital signature differs from a written signature and an electronic signature. A digital signature is essentially an encrypted stamp of authentication on digital information. The signature confirms that the information originated from the signer and that it has not been altered. In this respect, it is essentially a security protocol. It identifies the signatory and provides proof against the falsification of the data it represents.11 Unlike the electronic signature, the digital signature is not a computerised version of a handwritten signature, but rather a signature that is created and verified through the use of public key infrastructure, which seeks to ensure the authenticity of the document’s content and the

9. See above MPR r 10. 10. See above MPR Pt 1 r 3, Definitions. 11. W Ford and M S Baum, Secure Electronic Commerce: Building the Infrastructure for Digital Signatures and Encryption, 2nd ed, Prentice Hall, Sydney, 2001. 829

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Australian Property Law

sender’s identity. Public key infrastructure involves the use of an algorithm that utilises a keypair. There is a public key and a corresponding private key. The public key is available to all. The private key is known only by the owner and can’t be derived from the public one. When a document is encrypted with the public key, only the corresponding private key can decrypt it. Furthermore, when something is encrypted with the private key, anyone can verify it with the corresponding public key. For example: 12

EXAMPLE Debbie’s private key is used to encrypt the hash of the document. That encrypted hash is called a digital signature. Debbie sends Stewart the document with the appended digital signature of the document. Stewart uses Debbie’s public key to decrypt the digital signature. Then, Stewart calculates the hash of the document and compares it to the decrypted digital signature of the document, which is the hash of the document. When those hashes match, Stewart knows who the sender of the message is, as well as the content of the message. There might be an interloper pretending to be Debbie. A digital certificate resolves this. Stewart gets the digital certificate from Debbie, which includes Debbie’s public key and Stewart’s name. The certificate is digitally signed by the trusted certificate authority (CA) — the hash of the certificate is encrypted with the private key of the trusted CA. Stewart has a list of these authorities. Stewart can verify that the public key belongs to Debbie. Security is only compromised if the private key held by Debbie is stolen.

The nature and effect of the digital signature is set out in the ECNL. Significantly, once a subscriber applies a valid, non-repudiated digital signature to a registry document or other document connected with a conveyancing transaction, the document is taken to have been signed by the subscriber and the signature is binding on the subscriber, as well as all other persons for whom the subscriber acts under a client authorisation. The document will also be enforceable against any person claiming through or under the transacting parties as well as the Registrar, once the registry instrument or conveyancing document is electronically lodged for registration.13 This represents a substantial shift in perspective to physical execution protocols. It is therefore imperative that private keys are kept secure and held by the person named on the digital signature individually. Furthermore, it is important, for archiving reasons, to ensure that the digital signature software has an effective archiving system to ensure that the data can be retrieved expediently if a dispute arises years after the signing has occurred. One of the biggest concerns with the digital signature and public-key cryptography lies in the fact that they depend upon the private key being kept secret. If there was a cyber-security issue or a data breach, and the private key was exposed, it could impact the enforceability of digitally signed documents because a party could dispute that he or she was the person who digitally signed the document. This is why client authorisation is important. Client authorisation effectively means that the parties confer authorisation for signing to the holder of the digital certificate. 12. M A Parmentier, ‘Electronic Signatures’ (2000) 6 Columbia Journal of European Law 251 at  255 (the  author notes that it is unclear whether digital signatures can fulfil the formal, evidentiary function of the paper signature). 13. ECNL s 12(1). 830

Electronic Conveyancing

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It is not entirely clear whether the application of the digital signature to an electronic registry instrument actually creates property. The ECNL sets out that a digital signature, issued by a certificate holder and verified through the use of public key infrastructure satisfies all requirements for execution, signing, witnessing, attestation or sealing. Section 9(1) of the ECNL makes it clear that an electronic registry instrument will have the same effect as if it were in a paper document. Section 9(2) sets out that a registry instrument digitally signed by a subscriber, acting in accordance with the participation rules, will have the same effect as if a paper document having the equivalent effect had been executed by each person who is a signatory to the client authorisation. Section 9(3) then makes it clear that a registry instrument that has been digitally signed in accordance with the participation rules is taken to be in writing and the requirements of signing, witnessing attestation or sealing are regarded as satisfied. The effect of these provisions is that electronic registry instruments are treated as if they are paper documents, and where they are digitally signed they will have the same effect as a paper document that has been executed and will be assumed to have satisfied the requirements for writing, signing and attestation. The provisions do not actually state that a registry instrument which has been digitally signed creates a legal estate, and it is unclear whether having the ‘same effect’ means this or whether the interest arises at the point when it is registered. Furthermore, given that s 11(2) of the ECNL, which sets out that a client authorisation that is properly completed, will be regarded has having fully satisfied the requirements relating to the execution, signing, witnessing, attestation or sealing of documents, it is arguable that if the electronic registry instrument generates a legal estate prior to registration, it arises prior to the application of the digital signature. See  further: Y F Lim, ‘Digital Signature, Certification, Authorities and the Law’ (2002) Murdoch University Electronic Journal of Law 27; R Low and E Foo, ‘The Susceptibility of Digital Signatures to Fraud in the National Electronic Conveyancing System: An Analysis’ (2009) 17(3) Australian Property Law Journal 303; D Weber, ‘Tech Neutrality in Australian Law’ (2015) 24(1) Journal of Law Information and Science 101. 12.13  Once the digital certificate is obtained an administrator will then appoint the practitioners that will be the designated signers for the practice. Every signer must have their own identity verified before being provided with what is known as a ‘child’ digital certificate. Signers are authorised to digitally sign registry instruments and the financial settlement statement on behalf of clients. Given the importance of this devolved responsibility, and the fundamental shift in legal principles associated with the execution of land conveyancing documents, maintaining security over digital certificate hardware and passwords is paramount. 12.14  This nature and effect of the digital signature and the responsibilities of the holder of the digital certificate is regulated by the ECNL as follows: 12 Reliance on, and repudiation of, digital signatures (1) If a subscriber’s digital signature is created for a registry instrument or other document in connection with a conveyancing transaction, then: (a) unless that subscriber repudiates that digital signature, that registry instrument or other document is to be taken to be signed by that subscriber, and (b) unless that subscriber repudiates that digital signature, that digital signature is binding, in relation to that registry instrument or other document, on: (i) that subscriber, and (ii) all other persons (if any) for whom that subscriber acts under a client authorisation with respect to that conveyancing transaction, and 831

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(c) unless that subscriber repudiates that digital signature, that digital signature is binding, in relation to that registry instrument or other document, for the benefit of: (i) each of the parties to that conveyancing transaction, and (ii) each subscriber who acts under a client authorisation with respect to that conveyancing transaction, and (iii) any person claiming through or under any person to whom subparagraph (i) applies, and (iv) the Registrar, once that registry instrument or other document is lodged electronically in accordance with section 7, and (d) that subscriber cannot repudiate that digital signature except in the circumstances set out in subsection (4). (2) Subsection (1) applies regardless of: (a) who created the subscriber’s digital signature, and (b) the circumstances (including fraud) in which the subscriber’s digital signature was created. (3) Subsection  (1) does not prevent the unsigning of a registry instrument or other document. (4) Despite subsections  (1) and (2), a subscriber can repudiate the subscriber’s digital signature with respect to a registry instrument or other document if the subscriber establishes: (a) that the digital signature was not created by the subscriber, and (b) that the digital signature was not created by a person who, at the time the subscriber’s digital signature was created for the registry instrument or other document: (i) was an employee, agent, contractor or officer (however described) of the subscriber, and (ii) had the subscriber’s express or implied authority to create the subscriber’s digital signature for any document or documents, and (c) that neither of the following enabled the subscriber’s digital signature to be created for the registry instrument or other document: (i) a failure by the subscriber, or any of the subscriber’s employees, agents, contractors or officers, to fully comply with the requirements of the participation rules, (ii) a failure by the subscriber, or any of the subscriber’s employees, agents, contractors or officers, to take reasonable care. (5) For the purposes of subsection (4) (b) (ii), it does not matter whether the authority was: (a) general, or (b) limited or restricted to documents of a particular class or to a particular document or in any other way.

12.15  There are a number of issues arising from s 12. First, once imposed, the digital signature is binding in relation to the registry instrument for the benefit of each of the parties to the conveyancing transaction and any person claiming through or under those parties, even if the circumstances involve fraud. The only qualification occurs where the digital signature satisfies one of the grounds for repudiation. Repudiation can only occur under s  12(4), where it can be established that the digital signature was not created by 832

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the subscriber, an employee, agent or contractor of the subscriber, or that the creation of the digital signature did not involve a breach by the subscriber or their agents, employees or contractors of their responsibility to take reasonable care of the specific obligations articulated within the MPR. Repudiation of a digital signature is expressly acknowledged under the Transfer of Land Act  1958 (Vic) s  91M(2), which sets out that the digital signature may be repudiated in the circumstances listed in s 12(4) of the ECNL. Similar provisions exist in other states.14 It is not clear what effect a repudiation will have upon a digitally signed instrument. If the registry instrument has already been registered, repudiation constitutes an exception to indefeasibility (see discussion in Chapter 11). This is not expressly set out within s 91M(2). Alternatively, if the registry instrument has been lodged but not registered, s 91M(2) anticipates its repudiation, which would indicate that the enforceability set out in s 91M(1) does not apply. Section 91M of the Transfer of Land Act 1958 (Vic) is extracted below: EXTRACT Transfer of Land Act 1958 — s 91M Reliance on, and repudiation of, signatures (1) Subject to subsection (2), if a relevant person signs an instrument or other document in connection with a conveyancing transaction — (a) the signature is binding, in relation to that instrument or other document, on — (i) the relevant person; and (ii) any other person for whom the  relevant person  acts under a client authorisation with respect to that conveyancing transaction; and (b) the signature is binding, in relation to that instrument or other document, for the benefit of — (i) each of the parties to that conveyancing transaction; and (ii) each  authorised representative  who acts under a client authorisation with respect to that conveyancing transaction; and (iii) any person claiming through or under any person to whom subparagraph (i) applies; and (iv) the Registrar, once the instrument or other document is lodged.

14. An identical provision exists in New  South  Wales. See: Real Property Act  1900 (NSW) s  108(3). Variations exist in other states that would allow the Registry to remove the electronic instrument in circumstances where a digital signature needs to be repudiated. For example, the Land Titles Act 1994 (Qld) s 14C does not expressly provide for repudiation of an electronic registry instrument, but sets out that the document must be signed in accordance with the requirements under the ECNL. If the electronic document has had the digital signature repudiated, it will not be signed in accordance with the ECNL requirements. The Land Titles Act 1980 (Tas) s 48B(3) sets out that the ‘Recorder may require a person seeking to lodge a dealing or instrument by electronic means to produce documentary evidence that he or she is authorised to do so’. Where the recorder believes a digital signature should be repudiated, they may require the digital subscriber to provide further evidence. The Transfer of Land Act 1893 (WA) s 238B allows the Register to request an electronic document to be resubmitted where ‘for any reason it is impracticable to capture the data’. 833

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(2) A relevant person may repudiate the signature with respect to an instrument or other document if the relevant person establishes — (a) that the signature was not the relevant person’s signature; and (b) that the signature was not the signature of a person who, at the time of signing the instrument or other document — (i) was an employee, agent, contractor or officer of the relevant person; and (ii) had the relevant person’s express or implied authority to sign any document; and (c) that neither of the following enabled the signing of the  instrument  or other document — (i) a failure of the relevant person, or any of the relevant person’s employees, agents, contractors or officers, to fully comply with the  Registrar’s requirements; (ii) a failure by the relevant person, or any of the relevant person’s employees, agents, contractors or officers, to take reasonable care. (3) For the purposes of subsection (2)(b)(ii), it does not matter whether the authority was — (a) general; or (b) limited or restricted to documents of a particular class or to a particular document or in any other way.

12.16  The MPR also regulates the obligations of the practitioner holding the digital certificate. The MPR requires the subscriber to take reasonable steps to ensure that only designated signers digitally sign electronic registry instruments. The MPR states as follows: 7.5.2 The Subscriber must obtain and maintain valid at least one Digital Certificate. 7.5.3 The Subscriber must take reasonable steps to ensure that only Signers Digitally Sign electronic Registry Instruments or other electronic Documents. 7.5.4 The Subscriber must ensure that all information provided to any Certification Authority, or to any Registration Authority, or to the ELNO for the purpose of obtaining a Digital Certificate, is correct, complete and not false or misleading.

12.17  One of the aims of the ECNL is to promote certainty for parties involved in an electronic conveyancing transaction and to function consistently with the underlying tenets of the Torrens framework. A digital signature, which results in registration of a land conveyance under the ECNL, should provide transactional certainty and therefore is not readily overturned. Subscribers and associated parties must act responsibly and carefully in their management of a digital subscription. As such, it is only in the exceptional situation of a digital signature being provided by a party, completely unconnected with the subscriber, in circumstances where that subscriber could not be held responsible for such an act, that the ECNL allows for the repudiation of a digital signature and associated registry documents.

Security 12.18  With the implementation of electronic settlement and lodgment there is an increased awareness of transactional fraud. As outlined by the Commonwealth Fraud Control Framework: 834

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Fraud threats are becoming increasingly complex. Not only are entities at risk of fraud from external parties and internal officials, but increased provision of online services and exposure to overseas markets has created new threats from overseas criminals.15

The major areas where this can occur in the context of e-conveyancing is identity theft, forged documents, mortgage fraud and fraudulent transfer. The shift from a paper-based system to an electronic one has reduced the risks of many forms of transactional fraud, but opened up pathways for new forms. It is very clear that data security is imperative. Lawyers and conveyancers must maintain security and anti-virus software in order to reduce the risk of a breach. There is no doubt that the ECNL is aware of the potential for fraud and requires verification of identity to be undertaken for a transaction. Subscribers must take reasonable steps to verify the identity of clients, mortgagors, persons to whom certificates of title are provided and signers. One of the most serious instances of electronic fraud involving digital conveyancing involved the interception of email correspondence between conveyancers and vendors, with the fraudster seeking to redirect the sale funds without the vendor being aware. This occurred in October 2017, where two South Australian property buyers were defrauded out of nearly $1 million after scammers posed as conveyancers and changed the settlement bank account details. Similarly, in Astell v ACT [2016] ACTSC 238, the plaintiff was the victim of identity theft. The house she owned in Canberra was sold upon the instructions of a fraudster who provided instructions to both the real estate agent and a solicitor. The fraudster had intercepted the email address of the plaintiff who was residing in South Africa, and then emailed the solicitor and real estate agent with an updated email address. Neither the real estate agent nor the solicitor undertook sufficient identify checks to ensure that their instructions were being provided by the owner rather than an imposter. The fraudster requested the sale and forged the plaintiff ’s signature. Eventually, the settlement moneys were deposited in an account in Indonesia and the plaintiff accidentally discovered the sale a few months later. The Australian Federal Police were unable to retrieve the funds and locate the fraudster. The plaintiff was an innocent victim. The property was sold and the proceeds were lost. Mossop AsJ held that the plaintiff was entitled to damages ‘commensurate with the loss [she] sustained in consequence of the wrongful deprivation’. This amounted to damages that would put the plaintiff in the same position, so far as money can do, prior to the deprivation. His Honour stated at [29]: The plaintiff is entitled to the damages ‘commensurate with the loss [she] has sustained in consequence of the wrongful deprivation-damages that will put [the plaintiff] in the same position, so far as money can do, as if the deprivation had not occurred’: The plaintiff submitted that if the fraud had not occurred then she would have continued to own the property and earn rental income from the property. Therefore counsel for the plaintiff submitted that in order to put her in the position that she would have been in had she not been deprived of her property she is entitled to: (a) the price payable to purchase an equivalent property in the current market; (b) legal fees and stamp duty payable for the purchase of a replacement property; and (c) loss of net rent for the period plus interest on that rent taking into account when it would have been received.

15. Commonwealth Fraud Control Framework 2017, Attorney-General’s Department, p 2. Available at: . 835

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Similarly, in 2018 a Melbourne family lost $250,000 from the sale of their home after scammers gained access to a conveyancer’s email account, reset the password and then set themselves up as an additional user on the conveyancer’s PEXA account. From this point they were able to edit the settlement details on the property sale and reroute the settlement money into their own account. The edits were not detected by the conveyancer prior to the payment being made. The money was lost but eventually, PEXA agreed to reimburse the family for the lost money. The difficulty apparent from this type of fraud is that unlike the paper settlement process, where a settlement cheque can be cross-checked with the account name and there is a time delay before funds are transferred, in the electronic context, this cross-check is not a usual component of an electronic transfer and the funds transfer is instantaneous. These cases have prompted further suggestions for reform. Formal two-factor identification has been suggested by the Australian Institute of Conveyancers. Furthermore, new users are no longer able to set themselves up on an existing PEXA account without further verification. More fundamentally however, lawyers and conveyancers need to adapt their internal protocols to ensure they are consistent with the real prospect of electronic fraud. This involves being aware of the prospect of identity and data fraud in land transactions, given the large amounts of money involved, and ensuring every transaction is cross-checked and software systems are kept as secure as possible. Email is not secure and should never be used for payment details. This type of fraud was not even considered when the initial regulatory framework for the ECNL was developed, which means there is a need to adapt to ensure current cybersecurity issues and threats can be met. The ubiquity of the internet combined with poor IT and security practices in many legal and conveyancing organisations has generated a corresponding increase in identity theft and an increased prospect of fraud for electronic conveyancing. Unfortunately, because such fraud is not restricted to Australia, it is difficult for domestic laws to prevent it, although ARNECC is aware of the concerns and the need to ensure that an efficient and effective resolution framework is implemented for such cases. As outlined in the Review of the Intergovernmental Agreement for an Electronic Conveyancing National Law at 5.60: Given many ordinary Australian homeowners have most of their wealth in their homes, they would likely face severe financial hardship in the event of error or fraud unless there are mechanisms in place to ensure near immediate resolution. Action through courts would take too long and be costly. … it is incumbent upon government to ensure effective resolution mechanisms are in place.16

ECNL Fraud and the Torrens System 12.19  The Electronic Conveyancing National Law 2012 (NSW) Appendix  (ECNL) does not seek to undermine the core principles of the Torrens framework such as indefeasibility. This is clearly set out in s 5(1)(b) of the ECNL which states:

16. Prepared by Dench, McClean and Carlson, 13 February, 2019. Available at: . 836

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EXTRACT Electronic Conveyancing (Adoption of National Law) Act 2012 (NSW) — Appendix (s 5) 5 Object of this law (1) The object of this Law is to promote efficiency throughout Australia in property conveyancing by providing a common legal framework that: (a) enables documents in electronic form to be lodged and processed under the land titles legislation of each participating jurisdiction, but (b) does not derogate from the fundamental principles of the Torrens system of land title as incorporated in the land titles legislation of each participating jurisdiction, such as indefeasibility of title.

To this end, once an ECNL registry instrument is registered, indefeasibility is to be conferred in the same way as if the registry instrument had been physically prepared. There may be some problems given the clear shift in protocols apparent from the ECNL. For example, the ECNL prioritises identification verification because making sure that a person is who they say they are is crucial to the entire framework. If the identity verification fails, an imposter may authorise the registration of registry instruments under a client authorisation. This may mean that innocent owners are deprived of their title where those registry instruments confer indefeasibility. For example, where a mortgage is prepared in compliance with a client authorisation, but there has been breach of the verification of identity requirements, so that the mortgagor is not properly identified, it may nevertheless confer an indefeasible title upon the mortgagee. The reason for this is because traditionally careless verification of a mortgagor by a mortgagee does not amount to either statutory fraud or an in personam action. The position is different in Queensland, New South Wales and Victoria, which now require mortgagees to take reasonable steps to verify the identity of the mortgagor or fail to acquire an indefeasible title.17 In other states, however, where equivalent provisions do not exist, indefeasibility in this context may be seen as undermining the verification protocols under the ECNL. The position has been summarised as follows: That the in personam exception is not established by merely careless mortgagee VOI practices. However, will the introduction of the ECNL and the MPR, which specifically require the mortgagee to take reasonable steps to verify the identity of the mortgagor, make it more likely for a court to find an in personam exception to these cases? This question gives rise to something of a conundrum. It is well established that the recognition of an in personam cause of action must not be inconsistent with the principle of indefeasibility, nor have the effect of circumventing the indefeasibility provisions. The very strict definition of fraud, which precludes a challenge to the registered proprietor’s title on the basis of a failure to make sure enquiries, suggests an in personam claim based on a failure to make enquiries would likewise not be allowed. … Arguably according a wide interpretation to in personam claims undermines and stultifies one of the main objectives of the Torrens legislation, to 17. See Real Property Act 1900 (NSW) s 56C; Land Title Act 1994 (Qld) ss 11A(2), 11B(2), 185(1A); Transfer of Land Act 1958 (Vic) ss 87A, 87B. It has been argued that the failure of the other states to adopt similar provisions is a lost opportunity for national coherence, particularly in light of the implementation of the verification provisions under the ECNL. See P Carruthers and N Skead, ‘A Law for Modern Times: The Electronic Conveyancing National Law, Forged Mortgages and Immediate Indefeasibility’ (2017) 7 Property Law Review 4. 837

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provide in the context of a registered mortgage, an immediate indefeasible title to a nonfraudulent registered mortgagee. One might have expected that if the legislature had intended that a failure to take reasonable VOI steps was to be a basis for impugning the registered mortgagee’s indefeasible title, whether under an in personam claim or otherwise, there would be provisions to this effect in the ECNL and the MPR. There are no such provisions.18

Electronic Certificate of Title 12.20  As it is not possible to provide a paper certificate of title in an electronic workspace for settlement, the implementation of the ECNL therefore requires a new approach to electronic titling. An eCT provides an electronic record of the folio of the register and complements the electronic settlement process in that it avoids the need for any conferral of a paper certificate of title. 12.21  In NSW, with other states implementing similar processes, the eCT has been issued since late 2013 and over 4300 eCTs have been issued to date. The Real Property Act 1900 (NSW) has now been amended to reflect the fact that eCT is an alternative to the production of a formal certificate of title. This is set out in s 33AB extracted below. EXTRACT Real Property Act 1900 (NSW) — s 33AB 33AB  Alternative to production of a certificate of title

(1) A statutory requirement for the lodgment or production of a certificate of title that is imposed in connection with the  registration  of a matter may, if the relevant folio notes that no certificate of title has been issued, be satisfied by the person recorded in the Register (under section 33AA) as the person having control of the right to deal in the land providing electronic consent to the registration of the matter. (2) The electronic consent must: (a) be provided in a form and manner approved by the Registrar-General, and (b) be digitally signed by or on behalf of the person who has control of the right to deal in the land. (3) The Registrar-General may assume that a person having control of the right to deal in the land who provides an electronic consent to the registration of a matter has all necessary authority to provide it or to withdraw it. 12.22  At the time of writing, eligibility for an eCT was limited to financial institutions regulated by Australian Prudential Regulation Authority (APRA), which held a registered first mortgage and which comprised subscribers to PEXA or were represented by a Subscriber to PEXA. Further, the eCT is only available for the registration of new electronic mortgages. 12.23  The benefits of the eCT, particularly in connection with the ECNL are clear. The eCT provides electronic evidence of the current registered titleholders and details of  18. P Carruthers and N Skead, ‘A Law for Modern Times: The Electronic Conveyancing National Law, Forged Mortgages and Immediate Indefeasibility’ (2017) 7 Property Law Review 4, 21. 838

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the transactional history. To replicate the paper CT, it utilises what is known as control of the right to deal (CoRD). A party has control of the CoRD when that party has authority to consent to the registration of a subsequent interest in land. Hence, if land is mortgaged, the first registered mortgagee will have CoRD. When there are no registered mortgages or charges on a land title, the registered proprietor will retain both the right to deal and CoRD over the land. When the only mortgage or charge is discharged, CoRD is transferred back to the proprietor once the mortgagee or chargee hands over the certificate of title and the discharge instrument for the proprietor to lodge. 12.24  CoRD is an extremely important constituent of the eCT because the right to deal is an inherent entitlement of a registered proprietor who has possession of the certificate of title. The eCT seeks to replicate this by explicitly articulating the status of the right to deal. Hence, unlike the paper settlement process, where the duplicate paper certificate of title is physically transferred and title transfer is subsequently recorded, at an electronic settlement, the discharging mortgagee will have already lodged a CoRD holder through the PEXA framework. This is immediately effective and the holder of CoRD will then be recorded on the folio of the register. 12.25  CoRD is evidenced in New South Wales by either:

• legitimate possession of the current certificate of title; or • an eCT where the mortgagee has elected not to hold a paper CT. 12.26  A CoRD holder consent is an electronic document lodged through PEXA. The holder of this consent is able to approve the registration of all registry instruments and plans. The lodgment of the CoRD Holder Consent has been described as the ‘electronic equivalent of making available the certificate of title for a transaction’.19 There are different types of CoRD Holder Consent that may be lodged. A Transacting Party Consent is used where the consenting party is also a party to the transaction. EXAMPLE A transacting party consent is used where the mortgagor (registered proprietor) is taking out a new mortgage. The land title is unencumbered; that is, the new mortgage will be the first registered mortgage. The new first mortgagee is a party to the transaction and lodges the mortgage and the CoRD Holder Transacting Party Consent, through PEXA.

Alternatively, a third party consent is used where the consenting party is not a party to the transaction but is nevertheless consenting to a registration. EXAMPLE The mortgagor (registered proprietor) decides to take out a second mortgage over the land with a different mortgagee. The first mortgagee is not a party to the transaction and so is invited to prepare a CoRD Holder Third Party Consent. The second mortgagee prepares the mortgage instrument and lodges the electronic transaction.

19. See NSW Land and Property Information. Available at: . 839

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12.27  Should settlement not proceed, and/or a transaction be withdrawn, consents can only be withdrawn by the consenting party or their representative through the Land Property Information Office. This must be done manually rather than through PEXA, and must be accompanied by a statutory declaration indicating that the transaction is not proceeding and that all parties have been notified.

Summary of eCT developments in New South Wales 12.28  The implementation of the eCT has brought fundamental changes to the conveyancing process. In essence, the CT is not physically handed over at  settlement, neither is it produced to the Land Property Information Office for subsequent transactions. Rather, CoRD Holder Consent is lodged through PEXA in lieu of the physical production of the CT. A CoRD Holder Consent is an electronic document and therefore can only be lodged through PEXA, and it must be lodged before a paper settlement in order to protect the incoming transferee and mortgagee. The CoRD Holder Consent should specify the details of the incoming transaction. Eventually, as the eCT expands, the bulk cancellation of paper CTs may occur and this is explicitly anticipated by the Real Property Act 1900 (NSW) s 33AAA, which sets out that that the Registrar-General may cease to issue Certificates of Title under the Act from a designated ‘cessation day’.

Developments for eCT in other states 12.29  The transition from paper titles to eCT in line with the implementation of the ECNL is also significantly progressed in other states. For example, from 24 October 2016, Land Victoria will no longer accept paper certificates of title for lodgment where the title has been converted into an eCT and the outgoing mortgagee is a major bank. With all property dealings involving an eCT, the outgoing mortgagee will need to lodge a nomination to make the certificate of title available at the titles office for the specific dealing. Any attempt to lodge a paper certificate of title that has been converted into an eCT will, where the outgoing mortgagee is a major bank, be referred back to the outgoing mortgagee. In Victoria, as in New South Wales, the eCT control may be held by any PEXA subscriber. The eCT controller (eg, the vendor’s bank or, if unencumbered, the vendor’s representative) will complete and lodge a nomination in PEXA, relinquishing eCT control upon registration of the settlement dealing. A title search will confirm whether the nomination has been registered, and will confirm its dealing number. This provides a guarantee of the property transaction in a manner akin to the paper settlement process. The Transfer of Land Act 1958 (Vic) does not explicitly contain provisions authorising the creation of alternative electronic certificate of titles in the same way that the Real Property Act 1900 (NSW) does. However, following the adoption of the ECNL, pursuant to the Electronic Conveyancing (Adoption of National Law) Act 2013, a ‘document’ is specifically defined to include ‘any record of information that exists in a digital form and is capable of being reproduced, transmitted, stored and duplicated by electronic means’. The same principle applies to Queensland, Western Australia, South  Australia, Tasmania and the Northern Territory, which have all adopted the national law.20 Furthermore, Pt IIIA of the Transfer of 20. See  Queensland: Electronic Conveyancing National Law (Queensland) Act  2013; Western Australia: Electronic Conveyancing Act  2014; South  Australia: Electronic Conveyancing National Law (South Australia) Act 2013; Tasmania: Electronic Conveyancing (Adoption of National Law) Act 2013; Northern Territory: Electronic Conveyancing (National Uniform Legislation) Act 2013. 840

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Land Act 1958 (Vic) specifically deals with electronic instruments. Section 44A sets out that the Registrar is entitled to reject an electronic instrument if it is not in the requisite form approved by the Registrar and the ECNL. Further, instruments receive priority according to the date of lodgment for registration and the Registrar must ensure that this principle is complied with when dealing with electronic instruments (s 44E).

Electronic Conveyancing and the Torrens System 12.30  The core tenet of the Torrens system of land registration in Australia (as outlined in

Chapter 11) is the conferral of indefeasibility of title upon registration. Subject to statutory and established exceptions, a registered interest holder will hold a secure title unaffected by prior unregistered interests or the doctrine of notice. Electronic conveyancing does not undermine this, as once the conveyance is completed via the PEXA framework, the registered interest holder will acquire, in accordance with the Torrens system, an indefeasible title. There are, however, some aspects of electronic conveyancing that may change or impact the way in which registered interests are created and the type of fraud that may be perpetrated. These are briefly reviewed below: • Electronic conveyancing is based upon the conferral of responsibility for deed execution to authorised subscribers. A transfer or mortgage document that is signed in accordance with a digital signature, by an authorised subscriber, will satisfy the requirements for registration under the Torrens system despite the fact that it is not signed by the actual parties to the transaction. • The deposit of title deeds is a well-established concept within the Torrens environment and physical control of a paper title has provided sufficient security for the creation of an unregistered mortgage. This type of transaction will not exist within the electronic conveyancing framework because all electronic registry instruments (ie, PEXA transactions) require a CoRD Holder Consent (discussed above.) Consequently, mortgages under PEXA will be registered by the person holding CoRD. This could create significant differences for incomplete gifts of Torrens title land. See: S Barkehall Thomas, ‘Electronic Conveyancing and Incomplete Gifts of Torrens land’ (2018) 27(1) Australian Property Law Journal 87–99. See also: E M Petsinis, ‘A Land Transfer Revolution: Exploring the Opportunities and Limitations for Implementing the Blockchain in Electronic Land Transfer Transactions in Australia’ (2018) 27(1) Australian Property Law Journal 65. • Fraudulent transactions within the Torrens framework will be fundamentally different in the context of PEXA. The primary function of the paper title is to establish the identity of the party as a person having the right to deal with the property. A fraud then occurs when someone impersonates another by stealing their identity and possession of the paper title is indicative of identity. A fraud within the PEXA framework will not involve paper titles. Rather, it will occur where the security of the framework is jeopardised by the actions of authorised subscribers or through theft, loss or reproduction of the passphrase held by an authorised subscriber. See: R Thomas, L Grigg and R Low, ‘Electronic Conveyancing in Australia: Is Anyone Concerned About Security? (2014). Available at: . • Caveats may only be lodged by those holding CoRD (control of the right to deal), which means that the inherent problem associated with the Torrens framework, whereby a person with no genuine claim may lodge an obstructive caveat, will be largely eradicated by the PEXA framework. 841

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Concerns and Risks Associated with Electronic Conveyancing 12.31  Electronic conveyancing involves the reallocation of risk to conveyancing agents holding client authorisations. This reallocation means that lawyers and conveyancing agents may, in turn, experience an increase in liability. On the other hand, the PEXA system is only available to banks and conveyancing agents, and will therefore preclude individuals from using it. 12.32  The responsibility of lawyers and conveyancing agents operating under PEXA is significant and maintaining appropriate computer security will be extremely important. Ensuring that digital certificate hardware and passwords are secure is critical and a failure to do so may generate liability on the part of the conveyancing agent or lawyer. The MPR recognise that the primary responsibility for the security of the network resides with the operator; however, the MPR articulate a range of specific responsibilities to conveyancing agents and lawyers that must be followed. As outlined above, the subscriber must take reasonable steps to ensure that only signers digitally sign registry instruments or other documents. A key must be used to digitally sign documents and the subscriber must maintain at  least one digital certificate. The subscriber must also verify the identity of a signer and must take reasonable steps to ensure that a signer is not or has not been subject to specified events, including insolvency. Further, the subscriber must ensure that information provided to authorities regarding digital certificates is correct and, further, must take reasonable steps to ensure that only users are able to access the network. The subscriber also has a number of obligations regarding users’ access credentials and will be obliged to revoke the authority of users in certain situations. 12.33  The subscriber has further obligations regarding ‘jeopardised conveyancing transactions’, which are transactions that put the integrity of the Land Titles Register at risk by fraud or other means and ‘compromised security items’, which include items such as passphrases that have been lost, stolen, reproduced, modified, disclosed or used without authority.21 12.34  In both of the above scenarios, the subscriber must ‘unsign’ documents and immediately notify the operator. In the case of ‘compromised security items’, the subscriber must also immediately revoke the user’s authority, revoke or cancel the digital certificate and notify the certification authority and the operator. Furthermore, a subscriber also has an obligation to ‘unsign’ and notify the operator on becoming aware or suspecting that any of its private keys have been used without authorisation.22

Benefits of Electronic Conveyancing 12.35  There are, of course, a number of significant benefits connected with the implementation of electronic conveyancing given the improved efficiency, transparency and speed of the PEXA framework. The benefits of electronic conveyancing include:

21. See, for example, MPR (NSW) Final Version, 2015, 2.1 (Definition) and 7.9 (Compromised Security Items). 22. Exactly how a document is ‘unsigned’ and at what point a document may no longer be ‘unsigned’ has been the discussion of a law council paper. See Law Council of Australia, ‘Electronic Conveyancing Model Participation Rules’ 14th December, 2012, p 11. Available at: . 842

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• greater assurance and protection for parties that dealings will be registered almost immediately after settlement. This avoids the inherent risk connected with settlement delays; • a corresponding reduction of the risk associated with the use of cheques for settlement; • extensive reduction in time delays associated with creating and discharging mortgages, instructing conveyancing agents and their lawyers, physically attending settlements and lodging documents. For example, for the 2016–17 financial year, the benefits of the electronic system in terms of time savings were calculated to be in excess of $3 million. This includes time saved, editing documents, attending physical settlements and loan transactions (Deloitte Access Economics Report, ‘Impact of eConveyancing on the Conveyancing Industry’ May 2018. Available at: ; See also: KPMG, ‘Analysis of the Benefits of Electronic Conveyancing to Conveyancers and Lawyers in NSW’, February 2018. Available at: . • increased transparency between parties via the PEXA workspace; • automatic updates regarding all activities occurring on the PEXA workspace; • reduced reliance on payout figures provided on the day of settlement as the PEXA workspace will facilitate an agreed range for the payout figure; • online access to pre-settlement lodgment checks resulting in a corresponding reduction in post-settlement requisitions from the relevant land titles office; • immediate distribution of the proceeds of sale post-settlement; • greater efficiency and lower costs and burdens connected with the storage and retrieval of paper CTs thanks to the use of eCTs; • a reduction of potential fraudulent transactions associated with paper transactions flowing from undetected forgery.

Conclusion 12.36  In the foreseeable future, PEXA will be used by bankers and professional conveyancers rather than individuals, as it is only feasible for the cost and responsibilities of the system to be assumed by professionals with a commercial interest. Theoretically, the system will reduce mistakes, delay and costs, given the fact that the paper-based systems are intrinsically prone to human error. This, however, will be subject to the durability and strength of computer security frameworks. The system may also increase conveyancing productivity given the fact that it provides a simpler, more accessible framework, transactional transparency, expedient registration and simultaneous monetary transfers. The system will therefore inevitably reduce the gap between settlement and registration, and in so doing reduce the opportunity for the creation of a second, conflicting interest. This is likely to reduce the incidence of fraud and conflict, in particular priority disputes within land conveyancing. In so doing, the implementation of the ECNL reinforces the the core objectives of the Torrens framework.

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12.37  Revision Questions 1. What is a digital signature and how does it differ from a written signature? 2. What transactions are covered by the ECNL in a standard land conveyance? 3. Consider the following questions for the future of electronic conveyancing: How will liability be determined in an interoperable/multiple ELN world? If there is a fraud on one platform, how would it be resolved between parties on separate platforms? What sort of resolution framework should be implemented to assist people impacted by fraud and how might it operate with existing provisions (eg, compensation for losses flowing from registration under the Torrens system)?

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Chapter 13

Unregistered Interests Nature of Unregistered Interest 13.1 Case: Barry v Heider 13.2 Commentary 13.3 Unregistered Interests and Electronic Conveyancing 13.4 Priority Notice 13.5 Extract: Real Property Act 1900 (NSW) — s 74W 13.5 The Caveat System 13.6 Extract: Transfer of Land Act 1958 (Vic) — s 89 13.6 Extract: Transfer of Land Act 1893 (WA) — s 137 13.6 The Nature of a Caveatable Interest 13.7 Case: Boensch v Pascoe 13.7 Commentary 13.8 Failure to Lodge a Caveat 13.9 Case: Leros Pty Ltd v Terara Pty Ltd 13.10 Commentary 13.11 Caveat Must Relate to an Existing Interest 13.12 Priority Disputes Between Unregistered Interests 13.13 Merit analysis: assessing the better equity 13.13 Case: Heid v Reliance Finance Corporation Pty Ltd 13.14 Commentary 13.15 Different forms of priority disputes 13.16 Case: Black v Garnock 13.17 Commentary 13.18 Case: J and H Just (Holdings) v Bank of New South Wales 13.19 Commentary 13.20 Case: IAC (Finance) Pty Ltd v Courtenay 13.21 Commentary 13.22 Revision Questions 13.23 Case: Jacobs v Platt Nominees 13.24 Commentary 13.25 The Relevance of Notice 13.26 Case: Moffett v Dillon 13.27 845

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Commentary 13.28 Revision Questions 13.29

Nature of Unregistered Interest 13.1  Within the Torrens system, an unregistered interest is essentially an interest in Torrens

title land, which has not been registered, whether by choice or necessity. There are many reasons why an interest may not be registered. Despite the advantages, the Torrens system does not make registration compulsory. An interest may be registrable but nevertheless remain unregistered because the holder of a registrable interest has forgotten to register or, alternatively the failure to register is a consequence of mistake or error. An interest holder may decide not to register their interest because registration will not provide greater protection. For example, an equitable mortgagee may decide not to register the mortgage in circumstances where the mortgage has arisen through the deposit of title deeds. In this circumstance, the mortgagee may rely upon the possession of the title documents as adequate protection because no inconsistent dealing may be registered without the title documents. An interest may not need to be registered where it is explicitly protected against the consequences of a subsequent registration within the provisions of the Torrens legislation. Interests coming within this category include rights accruing under adverse possession, leasehold interests, and easements. These interests are discussed further in Chapter  11. An interest holder may be incapable of registering because the Torrens legislation explicitly set out that the interest is only capable of being protected under the caveat system. In all states, beneficial interests arising under trusts are not registrable under the Torrens system, although in some states a trustee may be registered or a trust deed deposited with the Registrar: Transfer of Land Act 1958 (Vic) s 37; Real Property Act 1900 (NSW) s 82; Land Titles Act 1980 (Tas) s 132; Transfer of Land Act 1893 (WA) s 55; Land Title Act 1994 (Qld) s 112 (which allows a beneficiary under a will to apply to be registered as proprietor with the consent of the deceased’s personal representative); Real Property Act 1886 (SA) s 162; Land Titles Act 1925 (ACT) s 124; Land Title Act (NT) s 125 (which allows a person to be registered as trustee).

13.2  Whatever the reason for non-registration, it is well established that an interest in

Torrens title land can still arise despite the fact that it has not been registered. This position was clearly confirmed by the High Court in Barry v Heider (1914) 19 CLR 197, which is extracted below.

  Barry v Heider  (1914) 19 CLR 197 Facts: Barry was the registered proprietor of land and executed a transfer of that land over to Schmidt in consideration of £1,200. Schmidt did not register the transfer and it was subsequently alleged by Barry that the transfer was voidable for fraud because Barry actually agreed to transfer the land for £4,000. Schmidt subsequently borrowed money from Heider on the security of the transfer. The mortgage in favour of Heider also remained unregistered. Barry sought an injunction to prevent the registration of the transfer and a declaration that the land was not encumbered by the mortgage in favour of Heider. The New South Wales Supreme Court concluded that the transfer could be set aside but that the land remained bound by the mortgage. Barry appealed to the High Court but this appeal was dismissed. One of the issues for the court was a consideration of whether the unregistered transfer and the subsequent unregistered mortgage constituted interests in land. 846

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13.2

Griffith CJ: The first objection taken is that the respondents were improperly joined as defendants. On this point it is sufficient to say that the order joining them was within the competency of the Court, and that on the materials before the Court it was properly made. The second ground of appeal is that the transfer impeached was a nullity, on the ground that the appellant was deceived as to the nature and character of the document which he was signing, so that the transfer was not his deed (Foster v Mackinnon). On this point the learned Judge found against the appellant on the facts, and on the evidence I can see no reason for differing from him. 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. A subsidiary point was made that, even if such a transfer could under some circumstances create a right before registration, the particular transfer in question did not do so, because, it is said, by s 107 of the Real Property Act 1900 it required attestation, and the attesting witness Peterson was not called as a witness at the hearing. The first answer to this objection is that the plaintiff, having admitted the execution of the transfer in his pleadings and himself put it in evidence, cannot now be allowed to deny the fact of execution. The second answer is that the provisions of sec 107 are not mandatory, but facultative. That section provides that instruments executed pursuant to the provisions of the Act shall be held to be duly attested, if attested by one witness. The transfer in question purports to be so attested. The section goes on to provide that the execution of such instruments ‘may be proved before’ certain specified persons. I have some difficulty in interpreting this provision, but I understand that in practice it is taken to mean that an instrument attested by any of those persons is admitted to registration. Sec 108 provides that the execution of an instrument ‘may be proved’ by the attendance and voluntary acknowledgment of the person executing it before any one of certain specified persons to whom he is personally known, or by the attendance of the attesting witness before any one of the persons specified in sec 107, and answering certain prescribed questions, the answers being certified upon the instrument. This may be done at any time before registration. The operation (if any) of the instrument after execution and before registration is not affected by these provisions. Moreover, it appeared from the evidence of the Deputy Registrar-General that for the last thirty years at least it has been the practice of the office to accept the attestation by a solicitor of the execution of an instrument under the Act as sufficient, and that the transfer in question would have been admitted to registration without further proof of execution. This objection therefore fails. 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, sub-sec 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 847

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Australian Property Law

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 section 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. Sec 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 RegistrarGeneral is one instance of the application of that scheme. Sec 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. Sec 44 deals with the case of suits for specific performance brought by a registered proprietor against a purchaser without notice of any fraud or other circumstances which would affect the vendor’s right, which can only be circumstances creating an equitable right in a third person. I cannot think that the jurisdiction of the Court to grant specific performance as against a registered proprietor vendor is not equally recognised. In South Australia the jurisdiction of the Court to decree specific performance in such a case was affirmed by the Supreme Court in the case of Cuthbertson v Swan, overruling an earlier case of Lange v Ruwoldt. The judgment of the Court (Way CJ and Stow J), which was delivered by Stow J, contains a very careful review of the provisions of the Act, entirely in accordance with the view I have expressed. 848

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13.2

In 1877 the Queensland legislature gave express recognition to this view by the Real Property Act Amendment Act of that year, which provided (sec 48): ‘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.’ This provision was adopted in South Australia in 1878. In the case of Franklin v  Ind the Supreme Court of that Colony expressed the opinion that the new Statute merely affirmed the law as declared in Cuthbertson v Swan. Opinions to the same general effect were expressed by the Supreme Court of Victoria in the cases of Plumpton v Plumpton and Sander v Twigg, by the Supreme Court of New Zealand in Paoro Torotoro v Sutton, and by the Supreme Court of New South Wales in Josephson v Mason. In my opinion equitable claims and interests in land are recognised by the Real Property Acts. It follows that the transfer of 19 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 23 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. With respect to the mortgage to the respondent Gale, it appeared that on or about 30 October a caveat, signed by Peterson, purporting to act as solicitor for Barry, was lodged with the Registrar-General with the proper registration fee, by which Barry, claiming as unpaid vendor, forbade the registration of any instrument affecting the land ‘except a memorandum of mortgage from Schmidt to Mrs Heider dated October 1912’ for £800. The caveat was not then entered upon the register, apparently by reason of the delay in preparing the new certificate. The loan by Gale to Schmidt was negotiated by Peterson, acting as solicitor for the latter, with Mr Gale, junior, acting as solicitor for his father, the respondent, and the money was paid over to Peterson on Schmidt’s written order on 4 December. About a week before that date Mr Gale, junior, had been informed by Peterson of the existence of the caveat. On that date they met in the Registrar-General’s office, where Gale saw the caveat. Peterson then informed him that the matter had been adjusted, and handed him a letter of the same date, signed by himself and addressed to the Registrar-General, withdrawing the caveat and requesting a refund of the registration fee paid in respect of it. Before accepting and acting on this letter Gale made inquiries of the officials, and was informed that as the caveat had not been registered and was signed by Peterson he had authority to withdraw it. On the faith of this assurance and of the withdrawal, which he lodged with the Registrar-General, Gale then and there paid over the £400, less costs, to Peterson in the Registrar-General’s office. On these facts, it was contended, on the one hand, that Gale was entitled to rely on Peterson’s ostensible authority to act as Barry’s solicitor in the matter of the caveat, and, on the other, that, as Peterson was then acting for Schmidt, the purchaser and borrower, Gale was put upon further inquiry both as 849

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to his authority to withdraw the caveat, which had been lodged for the protection of the vendor, and as to the actual satisfaction of the vendor’s lien. No reason is suggested for any ground for suspecting fraud on the part of either Schmidt or Peterson. Sec 72 of the Act requires a caveat to be signed by the caveator or by his solicitor, known agent or attorney, and provides that it may be withdrawn by the caveator. Any notice relating to the caveat, if served at the office of the solicitor who has signed the caveat, is to be deemed to be duly served. The form of the caveat is given in the Sixteenth Schedule to the Act. By it the caveator forbids registration of any instrument affecting the land ‘until this caveat be by me or by order of the Supreme Court or some Judge thereof withdrawn, or until after the lapse of fourteen days’ from the service of notice of the intended registration at an address in Sydney given in the caveat for that purpose. In the case of a caveat signed by a solicitor I think that, as between the caveator and the Registrar-General, the solicitor by whom the caveat is lodged has, prima facie, authority to withdraw it, at any rate until it has actually been noted on the title. I am disposed to think, also, that a stranger proposing to enter into a transaction respecting the land may reasonably draw the same inference of authority. Gale, however, was not a mere stranger coming on the scene for the first time. He knew on 4  December that Peterson was acting as solicitor for Schmidt, the proposed borrower. The letter withdrawing the caveat was equivalent to an acknowledgment by Peterson, as agent for Barry, that the latter’s lien for unpaid purchase money was satisfied. The case is, therefore, as if a person proposing to advance money on equitable mortgage were told by the solicitor for the proposed borrower, purporting also to act as solicitor for a prior equitable mortgagee, that the prior equitable mortgage had been satisfied. Can he safely act on such an assurance without further inquiry? After full consideration I have come to the conclusion that he cannot. In one sense it is not unreasonable in such a case, in the absence of any ground for suspecting fraud, to accept the assurance of the solicitor, but it would be more reasonable for the lender to ask for confirmation of the assurance from the prior equitable mortgagee himself or an independent agent. Under these circumstances I think that, in the absence of any positive evidence of Peterson’s authority to make the assurance of satisfaction beyond that furnished by his having signed the caveat, Gale cannot rely on it. He is entitled to rely upon the previous representations already referred to, by which Barry is bound as against Mrs  Heider, except so far as they were afterwards qualified by the caveat. But, not having established by positive evidence Peterson’s authority to withdraw the caveat, he cannot rely upon the withdrawal as a further representation by Barry. I think, therefore, that the rule Qui prior est tempore potior est jure must prevail, and that Gale’s mortgage must be postponed to Barry’s vendor’s lien. [Barton J agreed.]

Commentary 13.3  Griffith CJ in Barry v Heider concluded that registration under the Torrens system

was not the touchstone for the creation of an interest in land because equitable interests in land that have not been registered are recognised by the system. His Honour specifically concluded that ‘equitable claims and interests in land are recognised by the Real Property Acts’, which means that the Torrens system anticipated that interests in Torrens title land could exist despite the fact that they remained unregistered. Isaacs J agreed with this position, stating that the suggestion that no interest in Torrens land can exist until registered was: … 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

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way destroying the fundamental doctrines, by which Courts of Equity have enforced, as against registered proprietors, conscientious obligations entered into by them.

Indeed, Isaacs J further noted that the Torrens legislation does not have any application to the form of contracts that parties may enter into and, given that ‘[p]arties 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’ it is a reasonable interpretation to assume that the Torrens legislation did not intend to preclude the creation of equitable interests. Further, the fact that the legislation sets up a caveat system (discussed below) providing for the protection of unregistered and caveatable interests makes it very clear that the drafters of the Torrens system assumed that unregistered interests could exist. The recognition of equitable interests over Torrens title land is now well established. As outlined by Griffith CJ in Butler v Fairclough (1917) 23 CLR 78 at 83: 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 these statutes. This recognition is, indeed, the foundation of the scheme of caveats which enables 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 equitable interests in land which is not subject to the Acts.

See also Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 613; Gunns Ltd v Balani Pty Ltd [2011] FCA 431 at [87]; Finesky Holdings Pty Ltd v Minister for Transport for Western Australia [2001] WASC 87 at [127]; Residential Housing Corporation v Esber (2011) 80 NSWLR 69 at [56]; Byrnes v Kendle (2011) 243 CLR 253 at [48]; Mischel Holdings Pty Ltd (in liq) v Mischel [2013] VSCA 375, [61] fn 39; Sacks v Klein [2011] VSC 451; Re Wilson [2019] VSC 211 at [38]. This is not to suggest that all unregistered interests are equitable in nature. The dichotomy introduced by the Torrens framework is that of registered and unregistered interests. This framework does not directly correspond to the legal/equitable distinction. Hence, not all not all unregistered interests will be necessarily be equitable in nature. As outlined by Gleeson CJ, Gummow, Kirby and Hayne JJ in Halloran v  Minister Administering National Parks and Wildlife Act  1974 (2006) 229 CLR 545 at  [35]: ‘references to vesting at law and vesting in equity are apt to mislead. The Torrens system is one of title by registration, not of registered title. The assimilation of the registered title to a legal title may be convenient so long as it is appreciated what is involved. It is likewise with respect to the use of the term “equitable” to describe interests recognised in accordance with the principles of equity but not found on the Register.’ See also Byrnes v Kendle (2011) 243 CLR 253 at [47].

Unregistered Interests and Electronic Conveyancing 13.4  As outlined in Chapter  12, the introduction of electronic conveyancing is one

of the most significant changes that our property law system has experienced since the implementation of Torrens title. The framework under the Electronic Conveyancing (Adoption of National Law) Act 2012 (NSW), Appendix (ECNL) focuses upon interests generated pursuant to a client authorisation and the application of a digital signature. These ‘registry instruments’ are created digitally and are lodged for registration online. This new process will inevitably reduce the number of unregistered interests, particularly those that are unregistered because the holders have not physically lodged them. Further, unregistered interests arising from the deposit of physical title deeds are unlikely to arise under the ECNL, because of the fact that control of the right to deal (CoRD) is required. 851

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The holder of CoRD provides consent via the lodgment of an electronic document and this is the equivalent to making the certificate of title available for the creation of an interest. There are different types of CoRD consents. A transacting party consent is used by a person in the transaction; for example, a proprietor seeking to discharge a mortgage. A third party consent is used by a CoRD holder that is not a party to the transaction, such as a first mortgagee consenting to the creation of a second mortgage. See  also Chapter 12. Electronic conveyancing will also reduce what is known as the ‘registration gap.’ This refers to the time between the settlement of a property and the registration of the title documents from that settlement. Sometimes documents are not lodged immediately after settlement because delays occur. This can mean that an unregistered purchaser is vulnerable. Some states attempted deal with this issue via specific provisions. For example, difficulties with the registration gap are diminished in New South Wales because s 43A of the Real Property Act 1900 (NSW) makes it clear that for the purpose of protection against notice, the estate or interest in Torrens title land that is taken by a person under a registrable instrument shall, prior to registration, be deemed a legal estate. This section applies to the period between settlement and registration. The purpose is to provide protection to the holder of a registrable interest, where the dealing has been lodged: Diemasters Pty Ltd v Meadowcorp Pty Ltd [2001] 52 NWSLR 572. However, the need for this type of interim protection has diminished under the ECNL because registry instruments are immediately lodged during the virtual settlement with registration occurring very quickly. However, in the event that there is a delay, it is possible for a priority notice to be lodged. The nature and purpose of the priority notice is discussed below.

Priority Notice 13.5  The Torrens legislation in Victoria, Queensland, South  Australia and Tasmania

provides for what is known as a ‘priority notice’, which may be lodged to protect a registry instrument, such as a transfer or a mortgage.1 The purpose of a priority notice is to protect the interests of parties to a registry instrument by reserving priority on title for the dealing identified in the priority notice and in so doing, prevent any fraudulent displacement of that transaction by some other transaction. A priority notice will not prevent the recording of a registry instrument that does not require a supporting certificate of title (eg, caveats, warrants and land tax charges), which will still be recorded regardless of a priority notice. It is not necessary to prove an interest when lodging a priority notice. All that must be established is that the applicant is a party to a land dealing. The priority notice will prevent an interest from being registered, but it does not prevent all activity, only those relevant to the transaction that has been identified. Furthermore, the priority notice cannot prevent a caveat from being lodged. In this way, the priority notice differs from a caveat. The priority notice seeks to preserve the priority of a  specific dealing that is to be lodged for registration at a later time. By contrast the caveat prevents the registration of all inconsistent transactions and provides a warning to third parties that the caveator claims an interest in the land. Unlike the caveat, the priority notice applies to a dealing, not an interest, and it will automatically lapse after 60 days. By contrast, the caveat supports a caveatable interest (discussed below). The caveat prevents the interest from being defeated by a subsequent registration because it prevents the registration 1. Real Property Act  1900 (NSW) Pt 7B; Transfer of Land Act  1958 (Vic) Pt V, Div  1B; Land Title Act 1994 (Qld) Pt 7A; Land Titles Act 1980 (Tas) s 52; Real Property Act 1886 (SA) Pt 13A. 852

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from proceeding. The caveat will remain on title until it is removed. Where, however, a dealing is lodged that is inconsistent with the nature of the caveatable interest claimed, the caveator will have 60 days to prove the enforceability of the interest his or her caveat seeks to protect. This is also discussed below. The priority notice will have an application to either a paper or an electronic transaction. However, it has particular utility within a digital conveyance as it may be lodged electronically by a party to a dealing; for example, an incoming proprietor (lodging a notice of a transfer) or an incoming mortgagee (lodging a notice of a mortgage). The effect of the priority notice is clear from s 74W of the Real Property Act 1900 (NSW), which is set out below. Equivalent provisions exist in other states.2 EXTRACT Real Property Act 1900 (NSW) — s 74W Effect of priority notice 74W Effect of priority notice (1) While a priority notice has effect with respect to a proposed dealing to give effect to an entitlement to an estate or interest in land, the Registrar-General must not, without the consent of the person who lodged the notice, register or record: (a) any dealing or writ on the folio of the Register for the land, or (b) any plan (including a plan to which  section  88B  of the  Conveyancing Act 1919 applies) relating to the land. (2) Despite subsection  (1), the lodgement of a priority notice does not prevent the Registrar-General from registering any of the following in the Register: (a) a dealing in registrable form that was lodged before the notice, (b) the dealing or dealings to which the notice relates, (c) a caveat or the withdrawal or lapsing of a caveat, (d) a vesting or dealing effected in accordance with an order of a court or a provision of a law of this State or the Commonwealth, (e) an application made under section 93 by an executor, administrator or trustee in respect of the estate or interest of a deceased registered proprietor, (f) an application under section 12 of the Trustee Act 1925 or an order of a court or dealing which, in the opinion of the Registrar-General, effects or evidences a replacement of existing trustees or the appointment of new or additional trustees, (g) an application under section 101, (h) in relation to a mortgage, charge or covenant charge recorded or lodged in registrable form  before the lodgment of the notice — a  dealing  effected by the mortgagee, chargee or covenant chargee in the exercise of a power of sale or other power or a right conferred by the mortgage, charge or covenant charge or by or under law, (i) in relation to a lease recorded or lodged in registrable form before the lodgment of the notice — a dealing effected by the lessee pursuant to a right conferred by the lease or by or under law,

2. Transfer of Land Act 1958 (Vic) s 91C; Land Title Act 1994 (Qld) s 140; Land Titles Act 1980 (Tas) s 52(2)(d); Real Property Act 1886 (SA) s 154B. 853

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Australian Property Law (j) a transfer giving effect to a sale under a writ recorded under section 105 before the lodgment of the notice. Note: In addition to the matters referred to in this subsection, the Registrar-General is not prevented from taking action with respect to any other matters that are not dealings or plans referred to in subsection (1).

(3) If it appears to the Registrar-General that a dealing lodged during the period in which a priority notice has effect is a  dealing  to which the notice relates, the RegistrarGeneral may: (a) record the dealing in the Register if satisfied that the dealing is a dealing to which the notice relates, or (b) request the parties to the  dealing  to provide such further information as the Registrar-General may require to assist in determining whether the  dealing  is a dealing to which the notice relates.

A priority notice can be lodged, extended or withdrawn at any time prior to the actual settlement date and time. However, once lodged it cannot be amended. In order to lodge a priority notice, accurate information must be provided. The relevant information includes the instrument type, the dealing number and the name of the party receiving the interest. For example, for a transfer, the instrument type would be described as a ‘transfer’ and the party receiving would be the name of the transferee. Once the intended instrument or transaction is lodged, in order to gain the priority afforded to it under the notice, it must precisely match the details contained in the priority notice. Once recorded on title, a priority notice will have two effects: (i) It will ensure that the specified transaction has priority for regstration, and (ii) It will notify any person searching the title that a transaction is to be lodged for registration. A priority notice will be effective for 60 days from the date of lodgement and it may be renewed for a further period of 30 days. Once lodged, a priority notice will be visible on all title searches. While operative, any dealing that is lodged which is not the transaction set out in the priority notice will be visible as an unregistered dealing only and will not become registered until the priority notice either expires or is withdrawn. A priority notice will automatically expire when the anticipated instrument or transaction is registered, or if this does not occur, after 60 days, whichever is sooner.

The Caveat System 13.6  The Torrens system set up the caveat system with the aim of conferring injunctive

protection to unregistered Torrens title land interests. While the range of caveats available under the Torrens legislation varies in each state, one of the most common forms is the caveat against dealings. The purpose of this caveat, as outlined by Mason CJ, Dawson and McHugh JJ in Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407 at [28] is to ‘operate as an injunction against registration of an inconsistent dealing otherwise than in accordance with the caveat so as to enable, in the ultimate analysis, a determination of the conflicting claims’. In Victoria, the caveat against dealings is set out in s 89 of the Transfer of Land Act 1958 (Vic), which is extracted below.

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EXTRACT Transfer of Land Act 1958 (Vic) — s 89 89  Caveats temporarily forbidding dealings with lands (1) Any person claiming any estate or interest in land under any unregistered instrument or dealing or by devolution in law or otherwise or his agent may lodge with the Registrar a caveat in an appropriate approved form forbidding the registration of any person as transferee or proprietor of and of any instrument affecting such estate or interest either absolutely or conditionally and may, at any time, by lodging with the Registrar an instrument in an appropriate approved form, withdraw the caveat as to the whole or any part of the land. (2) A recording of every caveat lodged under this section must be made in any relevant part of the Register. (3) The Registrar shall give to the registered proprietor of the estate or interest concerned notice of the caveat together with a copy of the caveat or of such particulars thereof as the Registrar deems material to such person.

In Western Australia, the relevant provisions are set out in s 137 of the Transfer of Land Act 1893, which is extracted below: EXTRACT Transfer of Land Act 1893 (WA) — s 137 137  Lodging caveats for land already under this Act (1) Any beneficiary or other person claiming any estate or interest in land under the operation of this Act or in any lease mortgage or charge under any unregistered instrument document or writing or under any equitable mortgage or charge by deposit without writing or by devolution in law or otherwise may lodge a caveat with the Registrar in an approved form forbidding the registration of any person as transferee or proprietor of and of any instrument affecting such estate or interest either absolutely or until after notice of the intended registration or dealing be given to the caveator or unless such instrument be expressed to be subject to the claim of the caveator as may be required in such caveat.

Similar provisions exist in other states and territories: Land Titles Act 1925 (ACT) s 104; Real Property Act 1900 (NSW) s 74F; Land Title Act (NT) s 138; Land Title Act 1994 (Qld) s 122; Real Property Act 1886 (SA) s 191; Land Titles Act 1980 (Tas) s 133. Once lodged, in all jurisdictions apart from the Northern Territory, Queensland and South  Australia, a memorandum of the caveat remains on the Register until proceedings are brought to have it removed or until an inconsistent dealing is lodged for registration. In the Northern Territory and Queensland, the caveator must prove the claim within three months of lodging the caveat: Land Title Act (NT) s 142; Land Title Act  1994 (Qld) s  126(4). In South  Australia the registered proprietor may seek to have the caveat removed and where such an application is made, the caveator has 21 days to seek a court extension order otherwise the caveat will lapse: Real Property Act 1886 (SA) s 191(e), (f). 855

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The Nature of a Caveatable Interest 13.7  It has been argued that in order to constitute a caveatable interest, the estate or

interest must amount to an interest in land ‘known to the law’. Pursuant to s  89 of the Transfer of Land Act  1958 (Vic) (extracted above) there must be an ‘estate or interest in land under any unregistered instrument or dealing or devolution in law’. It has been argued that mere or personal equities are not caveatable because they do not constitute an estate or interest in land and are therefore outside the scope of this provision. In Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd [1994] 1 VR 672, the transfer of a purchaser pursuant to a mortgagee’s sale remained unregistered and the mortgagor, claiming that the sale was under value, sought to lodge a caveat prohibiting the registration of that transfer. The mortgagee requested that the Registrar not record the caveat. The trial judge, Eames J held that the interest was caveatable and the mortgagee appealed. The Victorian Supreme Court upheld the appeal. In his judgment, Brooking J noted the distinction between full and mere equities and considered whether it was possible for a mortgagee, who sells in breach of good faith under a power of sale, to pass a valid equitable title to the purchaser. His Honour concluded (at 678) that: 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 … 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 … enabled him to pass an equitable estate … 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.

His Honour added that the right to rectify a fraud could not come close to the definition of an equitable interest. He stated at p 682: … 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.

Subsequently, in Vasilou v Westpac Banking Corporation (2007) 19 VR 229, Maxwell P, Neave and Kellam JA at  [120] concluded that the decision in Swanston Mortgage may ‘require reconsideration’, although the Court of Appeal felt bound to follow it. The decision has been followed by subsequent courts: Renwarl Pty Ltd v  Birky [1998] ANZ Conv R 515 per Chernov J; Law Mortgagees Queensland Pty Ltd v Thirteenth Corp Pty Ltd [1999] VSC 360 per Warren J; Walter v Handberg [2003] VSCA 122 (Court of Appeal); Commonwealth Bank of Australia v  Kyriackou (2003) V Conv R 54-674  per Coldrey J; A E Brighton Holdings Pty Ltd v UDP Holdings Pty Ltd [2019] VSC 688 per Ginnane J; Super Jacobs Pty Ltd v  Esera Faalogo [2019] VSC 778  per Daly AsJ. For further critical evaluation of the decision in Swanston Mortgage v Trepan see: S Rodrick, ‘The Response of Torrens Mortgagors to Improper Mortgagee Sales’ (1996) 22 Monash UL Rev 289, 336; 856

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M-A Hughson, M Neave and P O’Connor, ‘Reflections on the Mirror of Title: Resolving the Conflict between Purchasers and Prior Interest Holders’ (1997) 21 MULR 461 at 475; D Wright, ‘Does the Registered Proprietor Have a Caveatable Interest?’ (1995) 69 Australian Law Journal 935. See also R Meagher, D Heydon and M Leeming, Meagher, Gummow & Lehane’s Equity Doctrines & Remedies, 4th ed, LexisNexis Butterworths, Sydney, 2002, at  p 151, who argue that this decision is ‘wrong’. This decision can be directly contrasted with that in Re McKean’s Caveat [1988] 1 Qd R 525, where Ryan J held that the registered proprietor of land did hold a caveatable interest in circumstances where a mortgagee had improperly exercised its power of sale because the right to rectify an improperly exercised power of sale constituted a caveatable interest. See also Gel Custodians v Gibson [2016] WASC 318 at [32]. The legislation in New  South  Wales is more explicit in its acceptance that equitable interests are caveatable. Section  74F(1) of the Real Property Act  1900 (NSW) makes it clear that any ‘legal or equitable estate or interest in land’ under the Torrens system will be protected by a caveat. In Sinclair v  Hope Investments Pty Ltd [1982] 2 NSWLR 870, Needham J concluded that the equitable right of a mortgagor who was still registered as legal title holder to set aside a fraudulent sale was caveatable. His Honour made the following comments at 874–5: 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 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.

The conclusions of Needham J in Sinclair v Hope Investments Pty Ltd [1982] 2 NSWLR 870 have been preferred in subsequent decisions.3 In Capital Finance Australia Pty Ltd v  Bayblu Holdings Pty Ltd & JNW Investments Pty Ltd [2011] NSWSC 24, Pembroke J concluded at  [24] that he had the ‘misfortune of being compelled to say that, in my respectful opinion, the decision and reasoning of Brooking J in Swanston Mortgage are clearly wrong’. In Patmore v Upton (2004) 13 Tas R 95, Underwood J concluded at [48] that there was nothing in the decision of Latec to support the findings in Swanston Mortgage and that ‘the classification of equities will be the same whether the issue is which competing equity has priority, or which equity creates an interest in land’. In Wichniewicz v Registrar of Titles [2014] WASC 18, Edelman J at  [13] suggested that Sinclair v  Hope ‘should be preferred on the basis that the Victorian approach takes an overly literal interpretation of the words “interest in land”. After all, an equitable mortgage or equitable charge is not 3. See Cross v National Australia Bank Ltd (1993) Q ConvR 54-33; R & I Bank of Western Australia Ltd v Lavery (unreported, Supreme Court of Western Australia, 25 October 1993, BC9301503); Patmore v Upton [2004] TASSC 77; (2004) 13 Tas R 95. 857

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literally an interest “in land”. They are interests in relation to rights to land. And it is well established that an equitable mortgage or equitable charge is a claim to an interest in land which can support a caveat.’ A further argument raised with respect to the Victorian legislation is that all caveatable interests must be supported by registrable instruments. In Classic Heights Pty Ltd v Black Hole Enterprises Pty Ltd (1994) V ConvR 54-506, Batt J concluded that an interest in Torrens title land is not caveatable unless it is either evidenced by an existing registrable dealing or the caveator is able to require the registered proprietor to execute a registrable dealing. This decision takes a very narrow perspective of a caveatable interest and greatly reduces the efficacy of the caveat system in protecting a range of different forms of equitable interests. The decision was not followed in Composite Buyers Ltd v Soong (1995) 38 NSWLR 286, where Hodgson J held that a charge that was contained within an instrument that was unregistrable was a caveatable interest. His Honour noted that one of the aims of the caveat system is to protect the rights of equitable interests that are prohibited from registration; hence, his Honour concluded that it was nonsensical to require a caveatable interest to be in a registrable dealing. According to Hodgson J, the only requirement for a caveatable interest is that the interest be such that equity will give specific relief against the land itself, whether by way of requiring the provision of a registrable instrument, or in some other way. Similarly, in Crompston v French (1995) V ConvR 54-529, Harper J disagreed with Batt J stating at 66,291: In principle, one would think that interests which the law has long recognised as being interests in land should under the Torrens system receive protection comparable to that which they receive under the general law. There is no reason to believe that, in enacting the Transfer of Land Act, the legislature intended to abolish such interests. On the contrary, the community in general has as a commonplace occurrence continued to create equitable interests in land in the belief that, whether or not the execution of a registrable instrument might be compellable as a result, the system was not inimical to their continued interest. Yet if they cannot be the subject of a caveat (for, under a system of title by registration, there is no other means of protecting interests which cannot be registered) they are almost if not entirely defenceless against an incompatible but registrable interest; and this is so even if the latter interest is created, in breach of his lawful obligations, by the registered proprietor who granted the earlier, unregistrable, interest. Such a result would seem to me to be productive of injustice.

In Schmidt v 28 Myola Street (2006) 14 VR 447 at [21], Warren CJ concluded that ‘in appropriate circumstances, an equitable interest in land is capable of supporting a caveat even where that interest will not compel the registered proprietor to deliver a registrable instrument’. This would indicate that in order to be a caveatable, the interest must be connected to property, not the registration system. In Bride v The Registrar of Titles [2015] WASC 11 at [16], Edelman J held that the requirement the caveator’s claim of substance be in respect of a claim of an ‘estate or interest in land’ meant ‘that the claim must concern a proprietary interest in land’. See  also Conroys Smallgoods Pty Ltd v  Tomlinson [2018] WASC 21. It is well established that a caveatable interest cannot merely arise where a contract confers it, because interests must be construed from the agreement.4 Thus, it has been held that where a registered proprietor consents by contract to the lodging of a caveat against his or her land in aid of a money claim, the agreement will support the implication of an 4. Murphy v Wright [1992] NSW Conv R 55-652. 858

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equitable charge sufficient to maintain a caveat. It has also been held that the benefit of a restrictive covenant will create a caveatable interest.6 However, conditions in a development approval will not, in themselves, be sufficient to found a caveatable interest.7 The caveator, in lodging the caveat, must have reasonable cause to believe that he or she holds a caveatable interest. A person who places a caveat on property necessarily accepts the risk that they may be liable for loss attributable to wrongful lodgement of the caveat. When considering whether a caveator had reasonable cause for lodging a caveat, the court will consider ‘whether the caveator has an honest belief, based on reasonable grounds’.8 In Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106, Wootten J considered at 109 that: 5

The drastic nature of the power is relevant in considering what is ‘reasonable cause’ for its use, just as the dangerous character of a thing is relevant to deciding what is reasonable care in handling it. Before exercising such a power, a person can reasonably be expected to get proper advice, and be reasonably sure of his ground. If he does not, he may find that he has acted at his peril. This is all the more so when he knows, as Mr Richards knew, and indeed intended, that his action will prevent an important transaction involving a large sum of money.

The onus is upon the plaintiffs to establish that the caveator acted without reasonable cause. It is important to understand that for reasonable cause to exist, it is not necessary that the caveator actually hold a caveatable interest, but rather, that they hold an honest belief, based upon reasonable grounds, that they hold such an interest. In Arkbay Investments Pty Ltd v Tripod Funds Management Pty Ltd [2014] NSWSC 1003, Robb J noted, however, at  [107] that ‘an honest belief on the part of the caveator based on reasonable grounds may not be sufficient to provide a reasonable cause for lodging or maintaining a caveat, if the caveat is lodged “not for the protection of his interest but for an ulterior motive and without regard to its effect on transactions to which the caveator had agreed”’. A two-step process was outlined in Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 at 474–475 per Clarke JA, 479–480 per Waddell A-JA, who held that it was first necessary to establish that the caveator had neither a caveatable interest nor an honest belief based on reasonable grounds that they held a caveatable interest; and second, that the caveator acted deliberately, knowing that he or she had no interest in the land. In applying this test in Mahendran v  Chase Enterprises Pty Ltd (2013) 17 BPR 32,733 at  [52]–[53], Barrett JA (with whom Emmett and Gleeson JJA agreed) quoted Biscoe AJ in Natuna Pty Ltd v Cook [2007] NSWSC 121 (at [195]): ‘It is subjective in that it requires an examination of the caveator’s actual belief and whether it was honestly held. It is objective in that it requires that the belief be held on reasonable grounds.’9 It is possible for a caveator to have a reasonable ground for lodging a caveat even though he or she is eventually found to be mistaken: Ceda Nominees Pty Ltd v Registrar of Title [1982] ANZ ConvR 524. On the other hand, where a caveator has an ulterior motive for lodging a caveat, this can demonstrate an 5. FTFS Holdings Pty Ltd v  Business Acquisitions Australia Pty Ltd [2006] NSWSC 846; Troncone v  Aliperti (1994) 6 BPR 13,291; Neoform Developments & Interiors Pty Ltd v  Town & Country Marketing Pty Ltd (2002) 49 ATR 625 at [21] per Young CJ. 6. Midland Brick Co Pty Ltd v Welsh [2006] WAR 287. 7. John Street Marina Pty Ltd v Minister for Transport [2005] WASC 171. 8. Lee v Ross (No 2) (2003) 11 BPR 20,991 at [85]. 9. See Lee v Ross (No 2) (2003) 11 BPR 20,991 at [21]–[23]; Beca Developments Pty Ltd v Idameneo (No 92) Pty Ltd (1990) 21 NSWLR 459 at 469–470 (CA); Bedford Properties Pty Ltd v Surgo Pty Ltd [1981] 1 NSWLR 106; Northstate Carpet Mills Pty Ltd v B R Industries Pty Ltd [2006] NSWSC 1057 at [61]; David Allan Thompson v Golden Investments Pty Ltd [2015] NSWSC 1176 at [78]–[79]. 859

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absence of reasonable cause, even where the caveator honestly believes his or her grounds for lodging are reasonable: Commonwealth Bank of Australia v  Baranyay [1993] 1 VR 589 at 600–601 per Hayne J. If the caveator has received legal advice this can be relevant. Even if the legal advice turns out to be incorrect, if the caveator has acted upon the advice when lodging the caveat, it may preclude a claimant from establishing that the caveator lacked reasonable grounds. Much will depend upon the significance of the legal advice received by the caveator including the completeness of instructions given to the lawyer, whether the advice has an arguable basis and the commercial or legal sophistication of the particular client: New Galaxy Investments Pty Ltd v Thomson [2017] NSWCA 153 at [327]. The question as to whether a caveator lodged a caveat with reasonable cause or whether the caveator infringed the two-step test outlined in Beca Developments was examined by the High Court in Boensch v Pascoe (2019) 375 ALR 15, which is extracted below:

  Boensch v Pascoe  (2019) 375 ALR 15 Facts: Mr Boensch claimed he held an interest in a house in Rydalmere as a trustee for his two children. Mr  Pascoe was his trustee in bankruptcy. Mr  Boensch argued that Mr  Pascoe held no vested interest in the property. Mr Pascoe disputed the existence of the trust arguing that it was void within the terms of the Bankruptcy Act 1966 (Cth). Mr Pascoe lodged a caveat over the property in 2005 but was ultimately unsuccessful in his argument that there was no valid trust over the property. Mr Boensch subsequently brought a claim under s 74P of the Real Property Act 1900 (NSW) seeking compensation from his trustee in relation to the lodging and maintenance of the caveat over the property. Mr Boensch claimed Mr Pascoe had lodged the caveat without reasonable cause. This was rejected by the trial judge and the Full Federal Court dismissed an appeal by Mr Boensch. He appealed to the High Court who unanimously dismissed the appeal. Bell, Nettle, Gordon and Edelman JJ: In  Beca Developments, a majority of the Court of Appeal of the Supreme Court of New South Wales embraced Wootten J’s conclusion in Bedford Properties Pty Ltd v Surgo Pty Ltd concerning the former s 98 of the Real Property Act that: ‘the foundation for reasonable cause must be, not the actual possession of a caveatable interest, but an honest belief based on reasonable grounds that the caveator has such an interest’. Clarke JA, who delivered the leading judgment in Beca Developments, with which Kirby P relevantly agreed noted that ‘a caveat operates in much the same manner as does an injunction’ and that this analogy supported the view that ‘in enacting s 98 the legislature intended to set up machinery for compensating persons who suffered as a consequence of a caveator, in effect, abusing the statutory power to lodge a caveat’. It followed, in his Honour’s view, that ‘Wootten J was correct to give to the phrase “without reasonable cause” the same meaning as had been attributed to the like phrase in the tort of malicious prosecution’, albeit that tort, unlike an award under s  98, also depended on proof of malice. Clarke JA proceeded to observe that, while  s 74P(1) of the Real Property Act extended compensation to cases where a person procures the lapsing of a caveat or refuses or fails to withdraw a caveat upon request, as then drafted it also added another pre-condition by the word ‘wrongfully’, which his Honour construed as in effect requiring an abuse of the statutory procedure ‘for oppressive and other reasons’. Accordingly, his Honour concluded that, in order to sustain a claim for compensation under  s 74P(1)(a), the claimant must establish that the caveator had neither a caveatable interest nor an honest belief based on reasonable grounds that the caveator had a caveatable interest (and thus ‘without reasonable cause’), and that the caveator acted deliberately, knowing that he or 860

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she had no interest in the land (and thus ‘wrongfully’). Although s 74P(1)(a) was amended to remove the word ‘wrongfully’ — the former requirement – described in these proceedings as the ‘two-step’ Beca Developments test — has continued to be applied. This continued approach is consistent with Parliament’s aim to preserve the existing law although removing the word ‘wrongfully’. As was observed in the Explanatory Note, the goal of the amendments was to have ‘the effect of reinstating the law that applied before 1986 when certain amendments to the Act relating to caveats were enacted’. That earlier law, on ‘reasonable cause’, was what had been explained and clarified in Beca Developments. Before the Full Court, Mr Boensch accepted that he had to satisfy that two-step Beca Developments test. Before this Court, he sought to argue that Beca Developments was wrongly decided; that the test under s 74P(1) of the Real Property Act is whether lodging and maintaining a caveat was objectively reasonable in all the circumstances, including the consequences of the caveat in preventing dealings with the property; and, accordingly, that whether the caveator in fact has a caveatable interest is not dispositive and whether the caveator had an honest belief in what was claimed in the caveat is irrelevant. The argument should be rejected. The starting point is the text of s 74P(1) of the Real Property Act, which in terms directs attention to whether the ‘cause’, not consequence, of an act or omission is ‘reasonable’, not necessarily right upon a proper application of the law to the facts. Moreover, a caveat against dealings has long been conceived of as ‘a statutory injunction to keep the property in statu quo until [the caveator’s] title shall have been fully investigated’, and, although that conception has been criticised, it serves only to emphasise that a person may reasonably lodge and maintain a caveat although investigation reveals that he or she lacked an interest. True it is that, ordinarily, the price of a quia timet injunction is an undertaking as to damages, and that such an undertaking is ordinarily enforceable regardless of whether the claimant had an honest belief on the basis of reasonable grounds in the strength of his or her cause. But the more limited protection afforded by s 74P(1) of the Real Property Act against the financial consequences of a misdirected caveat may readily be explained on the basis that the holder of an unregistered interest in land under the Torrens system is more vulnerable to inconsistent dealings, and so permitted reasonably to lodge and maintain a caveat without incurring liability to pay compensation, at least unless and until a lapsing notice is served and extension sought under  ss 74J  and  74K  of the  Real Property Act. As Kirby P observed in effect in Beca Developments, if it were otherwise, s 74P(1) would have an undesirable chilling effect on the proper lodgement of caveats that are honestly and reasonably believed to be necessary to protect legitimate interests; and, given the ready capacity of a claimant to have an unwarranted caveat discharged pursuant to s 74J or s 74MA of the Real Property Act, it is unlikely that Parliament intended that  s 74P(1)  should prevent the lodgement of caveats honestly and reasonably believed to be valid. Furthermore, the fact that the New South Wales Parliament enacted  s 74P(1)  in relevantly the same terms as the former s  98 of the  Real Property Act, after s 98 had been construed in Bedford Properties as requiring no more than an honest belief based on reasonable grounds, provides ‘a valuable presumption as to the meaning of the language employed’. The  Beca Developments  test has been substantially followed in New South Wales and by intermediate appellate courts in other States, and nothing which Mr Boensch has submitted in this matter gives cause to depart from it. It is, however, unnecessary to determine whether, if that test is not satisfied, a person may ever be liable under s 74P(1) of the Real Property Act by reason of acting with an ulterior motiveor where the only interest supporting a caveat is de minimis in terms of legal content or economic value. It was neither suggested that Mr Pascoe acted for an ulterior purpose nor demonstrated that his equitable estate was de minimis, even after accounting for the rights under the Boensch Trust. Finally, contrary to Mr Boensch’s suggestion, Mr Pascoe did not ‘claim’ any ‘inconsistent interests’ by justifying his lodgement and maintenance of the caveat on the basis of his alternative beliefs that the Boensch Trust was void and that, were it not, Mr Boensch would enjoy a right of indemnity. 861

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Conclusion and orders For the reasons earlier stated, there is no reason to doubt that, upon the making of the sequestration order, the Rydalmere property vested in equity in Mr Pascoe by reason of Mr Boensch’s right of indemnity and, therefore, that Mr Pascoe had a caveatable interest in the property. Nor is there any reason to doubt that Mr Pascoe honestly believed on reasonable grounds that the property so vested, either on the basis that the trust was void or on the basis of Mr Boensch’s right of indemnity. On the facts as found, Mr  Pascoe did not lodge or refuse to withdraw the caveat without reasonable cause. It follows that the appeal should be dismissed with costs.

Commentary 13.8  The decision in Boensch v Pascoe makes it clear that the trustee honestly believed on reasonable grounds that the property would vest, either on the basis that the trust was void or on the basis of the bankrupt’s right of indemnity. As such, the trustee did not lodge or refuse to withdraw the caveat without reasonable cause. The High Court upheld the two-step approach endorsed by the court in Beca Developments and held that in order to prove an absence of reasonable cause, Mr Boensch had to establish two matters. First, that Mr Pascoe did not have a caveatable interest and second, that he did not have an honest belief, based on reasonable grounds, that he had a caveatable interest. The court found that Mr Boensch had not established this on the facts. Their Honours rejected the idea that the test should be purely objective, based only upon whether the caveator actually had a reasonable basis to lodge the caveat, irrespective of their belief. The whole point of the caveat provisions is to provide protection to a person where they honestly and reasonably believe they hold an interest capable of receiving the protection of a caveat. These conclusions were referenced by Basten JA in the earlier decision of the New South Wales Court of Appeal in New Galaxy Investments Pty Ltd v Thomson [2017] NSWCA 153 at [18] when he noted, ‘What is required is a belief as to a particular matter, held by the caveator at the relevant time, namely when the caveat was lodged. Nothing is added by calling it an “actual” belief; nor does the word “honest” carry the matter any further.’

Failure to Lodge a Caveat 13.9  A failure to lodge a caveat will not, in itself, affect the validity of an unregistered

interest although it may leave the interest vulnerable to extinguishment or postponement. A failure to protect a caveatable interest may result in the interest being extinguished by the registration of a subsequent inconsistent dealing and it may result in an unregistered interest losing its priority in time. Where an unregistered interest is not caveated it may be extinguished by a subsequent inconsistent registration and, in such a situation, the interest may not be subsequently revived. There is, therefore, a clear distinction between a competition involving unregistered interests, and a situation where a prior unregistered interest is extinguished by the registration of a subsequent inconsistent interest. Where there is a dispute between unregistered interests, priority will be determined according to the merit analysis: discussed in Chapter 10. Where an unregistered interest that has not been caveated is extinguished by a subsequent registered interest, the interest will be terminated completely; there is no priority evaluation because there is no competition. This approach is consistent with the fundamental objectives of registration under the Torrens System.

13.10  These issues were considered by the High Court in Leros Pty Ltd v Terara Pty Ltd (1992) 174 CLR 407, which is extracted below. 862

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  Leros Pty Ltd v Terara Pty Ltd  (1992) 174 CLR 407 Facts: The issue was whether an option to renew a lease for a further term of seven years was valid and enforceable against the appellant (‘Leros’) which, on 12 March 1990, became the registered proprietor of an estate in fee simple. The option was protected by two caveats. The first was lodged when Leros’ predecessor in title, Western, was the registered proprietor. It was lodged by the lessee, Terara, and claimed a leasehold interest with an option to renew. Prior to the lodgment of the caveat, title to the leased premises changed and Jass Pty Ltd became the registered proprietor. The caveat forbade the registration of any instrument affecting the claimed interest unless it was expressed to be subject to the caveator’s claim. However, before this caveat could be lodged, the landlord transferred the reversion to SeventyFifth Jass Nominees Pty Ltd. Jass Nominees became registered prior to the lodgment of the caveat by Terara and the registration, whilst subject to the lease, was not expressed to be subject to the option to renew. In effect, this meant that the option to renew was not protected at the point when Jass Nominees Pty Ltd became registered. The second caveat was lodged by the National Australia Bank to protect its interest under a mortgage granted to Terara, securing the repayment of moneys. The caveat forbade the registration of any instrument affecting the interest claimed by the bank ‘unless such instrument was expressed to be subject to the Caveator’s claim’. The caveat was noted on all subsequent transfers. Mason CJ, Dawson and McHugh JJ: This appeal raises important questions concerning the enforceability of interests sought to be protected by caveats lodged under the Transfer of Land Act 1893 (WA) (‘the Act’) … The present appeal arises out of separate proceedings commenced by Terara for a declaration that it has a valid option for renewal. At first instance, Terara relied on its caveat only, the Bank not being a party to the proceedings. Rowland J upheld Terara’s claim on the basis that Leros had actual notice of the lease and the option to renew and accepted registration subject to the interest disclosed in the caveat. Leros appealed to the Full Court. When the appeal came on for hearing, the Court directed that the Bank be given notice of the proceedings and of the earlier proceedings heard by Nicholson J. Subsequently, the Bank moved for a declaration that its caveat protected the option of renewal so as to make it valid against a subsequent registered interest pursuant to s 68 of the Act. The Court made an order citing the Bank as the second respondent and the appeal and the motion were heard together. The Full Court, by majority, dismissed the appeal. Malcolm CJ and Pidgeon J held that Terara’s caveat was valid and that Leros’ title was subject to the lease and the option of renewal. Wallace J (dissenting) considered that neither caveat was valid. … The validity of Terara’s existing lease, the term of which will expire in 1992, is not in dispute. As a short term tenancy, not exceeding five years to a tenant in actual possession, the existing lease is specifically protected by s 68, notwithstanding that it is not registered. What is in dispute is the enforceability of the option for renewal which is not registered. The purpose of the last proviso in the section, that which relates to an option of purchase or renewal, is to ensure that no such option should be valid against the person having the benefit of the subsequent dealing unless the instrument creating the lease is registered or a caveat protecting the lease is lodged. This proviso was necessary, as Barwick CJ pointed out in Mercantile Credits Ltd v Shell Co of Australia Ltd (1976) 136 CLR 326, at p 339, ‘because, without it, the effect of the earlier substantive provision of the section  would have made the subsequent dealing subject to the right of purchase or of renewal as the case may be’. The assumption was that the prescribed exception to the principle of indefeasibility of the title of the registered proprietor in favour of a prior unregistered lease for a term not exceeding five years would, but for the proviso, extend to an option of renewal. 863

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Terara does not dispute, nor could it dispute, that the option to renew is an ‘encumbrance’ within the meaning of that expression as it is defined by s 4 of the Act. A covenant in a lease giving a right of renewal of the term runs with the land so that the covenant is so annexed to the land as to create an interest in the leased land ibid, per Barwick CJ at  pp  337–338; Gibbs J at pp 344–345; Stephen J at pp 350–351. Generally speaking, such a covenant runs with the reversion as well as the land ibid, per Gibbs J at p 344; Re Davies (1989) 1 Qd R 48, at p 51. Whether such a covenant in an unregistered lease of land under the Act runs with the reversion depends upon the provisions of the Property Law Act 1969 (WA). Section 78 of the Property Law Act provides that a covenant runs with the reversion. However, by virtue of s 6 of the Property Law Act, in the absence of express provision, the Property Law Act, so far as it is inconsistent with the Act, does not apply to land under the Act. Section 69, which, like s 78, is in Pt VII of the Property Law Act, provides that the provisions of Pt VII ‘apply to leases and sub-leases of land under the Transfer of Land Act 1893, notwithstanding anything contained in that Act’. Section 7 of the Property Law Act defines the expression ‘land under the Transfer of Land Act 1893’ in these terms: ‘any estate or interest registered under that Act’. As the fee simple of the land in question is an estate registered under the Act, Pt VII of the Property Law Act, including s 78, applies to leases of the land. Accordingly, contrary to the submission made on behalf of Leros, we take the view that an unregistered lease of land under the Act is a lease which satisfies the definition and that the option runs with the reversion. But this is not to say that Pt VII of the Property Law Act overrides the specific provision made in the concluding words of s  68 of the Act with respect to the invalidity of an option to renew. It would not be right to attribute to the general words of s 69 of the Property Law Act an intention to repeal the specific provision in s 68 of the Act. The appellant’s argument, based on the concluding words of s  68, is that Jass and its successors acquired a title free from that encumbrance from the moment at which Jass was registered as proprietor. The response to that argument, accepted by the majority in the Full Court of the Supreme Court, was expressed by Malcolm CJ in these terms: ‘Section 68 does not say that the option of renewal in an unregistered lease is not valid against all subsequent registered interests. It provides only that it shall not be valid against “a subsequent registered interest unless the said lease is registered or protected by caveat”.’ However, this interpretation ignores the fact that, in an appropriate context, the indefinite article ‘a’ is quite capable of meaning ‘any’. And here, when the provision is read in the light of its context and purpose, that is how it should be understood. The purpose of the last proviso in s 68 is to ensure that the title of the subsequent registered proprietor is indefeasible as against an option of renewal in a prior lease for not more than five years unless the lease was registered or protected by caveat. Section 68 gives expression to the essential principle of the Torrens system, namely, that ‘the registered proprietor has the legal property in the land, subject only to equities and such interests as the Act expressly preserves’, to quote the words of Windeyer J in Breskvar v Wall (1971) 126 CLR 376, at p 400; see also Frazer v Walker (1967) 1 AC 569, per Lord Wilberforce at p 585. A purchaser who takes with notice of an antecedent equitable interest, who becomes registered without fraud, takes free from that interest: Bahr v Nicolay (No 2) (1988) 164 CLR 604, per Brennan J at pp 652–653. To become registered with notice of a prior unregistered interest does not constitute fraud: Mills v Stockman (1967) 116 CLR 61, per Kitto J at p 78. The Torrens system is, as Barwick CJ noted in Breskvar (1971) 126 CLR, at pp 385–386: ‘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 registration itself has vested in the proprietor.’ Torrens, in his A Handy Book on the Real Property Act of South  Australia (1862), p 11, in a passage quoted by Windeyer J in Breskvar (1971) 126 CLR, at p 400, described the operation of the legislation as: ‘cutting off the retrospective or 864

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derivative character of the title upon each transfer or transmission, so as that each freeholder is in the same position as a grantee direct from the Crown’. This passage supports the view that the effect of the registration of a subsequent dealing bringing about the registration of proprietorship of an estate or interest in land is to extinguish all prior unregistered estates or interests which, but for that registration, would have conflicted with the proprietor’s estate or interest or encumbered that estate or interest, unless the prior unregistered estate or interest falls within the exceptions to indefeasibility of title mentioned in s 68. In other words, a person seeking to preserve an unregistered interest not falling within those exceptions must register that interest in advance of the registration of a subsequent inconsistent dealing or prevent such registration by caveat or otherwise, and thereby enable registration of the unregistered interest. Once that interest is defeated by registration of a subsequent inconsistent dealing bringing about the registration of a new proprietor, the first interest is extinguished for all purposes and cannot be asserted against any later proprietor. Note the reference in Bahr v Nicolay (No 2) (1988) 164 CLR, per Mason CJ and Dawson J at p 619, to ‘registration of the transfer … as destroying the appellants’ rights’. The first interest does not become an inchoate interest capable of being asserted against a later proprietor or an interest which remains in suspension so that it is capable of subsequent revival against such a proprietor. We adopt the comment of Franklyn J in Osborne Park Co-operative Society Limited v Wilden Pty Ltd (1989) 2 WAR 77, at p 84 with respect to the impact of s 68 on an option of renewal in a prior unregistered lease not exceeding five years, namely, that ‘no … proprietary right exists as from the date of acquisition of title by the subsequent registered proprietor’. It is an incident of the indefeasibility of the title of the registered proprietor not only that he or she holds free from prior unregistered interests, except those specified in s 68, but also that he or she has the capacity to transfer a title to the interest of which he or she is proprietor to a successor, free from such unregistered interests. In this respect, the operation of the Act is similar to the operation under the general law of the doctrine of the bona fide purchaser for value who acquires the legal estate without notice of a prior equitable interest. The acquisition of the legal title by such a purchaser in those circumstances defeats the prior equitable interest in the sense that the interest is destroyed. Thus a subsequent purchaser with notice of the equitable interest, who purchases from the first purchaser, is not bound by the interest. If it were otherwise, a bona fide purchaser might be unable to deal with his or her property. The sale of the property would be clogged Maitland, Lectures on Equity (1909), pp 122–123. The failure of a person entitled to an equitable estate or interest to lodge a caveat against dealings with the land does not necessarily involve any loss of priority which the time of the creation of that interest would otherwise give: J and H Just (Holdings) Pty Ltd v  Bank of New South Wales (1971) 125 CLR 546, per Barwick CJ at p 554; Windeyer J at p 558. That is because the purpose of a caveat against dealings is to operate as an injunction to the ­RegistrarGeneral to prevent registration of dealings forbidden by the caveat until notice is given to the caveator so that he or she has an opportunity to oppose such registration ibid, per Barwick CJ at  p 552; Godfrey Constructions Pty Ltd v  Kanangra Park Pty Ltd (1972) 128  CLR 529, per Barwick CJ at p 537. Although the failure to lodge a caveat may not result in a loss of priority in a competition between conflicting equitable interests, such a failure will, as previously explained, result in the destruction of the equitable interest as soon as registration of an inconsistent dealing constitutes the registration of a subsequent proprietor who takes free from the prior unregistered equitable interest. In this respect there is a distinction between a competition between unregistered equitable interests and a competition between a prior unregistered equitable interest and a subsequently registered estate or interest in the land. In the second case, the prior unregistered interest is defeated so that the contractual right on which that interest depends, though enforceable against the party who created it, is not enforceable as against the third party who becomes registered as the proprietor of the inconsistent estate or interest. 865

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This brings us to a consideration of the effect of Terara’s caveat as a ‘subject to claims’ caveat and the fact that the caveat was noted as an encumbrance in the instrument of transfer from Western to Leros. As appears from s 137 of the Act, a caveator may lodge a ‘subject to claims’ caveat, or ‘permissive’ caveat as it is known in South Australia, instead of a caveat forbidding the registration of dealings. If, in conformity with such a caveat, an instrument of transfer, expressed to be subject to the caveat, is registered, the title of the transferee is subject to the rights of the caveator. In South Australia, that view has been taken by Olsson J in Andrews v  South  Australian Superannuation Fund Investment Trust (1985) 124 LSJS 153, where his Honour, referring to the effect of registration of a transfer expressed to be subject to ‘an existing valid caveat’, stated ibid, at p 163, that ‘the effect is to preserve the rights of the caveator’. In Coles KMA Ltd v Sword Nominees Pty Ltd (1986) 44 SASR 120, Bollen J (with whose judgment Jacobs J expressed his substantial agreement) cited those remarks with approval ibid, at p 128. However, the effect of the registration of such a transfer is not to validate the estate or interest claimed by the caveat. All that registration in that form, in conformity with the caveat, achieves is to prevent the registration from destroying or defeating the prior unregistered interest claimed by the caveator, assuming it to be valid and enforceable. Whether the interest so claimed is valid and enforceable remains a matter for resolution after registration. The ‘subject to claims’ caveat and registration is a procedure which enables resolution of that question to occur after, if not before, registration. The registered proprietor takes, under such a transfer, subject to the caveat, that is, subject to the claim made by the caveator; the proprietor does not take subject to the interest claimed by the caveator. The form of the registration in the present case illustrates the point. It is the caveat that is noted in the memorandum of encumbrances. And a caveat is not a defect in title or an encumbrance: Godfrey Constructions Pty Ltd (1972) 128 CLR, per Barwick CJ at p 537; Forster v Finance Corporation of Australia Ltd (1980) VR 63, per Crockett J at p 65. … Terara contends that, notwithstanding s 68, it has an enforceable equity against Leros, arising out of the conduct of Leros before it became registered as proprietor. In Bahr v Nicolay (No 2), this Court recognised that a purchaser who has undertaken to hold his or her title subject to a third party’s right to repurchase is bound by that undertaking after registration of his or her transfer, the undertaking giving rise to a trust. In the present case, no such undertaking was given by Leros. Nor were the circumstances in which Leros became registered such as to justify an inference that Leros recognised the validity of the option of renewal claimed by Terara. Likewise, those circumstances do not warrant the conclusion that Leros’ refusal to acknowledge the validity of Terara’s option of renewal amounted to fraud, even according to the extended concept of ‘fraud’, in the context of s 68, favoured by Mason CJ and Dawson J: Bahr v Nicolay (No 2) (1988) 164 CLR, at p 619. … The Bank submits that its caveat affords protection for Terara’s interest as lessee  and option holder, at  least to the extent necessary to protect the Bank’s subordinate interest as ‘mortgage(e) by way of sub-demise’. Provided that the Bank’s caveat complies with the statutory requirements with respect to formalities and contents of caveats, the Bank’s contention is, in our view, correct. The concept of protection of an estate or interest by caveat is to be derived from s  137. As noted previously, that section enables a beneficiary or other person claiming an estate or interest in land under the Act to lodge a ‘subject to claims’ caveat forbidding the registration of any person as transferee or proprietor of or of any instrument affecting such estate or interest unless the instrument is expressed to be subject to the claim of the caveator. The section  proceeds on the footing that a person claiming an estate or interest protects that interest by lodging a caveat forbidding the registration of an interest or an inconsistent interest except on a ‘subject to claims’ basis. It should be noted that the section expressly provides for 866

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the lodging of a caveat by a person who claims an estate or interest ‘in any lease’ under an unregistered instrument. Thus, the concept of protection which emerges from s 137 is that a caveator who claims an interest in an unregistered lease as, for example, mortgagee by way of subdemise, may protect his or her interest and, incidentally, the lease itself to the extent necessary to protect the caveator’s dependent interest. The purpose of a caveat, as stated earlier, is to operate as an injunction against registration of an inconsistent dealing otherwise than in accordance with the caveat so as to enable, in the ultimate analysis, a determination of the conflicting claims. There is no reason in principle why the failure of Terara to lodge a caveat to protect its interest should affect the Bank’s capacity to protect fully its own interest by lodging a caveat. And if the Bank’s interest was dependent on, and derived from, an interest held by Terara, as it was, protection of the Bank’s interest by caveat necessarily entailed reliance on Terara’s interest as an element in that protection. Protection of the Bank’s interest meant protection of Terara’s interest, at least to the extent of the dependency. In this respect, it is necessary to bear in mind that, in a contest between the Bank and Leros, the Bank could compel Terara, even if it was unwilling to exercise its option, to do so. The argument for Leros is that every subordinate interest perishes with the superior interest upon which it is dependent: Bendall v McWhirter (1952) 2 QB 466, per Romer LJ at p 487, and, therefore, the Bank’s caveat perishes with the option. However, it is necessary to distinguish between the validity of a caveat and that of the interest sought to be protected by the caveat. Although a subordinate interest will perish with the destruction of the superior interest upon which it depends, that principle can have no application to a caveat which, as stated earlier, is not a proprietary interest. Therefore, the first question is whether the caveat sufficiently specifies the Bank’s interest as mortgagee by way of subdemise so as to satisfy the requirements of s  137. It has been said that the purpose of requiring the caveator to ‘specify’ the estate or interest claimed is to enable the registered proprietor to know, or find out, the claim which he or she will have to meet: In re Spencer; Hale (Caveator) (1904) 4 SR (NSW), per Darley CJ at p 473. It has also been said that another purpose is to enable the Registrar-General to determine whether a dealing lodged for registration is inconsistent with the estate or interest claimed by the caveator. But, in evaluating the significance of that purpose, regard must be had to the existence of the Registrar-General’s power under s 137 to require the caveator to provide a statutory declaration stating the nature of the estate or interest and the title thereto. In the ultimate analysis, it seems to us that ‘specify’ should be understood in the sense of ‘mention definitely or explicitly’. Subject to some qualification, that is the meaning adopted by the Full Court of the Supreme Court of Western Australia in Kuper v Keywest Constructions Pty Ltd (1990) 3 WAR 419. Two objections are made to the sufficiency of the description of the interest claimed in the caveat: that the caveat does not state the amount of the security and that it does not state the term of the subdemise. However, in our view, a statement of the amount of the debt is not required as an element in the requisite description of the caveator’s interest. And, although the term of the subdemise does not appear on the face of the caveat, par 6(a) of the annexure reveals to all who examine the caveat that the lessee ‘demised to the Caveator all the Lessee’s right, title and interest in and to the Leased Premises for the residue of the term of the Lease as renewed or extended from time to time except the last day of the term of the Lease’. Paragraph 6(b) states that the lessee is to stand possessed of that last day on trust for the Bank. Paragraph 4 states that the term of the existing lease is for a term of five years from 6 December 1987. On reading these paragraphs of the Annexure, a person examining the caveat could be left in no doubt as to the extent and nature of the Bank’s claim which he or she would have to meet if he or she proceeded to registration as proprietor subject to that claim. However, the same cannot be said for the option of renewal, the only reference to which is that made in par 6(a) of the Annexure, as set out above. Accordingly, the option is not sufficiently specified by the Bank’s caveat, and the Bank’s interest is supported by the caveat only to the 867

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extent of the term expiring in December 1992. Thus, the lease, but not the option, is protected by the Bank’s caveat to the extent of the dependency. It should be noted that the observations made previously in Mercantile Credits Ltd (1976) 136 CLR, at p 339 do not assist the respondents’ case. Even if capable of application to the different question in issue here, they cannot stand in the face of the clear words of s 68. The question remains whether the caveat lodged by the Bank which, for the purposes of s 137, will protect the lease to the extent necessary to protect the Bank’s interest, constitutes protection of the lease itself for the purposes of the concluding words in s 68. There is much to commend the view that the concluding words of that section contemplate a caveat protecting the lease itself as distinct from a dependent and lesser interest. That is the natural reading of the provision and it is supported by the circumstance that protection by caveat is specified as an alternative to registration of the lease itself. In other words, although the tenant’s unregistered lease for not more than five years is protected without registration if he or she is in actual occupation, an option for renewal in that lease is not protected unless the lease itself is registered or made the subject of a caveat. On the other hand, if s 137 permits protection of a superior interest to the extent that such protection may be necessary for the protection of a subordinate and dependent interest claimed by the caveator, why should s 68 be read in the narrow sense that its language might seem to suggest? Is there any discernible purpose to be served by insisting on the stricter requirement? Although the argument is not without force, we favour the stricter interpretation, because the concluding words of s 68 are providing for an exception to indefeasibility of title. As such, the exception should be strictly construed. For the foregoing reasons we would allow the appeal.

Commentary 13.11  The conclusions of the High Court in Leros Pty Ltd v Terara Pty Ltd outline the

consequences of registration from the perspective of unregistered interests. Registration will extinguish all prior unregistered estates or interests which, but for that registration, would have conflicted with the proprietor’s interest. Hence, a person holding an unregistered interest in land should protect that interest by making sure that they lodge a caveat to protect their interest against extinguishment by any subsequent registration. If nothing is done and a subsequent inconsistent interest is registered, the registration will defeat the unregistered interest and that interest may not be revived against any subsequent proprietor. Hence, while the failure of an unregistered interest holder to lodge a caveat to protect their interest will not necessarily affect their priority in a priority dispute, the failure to lodge a caveat will result in extinguishment of the interest if an inconsistent dealing is subsequently registered. As outlined by the High Court at 415: It is an incident of the indefeasibility of the title of the registered proprietor not only that he or she holds free from prior unregistered interests, except those specified. … but also that he or she has the capacity to transfer a title to the interest of which he or she is proprietor to a successor, free from such unregistered interests. In this respect, the operation of the Act is similar to the operation under the general law of the doctrine of the bona fide purchaser for value who acquires the legal estate without notice of a prior equitable interest.

On the facts of Leros Pty Ltd v Terara Pty Ltd, the High Court concluded that the caveat lodged by Terara Pty Ltd was not enforceable against Leros Pty Ltd, the subsequent registered proprietor, because the interest had been extinguished when Leros Pty Ltd’s 868

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predecessor in title became registered. Further, the caveat lodged by the bank protecting its security was not enforceable against Leros Pty Ltd because the option was not sufficiently specified and the bank’s caveat only protected the initial lease term and not the option. The conclusions of the High Court in Leros confined the scope of the earlier decision of the High Court in Mercantile Credits Ltd v Shell Co of Australia Ltd, where the High Court held that a registered lease, containing details of further options to renew, was binding on a subsequent registered proprietor. The conclusions of Mercantile Credit set out that the registration of a lease will bind any person dealing with the title to the terms and conditions of that lease, and will encompass all of the interests arising out of that lease. Following Leros v Terara, such protection will not be applied to options claimed in caveats that are lodged after an intervening registration. See  also: T Wilson, ‘Indefeasibility of Title under the Torrens: Leros v Terara Pty Ltd’ (1992) 22(2) West Australian Law Review 411; Nugawela v  Commonwealth Bank of Australia [2018] WASCA 70. The need for a caveat to be based upon a non-extinguished interest was raised in Piroshenko v Grojsman [2010] VSC 240 at [23] where Warren CJ stated: ‘A caveat is not a “bargaining chip”. It is not sufficient for the caveator to establish a prima facie case that they have contractual, equitable or statutory rights against the caveatee; their interest or rights must attach to the property with respect to which the caveat has been lodged.’10 In this respect, the lodgment of a caveat constitutes a reasonable claim by the caveator that he or she has an estate or interest in the land. It will therefore operate ‘so as to prevent registration of a later dealing until the caveator has had an opportunity to establish his or her claim and perhaps 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’.11 As confirmed by Kiefel CJ, Gageler and Keane JJ in Boensch v Pascoe (2019) 375 ALR 15 at [12], ‘The existence of a caveatable interest, without more, supplies “reasonable cause” for lodging and maintaining the caveat’.12

Caveat Must Relate to an Existing Interest 13.12  It is not possible to lodge a caveat to protect the mere possibility of an interest, even if that possibility is great. The caveat must direct itself to an existing, identifiable interest in Torrens title land. Thus, an expectancy, where no existing title is conferred, is not caveatable. This was discussed by the court in Kerabee Park Pty Ltd v Daley [1978] 2 NSWLR 222, where the plaintiff was the registered first mortgagee and the defendants had lodged caveats over the land to protect an unregistered equitable mortgage. The priority of the plaintiff ’s mortgage over the defendants’ mortgage was accepted; however, the dispute arose because the plaintiff ’s mortgagor defaulted and the plaintiff wanted to exercise the power of sale. The defendants refused to remove their caveats. Holland J in the New South Wales Supreme Court found in favour of the plaintiff and held that a caveator does not have a right to prevent registration of a dealing to which his or her interest does not entitle him or her to object. A caveat can only provide protection, by way of notice, commensurate with the extent of the notified estate or interest. Where a caveator enjoys more, or different, rights over land 10. See also Allens Asphalt Pty Ltd v SPM Group Pty Ltd [2010] 1 Qd R 202; Martorella v Innovision Developments Pty Ltd [2011] VSC 282 at [51]–[57]. 11. Renshaw v Queensland Mining Corporation (No 2) [2016] FCA 1482 at [92]; Black v Garnock (2007) 230 CLR 438 at [76] per Callinan J. 12. (2019) 375 ALR 15 at [12]. 869

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than that which is claimed in the existing caveat, it is appropriate for the caveator to lodge another, different, caveat notifying such interests. As outlined by Barrett J in Multi-Span Constructions No 1 Pty Ltd v 14 Portland Street Pty Ltd [2001] NSWSC 696 at [127], ‘a caveat is not an ambulatory or flexible means of maintaining a blocking position in aid of whatever interest, if any, the caveator may have from time to time’. See also Martorella v Innovision Developments Pty Ltd [2011] VSC 282 at [56]. It is important to ensure that all caveatable interests are clearly described. In Hanson Construction Material v Vimwise Civil Engineering (2006) NSW ConvR 56,137, Campbell J held that the requirement that a caveat ‘specify the prescribed particulars’ of the nature of the estate or interest claimed was not adequately met simply by a description of the estate or interest in the land claimed as ‘equitable interest’. Similarly, in Circuit Finance Pty Ltd v Crown & Gleeson Securities Pty Ltd (2006) NSW ConvR 56,143 at [21], Brereton J stated the characterisation and description of the nature of the estate, interest or right claimed by the caveator was more than a mere formal requirement of the provisions of the Act relating to caveats. Rather, it went to the heart and substance of the operation of the provisions because without such a description, neither the Registrar-General nor a person reading the caveat could know whether a dealing would affect the estate claimed.13 In Westpac Banking Corporation v Dunn [2011] WASC 7 at [16], Le Miere J concluded that the caveat must ‘specify the estate or interest claimed in the sense of being mentioned definitely or explicitly’.

Priority Disputes Between Unregistered Interests Merit analysis: assessing the better equity 13.13  The merit assessment involves an assessment of the conduct of both parties. The prior interest holder will retain priority unless it is postponed following a holistic review of the conduct of both parties. As outlined by Ormiston JA in Moffett v Dillon [1999] 2 VR 480 at [77] (and approved by Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd (2017) 18 BPR 36,683 at  [257] per Ward JA), this assessment is essentially a negative inquiry. Ormiston J stated: 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.

The priority test for determining a dispute between unregistered interest holders is the same as the priority test applicable between competing equitable interests. It must be established, in the words of Mason and Deane JJ in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 337 that in ‘fairness and justice’ the overall circumstances 13. See also Northern Star Agriculture v Morgan & Banks Developments Pty Ltd [2007] NSWSC 2 and Depas Pty Ltd v Dimitriou (2007) V ConvR 54-728. 870

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justify the priority of the prior holder and ‘preference should be given to what is the better equity in an examination of the relevant circumstances’. The mere failure to lodge a caveat should not, in itself, result in a loss of priority when priority in time would otherwise have validated a prior unregistered interest. Loss of priority may be relevant, but the merit analysis is dependent upon an overall assessment of all of the relevant circumstances. 13.14  An extract of the High  Court decision in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326, outlining the relevant priority principles applicable to a competition between two unregistered interests in Torrens title land, is set out below.

  Heid v Reliance Finance Corporation Pty Ltd  (1983) 154 CLR 326 Facts: The appellant (Heid) sold his land to Connell Investments Pty Ltd. Heid signed a transfer which set out that he had received full payment for the sale. This was not, however, true. Heid then gave this transfer along with an authority to collect the duplicate certificate of title to Gibby whom Heid believed to be the solicitor for Connell Investments Pty Ltd, but it turned out that Gibby was not that person. When Gibby obtained the certificate of title, Connell Investments used this title to obtain loan money from Reliance Finance Corporation, who were satisfied by the fact that Connell Investments held a completed transfer and the duplicate certificate of title over the land. The question that subsequently arose was between the two unregistered interests — that of the vendor’s lien held by Heid for the unpaid purchase price, and the equitable mortgage held in favour of Reliance Finance Corporation. The High Court considered the factors relevant to a merit analysis in a priority dispute between unregistered equitable interests. Gibbs CJ: On the appeal before us Mr Alexander was not represented and it 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 p 78 (61 ER 646, at p 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. (at p 333) In Rimmer v Webster (1902) 2 Ch 163, at p 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.’ 871

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There is no doubt as to the general correctness of that proposition: see also Capell v Winter (1907) 2 Ch  376, at  p 381, and Tsang Chuen v  Li Po Kwai (1932) AC 715, at  pp 728–729. It is illustrated by the decision 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, at pp 83–84 (61 ER, at p 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 p 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, at p 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 p 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 at pp 68–9: ‘Apart from priority in time, the test for ascertaining which encumbrancer 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, at p 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, at p 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.’ 872

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The decisions in such cases as Rimmer v  Webster and Abigail v  Lapin may be based, alternatively, 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, at  p 382), but it seems to me that it may be regarded as a particular form of estoppel. However, either principle will 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 p 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, at p 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 p 208, that ‘the transfer operated as a representation, 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 unreasonable 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 873

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to guard against the possible fraud of the solicitor, from asserting his equitable interest as unpaid vendor: cf Rimmer v Webster (1902) 2 Ch, at p 172. Although the broad principle stated in Lickbarrow v Mason (1787) 2 TR 63, at p 70 (100 ER 35, at p 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 occasioning of the loss can be correctly attributed to the party sought to be made responsible’: Thompson v Palmer (1933) 49 CLR 507, at p 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. By the same reasoning, the interest of Mr Alexander also takes priority over the interest of the appellant. By the time that Mr Alexander made the advance to Connell Investments, that company had become registered as proprietor of the land, and although Mr Alexander did not see the memorandum of transfer, it was held by the Court of Appeal that the registration allowed Connell Investments to hold out to Mr Alexander that, subject to the interest of Reliance Finance, it had a good title, and that Mr Alexander acted on the faith of this representation. This finding was not attacked. In the case of Mr Alexander also, all the elements necessary to ground an estoppel are present. In reaching these conclusions it is unnecessary to rely on the appellant’s failure to take any action when he received the erroneous deposit notes shortly after 2 June. 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 and Mr Alexander of his equitable interest: cf J and H Just (Holdings) Pty Ltd v Bank of NSW (1971) 125 CLR 546, at pp 554–555, 557–559. 874

Unregistered Interests

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For these reasons the decision of the Court of Appeal was right and the appeal should be dismissed. Mason and Deane JJ: As Gibbs CJ has related the facts and the issues which arise in this appeal there is no need for us to repeat them. 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 p 276; Abigail v Lapin (1934) 51 CLR 58, at p 63; IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, at pp 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, at p 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, at  pp 197–198; Tsang Chuen v  Li Po Kwai (1932) AC 715, at  pp 728–729; Rice v Rice (1853) 2 Drew 73 (61 ER 646); and Rimmer v Webster (1902) 2 Ch 163, at p 173; cf Courtenay (1963) 110 CLR, at p 578. To use the words of Lord Selborne LC in Dixon v Muckleston (1872) LR 8 Ch App 155, at p 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, at pp 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, at pp 728–729. But in Capell v Winter (1907) 2 Ch 376, at p 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, at  p 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 encumbrancer 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, at p 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 875

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in Abigail v Lapin (1934) 51 CLR at p 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, at pp 83–84 (61 ER, at p 650); approved in Abigail v Lapin (1934) 51 CLR, at p 68; Rimmer v  Webster (1902) 2 Ch, at  pp  172–173; Central Newbury Car Auctions Ltd v  Unity Finance Ltd (1957) 1 QB 371, at p 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 pp 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, 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, at p 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, at p 204 — was just one ‘instance’ of a case when the merits are unequal: see also Lapin v Abigail (1930) 44 CLR, at pp 185–186, per Isaacs J; General Finance Agency, etc, Co (In liq) v Perpetual Executors And Trustees Association, etc (1902) 27 VLR 739, at pp 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, at p 160; Latec Investments (1965) 113 CLR, at p 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, at p 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 nonexistence 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 and 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. 876

Unregistered Interests

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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 foreseeable 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, at p 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 postponement 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, at p 578, speaking of the Courtenays’ conduct, said, adopting the Dixon v Muckleston (1872) LR 8 Ch App, at p 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, at pp 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 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, at p 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 p 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 misrepresent 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 p 482: 877

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‘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 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. The inevitable conclusion therefore is that there was negligence on the part of the appellant. It led — and this is not in dispute — to an assumption by Reliance Finance and by Mr Alexander 878

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that the appellant’s interest no longer existed. It follows that, in all the circumstances, Reliance Finance and Mr Alexander have the better equities. The appeal should be dismissed. Murphy J: … The appellant handed over the memorandum and the certificate of title to a person he believed to be a solicitor, and that person’s employer used them to obtain moneys fraudulently from the respondents who relied on the acknowledgment. The appellant concedes that the respondents were not negligent. In my opinion it makes no difference whether the appellant did or did not reasonably believe that the person was a solicitor, or whether or not the person was a solicitor, or whether or not the person was also acting for or employed by the prospective purchaser. The appellant ‘armed’ a third party ‘with the power of going into the world under false colours’: Dixon v Muckleston (1872) LR 8 Ch App 155, at p 160. His equitable interest should not prevail over that of the respondents. 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 pp 83–84 (61 ER 646, at p 650); Rimmer v Webster (1902) 2 Ch 163, at p 173; Tsang Chuen v Li Po Kwai (1932) AC 715, at pp 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 p 70 (100 ER 35, at p 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  p 208; Thompson v Palmer (1933) 49 CLR 507, at pp 547–548; and IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550, at p 578. In Lapin v Abigail (1930) 44 CLR 166, at p 198, Gavan Duffy and Starke JJ stated: ‘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.’ On appeal this was approved by the Privy Council (1934) 51 CLR 58, at p 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, at p 204: ‘… 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. 879

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Commentary 13.15  In a dispute between unregistered interests there are essentially three different aspects to the merit evaluation. The first is whether the prior interest holder has allowed a third party to hold themselves out that they hold that title unencumbered by any other interest and in so doing, represent to a subsequent unregistered interest holder that their interest does not exist. The second involves a holistic examination of all of the circumstances and conduct of both parties to determine whether there is anything in the individual circumstances that would justify the postponement of either interest holder. This assessment involves an overall evaluation of the bona fides of both parties to assess whether there is any conduct that may constitute equitable fraud on the part of either interest holder. In Heid v Reliance Finance Corporation Pty Ltd, Gibbs CJ felt that where the prior interest holder has provided the indicia of title to a third party without any indication of the existence of their prior equity, it constituted a representation to a subsequent interest holder that no interest existed. In this respect, his Honour quoted from the Privy Council decision in Abigail v Lapin [1934] AC 491 where Lord Wright noted that the parties were bound by the natural consequences of their acts. In agreeing with Lord Wright, Gibbs CJ suggested that the actions of a person handing over title deeds in such a situation constitutes a form of estoppel because it amounts to an indirect representation, to any person into whose hands the transfer might lawfully come, that no prior interest exists. On this basis, his Honour concluded that this act, combined with the failure of Heid to lodge a caveat to protect his vendor’s lien constituted postponing conduct. His Honour stated: ‘… 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’. Mason and Deane JJ articulated two different tests for determining priority between unregistered interests. The first, as endorsed by Gibbs CJ, was the ‘estoppel’ based test; the second was a broader test based focusing upon a determination of the ‘better equity’. According to Mason and Deane JJ this test was dependent upon a holistic examination of all of the circumstances including representations made by the prior interest holder, the conduct of both parties and the protective measures taken by both parties. Their Honours disagreed with Gibbs CJ and felt that it was difficult, if not impossible, to encompass all the cases of postponement of a prior unregistered interest under the umbrella of estoppel because 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 (wilful and unjustifiable neglect). In light of this, their Honours preferred 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.

In expounding a broader test, Mason and Deane JJ concluded that fairness and justice required attention be given to acts where it is reasonably foreseeable by the prior interest holder that they may contribute to the creation of a later equitable interest because they contribute to the belief by the later interest holder that no 880

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previous interest exists. In particular, their Honours felt that in itself, a mere failure to caveat should not result in a loss of priority although it must be treated as a relevant consideration. In Circuit Finance Australia Ltd (in liq) v Panella [2011] NSWSC 311 Pembroke J at [13], in upholding the conclusions of the High Court in Heid v Reliance, made the following comments: When courts speak of ‘general considerations of fairness’ in the context of a priority dispute, the search is for conduct which is both blameworthy and causative. Mere unfairness in the outcome is irrelevant unless there is also some tangible conduct by the holder of the first interest which caused the holder of the later interest to act on a false premise. This is why, in such a case, the conduct of the holder of the first interest is often described as ‘postponing’ or ‘disentitling’ conduct. It is not sufficient to point to the eventual outcome and contend that it is unfair. It may well be so by some moral standard. But the unfairness of the outcome is not a reason for departing from well-established legal principle. The only relevant question is whether the supposedly unfair result is the consequence of some causative act, neglect or default by the plaintiff. If not, the plaintiff is entitled to the benefit of its equitable charge over the land.

In AG (CQ) Pty Ltd v A & T Promotions Pty Ltd [2010] Qd ConvR 54-732, Holmes JA at  [37] concluded that the mere fact that the subsequent interest holder took greater diligence in protecting its interest should not mean that the subsequent interest holder acquires immediate priority, as this would be inconsistent with the emphasis given by Mason and Deane JJ in Heid v Reliance on the characterisation of the conduct of the earlier interest holder. The decision of the Privy Council in Abigail v Lapin [1934] AC 491 was an important reference for the High Court in Heid v Reliance. On the facts of Abigail v Lapin, Mr and Mrs  Lapin owned two properties and executed two transfers of those properties to Mrs Heavener, who became registered proprietor of both properties. Mortgages to English, Scottish and Australian banks were then lodged over the properties and subsequently discharged. The  mortgages were discharged out of moneys lent by Abigail to Mr  and Mrs  Heavener. The mortgage to Abigail was signed by Mrs  Heavener as the registered proprietor of an estate in fee simple. Abigail held the certificates of title and lodged a caveat to protect the mortgage. Abigail subsequently lodged the mortgage for registration, but before it could be registered the Lapins lodged a caveat. The Lapins claimed that they were the registered proprietor over the land, arguing that they had handed the transfers and title over to Mrs Heavener purely as collateral security for a different loan transaction that had already been discharged. They further alleged that they had been induced to sign the transfers by fraud. The trial judge found that the Lapins were estopped from asserting their title against Abigail because he made a mortgage advance in good faith as a bona fide purchaser (mortgagee) for value without notice. Thus, Abigail’s equity, although subsequent in time was given priority, because the conduct of the Lapins, in executing an unfettered memorandum of transfer and in failing to place on the Register any embargo that prevented the Heaveners from using those transfers at  their face value, amounted to unreasonable and negligent conduct. The High  Court allowed the appeal, noting that Abigail had not searched the Register. The Privy Council disagreed with the High Court and, following the approach of the trial judge, postponed the interest of the Lapins. The Privy Council held that the conduct of the Lapins, in allowing the Heaveners to represent to the world that they held good title, contributed to the creation of the subsequent mortgage. The Lapins armed the Heaveners to go out into the world armed with false ‘title’ colours. The failure to search the 881

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Register was, according to the Privy Council, irrelevant because it would not have revealed anything to Abigail other than the existence of two transfers to the Heaveners. According to the Privy Council, the test for ascertaining who has the better equity must be whether either has been guilty of some act or default that prejudices his or her claim. On the specific facts it could not be said that Abigail did or omitted to do anything that he should have done in lending the money on the security. On the other hand, the Lapins had, through their conduct in providing the indicia of title, represented that Mrs Heavener was the registered proprietor and that no prior interest existed and this constituted postponing conduct. In this respect, the test requires an evaluation of who has acted worst, in order to determine who is entitled to priority. This was confirmed by Holmes JA in AG(CQ) P/L v A&T Promotions P/L [2011] 1 Qd R 306 at [36], who concluded 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’. See also Australia Capital Financial Management Pty Ltd v Linfield Developments Pty Ltd (2017) 18 BPR 36, 683; LTDC Pty Ltd v Cashflow Finance Australia Pty Ltd [2019] NSWSC 150 at [46] per Darke J.

Different forms of priority disputes 13.16  Priority disputes between unregistered interest holders may arise in a range of different situations. The relevance of failing to lodge a caveat, while an important factor in this assessment, must be evaluated in accordance with the context in which it occurs. Consider the following different situations: (i) The prior interest holder is aware of the fact that they hold an unregistered interest and are in a position to protect that interest; however, they fail to caveat. In this situation, the failure to caveat may offset the priority in time. (ii) The prior interest holder is aware of the fact that they hold an equitable interest and are in a position to protect that interest and do so by retaining possession of the title documents. In this situation the failure to caveat may not be relevant to a priority analysis if retaining the title documents is regarded as a sufficient means of protection.14 (iii) The prior interest holder is aware of the fact that they hold an unregistered interest; but, it is usual conveyancing practice not to lodge a caveat: see  IAC (Finance) Pty Ltd v  Courtenay (1963) 110 CLR 550. In Black v  Garnock (2007) 230 CLR 438 Callinan J suggests that the conveyancing practice for the sale of land should incorporate, as a matter of course, caveating the equitable interest the purchaser acquires upon entering into the contract of sale. This case is extracted below at 13.17. (iv) The interest of the prior interest holder arises constructively and in light of this, the holder is unaware that they have an interest that is caveatable. In such a situation, the failure to lodge a caveat may be justified and may not constitute postponing conduct. (v) The prior interest holder is aware of the fact that they hold an unregistered interest, but no caveat is lodged due to a reasonable belief that lodgement was unnecessary and may cause ill-feeling: see Jacobs v Platt Nominees [1990] VR 146. 14. See J and H Just Holdings v Bank of New South Wales (1971) 125 CLR 546; Person-to-Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745. 882

Unregistered Interests

13.17

13.17  The failure to lodge a caveat where a purchaser has entered into an enforceable contract for the purchase of land can result in the purchaser losing their interest in a priority dispute with a subsequent interest-holder. In Black v  Garnock (2007) 230 CLR  438, the High Court concluded that failure to lodge a caveat in such a situation should constitute postponing conduct because it was ‘subversive’ to the entire Torrens system. The decision is extracted below.

  Black v Garnock  (2007) 230 CLR 438 Facts: Black obtained a judgment debt against the registered proprietor of farming land. A few months later, the registered proprietor entered into a contract of sale with the Garnocks to sell them the farming land. The purchasers paid a deposit but did not lodge a caveat protecting their equitable interest arising out of the contract of sale. A few hours prior to settlement, a writ of execution in favour of Black was recorded on the title to the land. This prevented the land from being transferred to the Garnocks. The issue for the court was whether the prior interest of the Garnocks arising pursuant to the contract of sale took was enforceable against the registered writ of execution. Of particular interest was the relevance of the failure of the purchasers to protect their interest by way of a caveat. The New South Wales Court of Appeal found in favour of the purchasers. A majority of the High Court (Gummow, Hayne and Callinan JJ) upheld an appeal from Black holding that the failure of the purchasers to protect their interest by way of a caveat was vital in the circumstances because it could have prevented the subsequent registration of the writ of execution. The judgment of Callinan J is extracted below. Callinan J: 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. 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. … 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 883

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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 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. 884

Unregistered Interests

13.17

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 and H Just (Holdings) Pty Ltd v Bank of New South Wales, in which he said: ‘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.’ … 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 Heavens 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 and 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 885

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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. 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 Register-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. For these, and the reasons given by Gummow and Hayne JJ, I would allow the appeal and join in the orders proposed by them. 886

Unregistered Interests

13.19

Commentary 13.18  The majority of the High  Court in Black v  Garnock (Gummow, Hayne and Callinan JJ, with Gleeson CJ and Crennan in dissent) concluded that the failure of the purchasers to lodge a caveat, while not in itself determinative in a priority dispute, was clearly instrumental in the loss of interest to the purchasers. A writ of execution will not in itself constitute a proprietary interest; however, it may be registered and for the period in which it exists, will confer rights upon the Sheriff to deal with the land by and on the face of the Register. The failure of the purchasers to lodge a caveat to protect their interest meant that the writ was able to be registered and to effectively defeat the unregistered interest of the purchasers. Callinan J noted that the case was 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’. Rather, the case concerned the failure of a prior unregistered interest to protect that interest through the lodgment of a caveat against a subsequent registration. Callinan J opined that the lodgment of a caveat protecting an interest acquired under a contract for the sale of land was a ‘salutary practice’. His Honour made it clear that if this practice had not fallen into disuse, the purchasers would not find themselves in the position they were in. In particular, Callinan J suggested that the failure of a person entitled to lodge a caveat was ultimately ‘subversive of the whole scheme of the Torrens system’. Gummow and Hayne JJ agreed, noting at  [49] that ‘the purchasers under the contract of sale made with the judgment debtor had steps available under the Real Property Act which, if taken, would have prevented a purchaser at a subsequent sale made in execution of the writ obtaining registration as owner of the land’. See  also Secure Funding Ltd v  Donneley [2010] QSC 91 distinguishing the provisions of the Land Title Act 1994 (Qld) from those of the Real Property Act 1900 (NSW), which Black v Garnock was concerned with. In Augusta Pty Ltd v  Provident Capital Ltd [2012] NSWCA 26 at  [66]–[67], Barrett JA concluded that the High Court in Black v Garnock did not deal explicitly with the alternative course that a person with an unregistered and unregistrable interest might adopt after recording the writ; that being, the lodgment of a caveat under s 74F forbidding the registration of any transfer. Gummow  J and Hayne J were of the view that a caveat lodged by the holder of the equitable interest before the recording of the writ would have operated, after such recording, to prevent registration of the Sheriff ’s transfer. The prohibition on registration that arises from s 74H through lodgment of a caveat under s 74F is therefore left to operate without any constraint created by the provisions concerning writs. As such, His Honour concluded that there was no apparent reason why the same should not be so in relation to a caveat lodged by the holder of an equitable interest after the recording of a writ, with the result that ‘a trustee with a beneficial interest arising from the trustee’s right of indemnity could lodge an effective s 74F caveat despite the recording of a writ.’15 See also Boensch v Pascoe (2019) 375 ALR 15 at [113]. 13.19  The caveat is merely one method of protecting an unregistered interest. If an unregistered interest holder seeks to protect their interest in another way, such as retaining control of the title documents, a failure to caveat may not, in the circumstances, be determinative in a merit analysis. This issue was discussed by the High Court in J and H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546 which is extracted below. 15. See also Bank of Queensland Ltd v Dodrill [2011] QCA 130; Hanson Construction Materials Pty Ltd v Robert [2016] NSWCA 240 at [53]–[54]. 887

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  J and H Just (Holdings) v Bank of New South Wales  (1971) 125 CLR 546 Facts: This case involved a dispute between two equitable mortgages. The first was held by the Bank of New South Wales and arose because the mortgagor deposited the duplicate certificate of title with the bank. The bank did not lodge a caveat or register this mortgage. The second mortgage was acquired by J and H Just Holdings. This was also an unregistered equitable mortgage which arose because J and H Just Holdings believed that the land was unencumbered, the mortgagors having told them that the duplicate certificate of title was with the bank for safe custody. The issue was whether the failure of the Bank of NSW, as prior interest holder, to caveat, offset their priority in time. Barwick CJ (with whom McTiernan and Owen JJ concurred): … Having considered whether or not the fact that the Bank did not lodge a caveat disentitled it to the priority which its earlier memorandum of mortgage would otherwise have over the memorandum of mortgage given to the appellant, the primary judge concluded that there was no conduct on the part of the defendant Bank that would render it inequitable for it to maintain that priority. His Honour also considered a submission that the appellant was entitled to the benefit of s 43A of the Real Property Act and that by virtue of that provision the memorandum of mortgage given to the appellant had priority over that given to the Bank. In this connexion he held that ‘the conduct of the (appellant) in not obtaining possession or production of the certificate of title did not amount to aggravated carelessness’, thus not sharing the view of the solicitor from whose evidence I have quoted a passage. However, he concluded that the appellant was ‘not in a position to receive the benefit which s 43A affords’. This was because the appellant, not having possession of the certificate of title or the means of compelling its production, was not in his opinion a person taking an estate or interest ‘under an instrument registrable’ within the meaning of that section. Upon the appellant’s appeal to the Court of Appeal Division of the Supreme Court (1970) 92 WN (NSW) 803, Jacobs JA, with whose reasons Mason and Moffitt JJA agreed, held that a failure to give notice by lodging a caveat should not be regarded as entitling any person subsequently dealing with the registered proprietor to regard the title as clear of any outstanding equitable interest. He thought it unheard of that one who proposes to become a first mortgagee should dispense with either production or delivery of the duplicate certificate of title upon the faith of a clear register. In this respect he accepted the evidence of the solicitor which I have quoted. He therefore found no ground for postponing the memorandum of mortgage given to the Bank. He further found that, because of its gross carelessness in not sighting or obtaining the duplicate certificate of title, the appellant could not claim any benefit from s 43A. 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, eg under ss 12(1)(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 888

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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. In Abigail v Lapin (1934) AC 491; 51 CLR 58 husband and wife, the respondents, each the registered proprietor of a separate parcel of land each executed a memorandum of transfer in favour of a nominee of a solicitor. The memoranda were executed as security for certain costs and for the payment of a sum due to a bank. As the matter was ultimately viewed, the respondents in executing and handing over the memoranda of transfer had authorised the solicitor to deal with the property but not for his own benefit or for that of his nominee otherwise than as mortgagee. The transfers were subsequently registered in breach of that authority. The transferee became the registered proprietor of the fee simple in each parcel of land. After other dealings, the appellant lent money on the security of registrable memoranda of mortgage of the land executed by the registered proprietor and of the deposit with him of the duplicate certificates of title. Caveats by the respondents prevented registration of these memoranda of mortgage. The respondents sued the appellant and others claiming that they were entitled to an order that the registered proprietor should transfer the land to them free of encumbrances. Thus the case was one in which the equitable interest of the appellant was derived from a registered proprietor who had come to that place on the register by the misuse of his authority from the respondents and possession of the duplicate certificate of title. That interest was in competition with the equitable interest of the respondents, as mortgagors. The lodgment 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. But it 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 VC’s judgment in Rice v  Rice (1853) 2  Drew 73 (61 ER 646) from which Lord Wright quotes a passage (1934) AC, at pp 503–504; 51 CLR, at p 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 exceeding the limits of his authority but acting within its apparent indicia’ per Lord Wright (1934) AC, at p 508; 51 CLR, at p 72. I emphasise these aspects of the decision Abigail v Lapin (1934) AC 491; 51 CLR 58 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. 889

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Australian Property Law

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  p 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, at pp 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 & Canal Co v R (1875) LR 7 HL 496, at p 507. ‘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 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, at p 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. Of course, a provisional certificate of title may be issued by the Registrar-General if the duplicate is lost, mislaid or destroyed: s 111. The stringency of proof required by the Registrar-General before issuing a provisional certificate may be gauged by a perusal of the departmental instructions set out in Baalman & Wells, at p 280. A person in the situation of the Bank in this case does run the remote risk of a fraudulent claim being made to the Registrar-General by the borrower in order to obtain a provisional certificate. But, in my opinion, such a person is not to assume such criminal conduct on the part of the registered proprietor. 890

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In any case the failure by such a person to lodge a protective caveat cannot of itself properly be held to be an act fulfilling the requirements to which I have referred of conduct which will deprive a prior equity of its priority. As I have said, the purpose of the caveat is protective: it is not to give notice. The holder of the subsequent equity in my opinion could not properly rely upon the absence of any notification in the register book of the lodgment of a caveat as a representation or as the basis for a conclusion that no equitable interest in the land existed in any person. In my opinion the conclusion and the reasoning of the Court of Appeal Division were correct on this aspect of the case. In my opinion, the appeal should be dismissed.

Commentary 13.20  The decision in J and H Just (Holdings) Pty Ltd v  Bank of New  South  Wales illustrates the fact that a failure to lodge a caveat will not, according to the High Court, constitute postponing conduct in circumstances where the prior equity holder has protected their interest by retaining the duplicate certificate of title. The decision is to be distinguished from the conclusions of Griffith CJ in Butler v Fairclough (1917) 23 CLR 78, who had argued that a failure to caveat should be treated as a representation, inducing persons subsequently dealing with the registered proprietor to regard the title as clear of any outstanding equitable interest. All of the judges in J and H Just (Holdings) Pty Ltd agreed with the earlier conclusions of the High Court in Butler v Fairclough and held that a failure to lodge a caveat was a relevant factor in a merit analysis; however, the court in J and H Just (Holdings) Pty Ltd held that the failure to lodge in circumstances where sufficient protection had already been acquired, such as retaining the duplicate certificate of title, should not be regarded as postponing behaviour. Barwick CJ (with whom McTiernan 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 wellrecognised ability of parties to create or to maintain equitable interests in such lands.

Windeyer J concluded that caveating was one way of protecting an equitable interest. His Honour stated at 558: If a person intending to deal with a registered proprietor becomes aware of a caveat, it is notice to him of a claim that an interest is outstanding: and then caveat emptor; qui ignorare non debuit qued jus alienum emit. But a caveat is not the only way in which a purchaser from the registered proprietor can be made aware of the prior equitable claims of another person. It is merely one way, and no doubt a very sure way, in which such a claimant may protect his interest against its subversion by the registered proprietor in favour of another person.

Equally, the holder of an equitable interest cannot improve his or her interest by lodging a caveat: see  Butler v  Fairclough (1917) 23 CLR 78 at  84 per Griffith CJ. 891

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Australian Property Law

The caveat does not enlarge or add to the existing rights of the caveator but merely protects them. A mortgagee who lodges a caveat will not, therefore, secure a de facto registered mortgage and a mortgagee who does not lodge a caveat will not prevent one from arising. The failure to caveat does not necessarily indicate the non-existence of a prior equitable title, but, rather, the failure to protect. This was confirmed by Tadgell J in Avco Financial Services Ltd v Fishman [1993] 1 VR 90 who, in approving of J and H Just (Holdings) Pty Ltd v Bank of New South Wales, held that the essential purpose of the caveat is protective; it is not to give notice. Whether such an omission constitutes postponing behaviour will therefore depend upon the circumstances and a consideration of whether the failure by the holder of the prior equity to lodge a caveat has induced or contributed to a belief on the part of the holder of the subsequent equity that the prior equity did not exist. See also Mimi v Millennium Developments Pty Ltd [2003] VSC 260 at [27] per Nettle J; Perpetual Trustee Co Ltd (ACN 000001007) v Smith (2010) 186 FCR 566 at [70]. In Person-to-Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745, McLelland J agreed with the conclusions in J and H Just (Holdings) Pty Ltd v Bank of New South Wales, noting that a failure to lodge a caveat does not necessarily postpone the priority of an earlier interest. However, his Honour made it clear that the case was: … not 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 and 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 … 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 and 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.

The facts of Person-to-Person Financial Services Pty Ltd v Sharari involved a competition between two unregistered mortgages. Following the purchase of a property, a first mortgage was given to Mr Tredgolde and it was registered. The second mortgage given to Sharari remained unregistered; the second mortgagee did not retain the duplicate certificate of title and no caveat was lodged to protect the interest. Person-to-Person then lent a sum of money in exchange for a further mortgage over the property. The mortgagor had represented that the only other mortgage over the property was that held by Mr  Tredgolde. The search showed that the mortgagor was the registered proprietor and the only other  registered mortgage was held by Mr Tredgolde. It was clear from the facts that Person-to-Person lent the money purely on the faith of the search and only requested consent for the production of the certificate of title to enable subsequent registration. McLelland J held that while a failure to lodge caveat will not necessarily result in a postponement of a prior interest in a priority dispute, there may be circumstances where lodgment is appropriate because a mortgagee has no other protection. On the facts, the failure to caveat contributed to the subsequent creation of the mortgage and this omission did in the circumstances, constitute postponing conduct. 892

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The decision of McLelland J in Person-to-Person Financial Services Pty Ltd v Sharari relied particularly on the conclusions of the High Court in Butler v Fairclough (1917) 23 CLR 78. Other decisions, such as Jacobs v Platt Nominees Pty Ltd [1990] VR 146, have underplayed the significance of this case. There have also been several cases where the failure to lodge a caveat by the holder of an equitable interest has caused the postponement of that interest to an interest created later in time.16 It has been held that the effect of a failure to lodge a caveat will depend on whether it is established that it is general practice to lodge a caveat. In Elderly Citizens Homes of SA Inc v Balnaves [1998] 72 SASR 210, Debelle J said: I do not think that it can now be doubted that in this State it is accepted that it is the practice of reasonably competent solicitors and landbrokers to lodge a caveat as soon as reasonably possible to protect an equitable mortgage, and that it is a common practice to do so. Similarly, I do not think it can now be doubted that in this State it is an accepted practice of reasonably competent solicitors and landbrokers to search a certificate of title before dealing with a registered proprietor or any other person who claims an interest in the subject land. For these reasons, I do not think the absence of evidence of conveyancing practice is material.

In Perpetual Trustee Co v Smith (2010) 273 ALR 469, Moore and Stone JJA concluded at [71] that 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 Pty Ltd (1983) 154 CLR 326 per Mason and Deane JJ. In Double Bay Newspaper Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409 at 423, Bryson J held that where the failure to lodge the caveat has contributed to the subsequent creation of an interest, the failure should be relevant to a priority dispute. His Honour stated: In the presence of these authorities McLelland J in Person-to-Person Financial Services Pty Ltd v Sharari [1984] 1 NSWLR 745 made observations which show the significance which in my opinion ought to be attributed to a failure to lodge a caveat. I respectfully share his Honour’s view that the decision in Butler v Fairclough continues to be of authority. Priority which would otherwise exist according to time 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 on the supposition that the earlier did not exist. Examples of those circumstances occur where the holder of a later interest searched the register, found no such information as lodgement of a caveat would have put there and acted in reliance on the apparent absence of any such interest. As is shown by J & H Just Holdings where these circumstances exist they may not be the only significant circumstances, and they may be outweighed by other circumstances. See also: LTDC Pty Ltd v Cashflow Finance Australia Pty Ltd [2019] NSWSC 150 at [41]–[46] per Darke J.

The High Court in IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550 considered the relevance of a failure to caveat in a priority dispute between unregistered interests in circumstances where it was usual conveyancing practice not to do so. The decision involved

16. See  Osmanoski v  Rose [1974] VR 523; Taddeo v  Catalano (1975) 11 SASR 492; Clark v  Raymor (Brisbane) Pty Ltd [1982] Qd R 479; King v AGC (Advances) Ltd [1983] 1 VR 682; Finlay v R & I Bank of Western Australia Ltd (1993) 6 BPR 13,232; Double Bay Newspaper Pty Ltd v A W Holdings Pty Ltd (1996) 42 NSWLR 409; El-Kazzi v Kassoum [2009] NSWSC 99 at [234]. 893

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an assessment of the operation of s 43A of the Real Property Act 1900 (NSW). Section 43A of the Real Property Act 1900 (NSW) 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 has been accepted that this section  confers upon a purchaser who has received a registrable instrument, paid the purchase money and lodged the instrument, the same protection against notice as that achieved by a purchaser who acquires the legal estate at  common law.17 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. 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 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. See also Barlin Investments Pty Ltd v Westpac Banking Corporation (2012) 16 BPR 30,671at [38] per Ball J.

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 has been interpreted to operate in the same way. The court in Jonray (Sydney) Pty Ltd v Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW) 568 stated 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.18

13.21  The decision is extracted below.

  IAC (Finance) Pty Ltd v Courtenay  (1963) 110 CLR 550 Facts: Miss Austin sold property to the Courtenays who then mortgaged it back to her. Miss Austin’s solicitor, Mr  Easton, lodged the transfer and the mortgage for registration. 17. Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (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) 110 CLR 550 at 583-5. 18. See  also the discussion in Barlin Investment Pty Ltd v  Westpac Banking Corporation [2012] NSWSC 699 per Ball J at [37]–[39]. 894

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The  Courtenays did not caveat their interest as this was the usual practice at  the time. Subsequently, Mr Easton withdrew the transfer and the mortgage and purported to sell the land to Denton Subdivisions Pty Ltd who in turn mortgaged the property to IAC (Finance) Pty Ltd and Hermes Trading & Investment Pty Ltd. The transfer to Denton and the mortgages to IAC and Hermes were presented for registration but had not been registered at the time proceedings were commenced. The Courtenays commenced proceedings seeking a declaration that their interest took priority over those of Denton, IAC and Hermes. Denton and IAC sought to rely, amongst other things upon s 43A of the Real Property Act 1900 (NSW) as well as the failure by the Courtenays to caveat. The High Court concluded that s 43A would not assist them and further that the failure of the Courtenays to lodge a caveat did not contribute to the creation of the subsequent interests. Kitto J: The facts that are relevant to the first contention may be quickly related. The transfer to the Courtenays was taken, and their mortgage back to Miss Austin was given, upon completion of the contract of sale from Miss Austin to the Courtenays. The sale price was £15,000. A deposit of £3,000 had been paid to Miss Austin at the time of the contract, and the mortgage was given, in accordance with the contract, to secure the balance, viz £12,000. Settlement of the transaction took place on 23 July 1958, the vendor-mortgagee acting through one solicitor and the purchasers-mortgagors acting through another. The memorandum of transfer and the memorandum of mortgage had been executed in anticipation. Miss Austin’s signature to each was witnessed by her solicitor, he being described on the face of the mortgage as her solicitor. The Courtenays’ signature to the mortgage was witnessed by their solicitor; but they did not sign the transfer at all: their solicitor signed it, with the addition of the words: ‘solicitor for Transferee(s) whose signatures cannot be obtained without difficulty or delay’. (The statutory authority for this is to be found in the Fifth Schedule to the Act.) A procedure for settlement was adopted which, according to the evidence, followed the usual practice. The transfer, duly executed, was produced by Miss Austin’s solicitor but retained by him. A representative of the Courtenays’ solicitor then handed to Miss Austin’s solicitor the mortgage, signed by the Courtenays, together with a cheque for a sum covering usual adjustments and the amount of the registration fee payable in respect of the transfer. The transfer was left with Miss Austin’s solicitor for the sole purpose (as the trial Judge expressly found) of its being lodged by him, together with the mortgage, with the Registrar-General for registration. For some unexplained reason, seven months went by before the instruments were lodged in the Registrar-General’s office. The profession had apparently become used to long delays in that office, and the Courtenays’ solicitor, having no reason to doubt that the transfer had been lodged with due expedition, made no inquiry as to what had happened. Nothing turns, however, on the delay, for no event occurred in the interval that could affect the relative positions of the parties. It was after the transfer and the mortgage had been lodged, and while they were still awaiting registration, that Miss Austin entered into a contract with Denton to sell the same land to it. Her solicitor was informed by a firm of estate agents on 15 September 1959 that this sale had been agreed upon, and on the next day he uplifted from the Registrar-General’s office both the transfer to the Courtenays and their mortgage to Miss Austin. A receipt which he signed for these documents contained the words ‘dealings withdrawn’. A few days later he wrote the Registrar-General a letter confirming that the instruments had been ‘withdrawn from registration’. It may be that he had no dishonest purpose in doing this, and thought that the best way of carrying out a repurchase of the land by his client from the Courtenays would be by cancelling the transfer that had been lodged and giving Denton a direct transfer from Miss Austin. But he did not consult the Courtenays or their solicitor, and he received no authority from either of them to terminate the application which he had initiated on their behalf for registration of their transfer. The appellants contend that he had implied or at least ostensible authority to do so, because he had been authorised to lodge the instruments in the first place, and it was well known at the 895

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time that in the Registrar-General’s office a practice existed of allowing instruments awaiting registration to be uplifted by the person who lodged them. On the assumption that this view as to the solicitor’s authority should be accepted, the appellants rely on s  36(1) to entitle them to registration ahead of the Courtenays’ transfer. To any suggestion that their right is subject to the Courtenays’ interest as having been acquired with notice of that interest they make the reply that s  43, or alternatively s  43A, of the Real Property Act exempts them from the effect of any such notice. If the preliminary assumption were sound, I should be of opinion that Denton, if not the other appellants, should succeed by virtue of s 43A, though not of s 43; and as the operation of these sections has been argued at length I shall explain at once why that would be my conclusion, although, for reasons which I shall state subsequently, I think the assumption as to the solicitor’s authority is unwarranted. The purpose and effect of s 43A(1) have been the subject of controversy among legal writers, and they are not apparent until the provision is read, as its numbering suggests that it should be, as a supplement to the preceding provisions, and in particular ss 41, 42 and 43. Until registration, a person who has dealt with a registered proprietor cannot have more than an equitable interest, for until that event even a registrable instrument cannot pass the estate or interest which it specifies: s 41. After registration, he holds, by virtue of s 42, free from all encumbrances, liens, estates or interests not notified on his certificate of title (with immaterial exceptions); but this does not exclude equitable interests: Barry v Heider; Great West Permanent Loan Co v Friesen; Abigail v Lapin. Even as regards equitable interests he has a degree of immunity by virtue of s 43. But the immunity under that section is limited: it is only such immunity as is created by exonerating him from the effect of notice of any trust or unregistered interest. ‘Except in the case of fraud’, the section says, ‘no person contracting or dealing with or taking or proposing to take a transfer from the registered proprietor of any registered estate or interest shall be affected by notice, direct or constructive, of any trust or unregistered interest.’ It is settled law that the immunity thus conferred, upon a purchaser for example, is afforded to him if and when he becomes registered and not before: Templeton v Leviathan Pty Ltd; Lapin v Abigail. In order to appreciate the nature of the addition which s 43A enacts it is important to have in mind that this conclusion as to the operation of s 43 is not reached by a process of interpretation. It is a conclusion not as to the meaning of the section but as to the way it works. A purchaser, his interest before registration being necessarily equitable only, derives no priority over the holder of a pre-existing equitable interest from absence of notice: Phillips v Phillips; Abigail v Lapin. Consequently, 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, for a registered interest is not (as was suggested in the course of the appellants’ 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 that 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. The statement that it has no operation in favour of a person before he becomes registered means, simply, before he acquires a legal estate by registration. It is to this situation, as I understand the matter, that s  43A(1) is addressed. Indeed, the introductory words by which its operation is limited, ‘For the purpose only of protection against notice’, preclude, I think, any other view. Something which is less than a legal estate is to be deemed a legal estate for the purpose of the protection against notice which s 43 provides for a legal estate. What is to receive this protection is the estate or interest in land ‘taken’ by a person under an instrument which either is registrable or, if signed by or on behalf of that person, 896

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would be registrable. The word ‘taken’ must be construed having regard to the provision in s 41 that no instrument until registered shall be effectual to pass any estate or interest in land under the Act. The estate or interest ‘taken’ under an unregistered instrument must therefore mean the estate or interest which the instrument on its true construction purports to confer, and upon its being registered will confer. That estate or interest is given by s 43A the same immunity from the effect of notice as s 43 provides for registered estates or interests in virtue of their being legal estates or interests. The result is that (fraud apart) a purchaser may pay his money to the registered proprietor in exchange for a registrable instrument (or one that will be registrable upon his signing it) without troubling about any notice that he may have received of a trust or unregistered interest. Provided that he lodges his instrument for registration before the holder of a competing prior interest renders the purchaser’s instrument no longer registrable by lodging a registrable instrument for registration or entering a caveat, s 36(1) will ensure that the purchaser obtains registration and thus obtains the protection of s 43 (see also s 36(3)). This is so because, by reason of a proviso added to s 74 by the amending Act which inserted s 43A, no caveat subsequently entered can defeat him, and the holder of the competing interest will not be entitled to the intervention of a court of equity on the ground that the purchaser acquired his right to registration with notice of that interest. Accordingly in the present case Denton would be entitled by virtue of s 43A, in my opinion, to have its transfer from Miss Austin registered, notwithstanding that before the settlement of its purchase it had express notice of the Courtenays’ interest, if the Courtenays’ prior application for registration had been effectually determined by the action that was taken by Miss Austin’s solicitor. But Hardie J’s conclusion that the application was not so determined seems to me to be plainly correct. It may well be that where a person has lodged an instrument on behalf of another as his solicitor, or in any other capacity which implies an authority to act for him in regard to the matter generally, the Registrar-General and other persons are justified in assuming in the absence of any indication to the contrary that the general authority is undetermined and extends to uplifting the instrument so as to withdraw the application for its registration: cf Barry v Heider. But the situation cannot be the same where a memorandum of transfer is lodged by a person who is shown as the solicitor for the transferor only, and whose possession of the instrument — which normally would be lodged by the transferee’s solicitor — is to be accounted for by the fact that the transferor is taking a mortgage back and requires the transfer in his hands so that he may be in a position to perfect his security by lodging it for registration and lodging the mortgage immediately afterwards. It seems to me that in such a case, even if both solicitors know that the RegistrarGeneral’s office follows the loose practice referred to, there is nothing to make it a reasonable inference that the transferee meant to make the transferor’s solicitor his agent not only to apply for registration but also to withdraw the application if he should choose to do so. What was said by Isaacs J in relation to a caveat in his dissenting judgment in Barry v Heider states, I think, what anyone would naturally infer in such a situation: ‘the authority to lodge (the instrument) is complete in itself, and is exhausted when the (instrument) is lodged … The person authorised to lodge the (instrument) is then functus officio’. In my opinion the proper conclusion in the present case is that the purported withdrawal of the transfer by Miss Austin’s solicitor, being unauthorised, left the application for registration on foot notwithstanding the physical removal of the document from the Registrar-General’s custody. The appellants’ first contention, in my opinion, fails. The contention based on the resale by the Courtenays to Miss Austin ought also, I think, to fail. The contract of resale was entered into on 24 September 1959. The agreed price was £22,275, payable by a deposit of ten per cent and a cash payment of the balance on completion. The Courtenays repeatedly pressed for completion of the matter, but in March 1960 Miss Austin’s solicitor was found to have misappropriated moneys including the money he had received from the Courtenays on settlement of their purchase from Miss Austin. Having lost this money, Miss Austin was unable to complete the repurchase, and it is still uncompleted. The Courtenays asserted before Hardie J that they had determined the contract by reason of Miss Austin’s 897

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default; but his Honour found it unnecessary to decide whether or not the contract was still on foot, being of opinion that even if it was the Courtenays were entitled to have their transfer from Miss Austin registered. This conclusion seems clearly correct. The contract of resale did not rescind or discharge the contract of sale from Miss Austin to the Courtenays: it assumed its completion. Each contract contemplated a transfer, the one from Miss Austin to the Courtenays and the other from the Courtenays to Miss Austin, and there was no agreement at any time to obviate the circuity thus involved. A passage from the majority judgment in Currey v Federal Building Society was relied upon in support of the argument that the contract of resale put an end to the Courtenays’ right as against Miss Austin to have their transfer effectuated by registration. The passage shows that a decree for specific performance of both a contract of sale and a contract of resale would not require the parties to go through the steps of transfer and retransfer in a case where no transfer under either transaction has been lodged for registration. But that is only a matter of the machinery by which the Court will give effect to the rights of the parties under both instruments taken together. Where, as in the present case, the contract of sale has been carried out to the extent that a transfer has been lodged for registration, and the original vendor is unwilling or unready to complete his repurchase, there is no ground whatever for holding that the existence of the contract of resale provides a legal obstacle to the registration. 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 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: ‘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’. 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 17 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 23 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 898

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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 23 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. Finally, there came the Hermes transaction. On 28 January 1960, Hermes advanced £5,000 to Denton, receiving as security a memorandum of mortgage in respect of the subject land. It was duly executed by Denton as mortgagor, and it named Hermes as mortgagee in the body of the instrument; but in the testimonium clause it named Challis (Finance) Pty Limited as mortgagee. The security was expressly subject to IAC’s first mortgage. The negotiations for the loan by Hermes had all taken place in January 1960, and Hermes had no notice before parting with its money that the Courtenays had or claimed any interest in the land. Hermes lodged its mortgage on 1 February 1960 for registration, but it was still unregistered when the proceedings began. 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 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 unreasonably; 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’ 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 899

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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. 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 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’. 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.

Commentary 13.22 In IAC Finance v  Courtenay the High  Court concluded that the failure of the Courtenays to caveat was not relevant because the question was not whether anything they could possibly have done would have prevented the deception of Miss Austin’s solicitor but rather, whether their conduct was such that the deception was a natural consequence, so that they could be said to have armed Miss Austin’s solicitor with the power of going into the world under ‘false colours’. Kitto J concluded that ‘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’. With respect to the issue of s 43A, Kitto J held that s 43A, in the circumstances in which it applied, gave a person the same protection as that person would obtain on registration of the relevant dealing because it conferred the same immunity from the effect of notice upon registrable instruments. However, his Honour took the view that ‘the purported withdrawal of the transfer by Ms Austin’s solicitor, being unauthorised, left the application for registration on foot notwithstanding the physical removal of the document from the Registrar-General’s custody’. Consequently, s 43A could not confer a priority on Denton (or IAC and Hermes) because the Courtenays’ prior application for registration had not been determined. Dixon CJ expressed the view at p 568 that ‘[w]hatever be the meaning of s 43A, it cannot give priority to the later dealing over the earlier in circumstances like this’. Taylor J reached the same conclusion holding that s  43A only gave the purchaser the protection available to a legal owner at common law. Following this approach, s 43A only protects a bona fide purchaser who took for value and without notice. On the facts, Denton was on notice of the Courtenays’ interest because his solicitor was aware of the transfer that had been lodged in their favour. IAC and Hermes dealt only with Denton and their respective instruments would become ‘registrable’ only upon registration of Denton’s memorandum of transfer. Consequently, reliance upon s  43A was not possible. The 900

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approach that was adopted by Taylor J has been subsequently approved. In Commissioner of Taxation v Luxxotica Retail Australia Pty Ltd (2011) 191 FCR 561 at [28]–[29], the court noted that both Kitto J and Taylor J in IAC Finance v Courtenay felt that s 43A achieves ‘literally nothing’ other than to provide some protection to an unregistered purchaser in certain circumstances and to fill the gap left by the settled law. The importance of providing protection for what is known as the ‘registration gap’ has diminished with the implementation of the ECNL, which provides for instant registration of registry documents that have been lodged online. This is discussed further in Chapter 12. 19

13.23  Revision Questions 1. Do you think that the conclusions of Kitto J in IAC (Finance) v  Courtenay, suggesting that conduct which is not ‘reasonably foreseeable’ by the prior interest holder should not affect their priority is consistent with the conclusions of the High Court in Heid v Reliance Finance Corporation Pty Ltd? 2. What relevance does the failure to lodge a caveat have to a priority dispute between unregistered interests? 3. What, according to the High Court in Leros Pty Ltd v Terara Pty Ltd, is the effect of the subsequent registration of an inconsistent dealing on an unregistered interest unprotected by a caveat? 4. What was the rationale given by Brooking in Swanston Mortgage Pty Ltd v Trepan Investments Pty Ltd for precluding the mere equity from the category of caveatable interests? 5. What is the appropriate test for determining whether a person has lodged a caveat honestly and reasonably? How was this applied by the High Court in Boensch v Pascoe? 6. In J and H Just (Holdings) v Bank of New South Wales the High Court concluded that: 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.



Do you agree with this assessment? Is it ‘subversive’ to the principles of equity to hold that a failure to lodge a caveat will necessarily involve a loss of priority? 7. In Person-to-Person Finances v Sharari, McLelland J indicated that it is ‘critical’ to determine whether or not a prior interest holder has sufficiently protected their interest when considering the relevance of a failure to caveat. Is lodgment of a caveat the only means of protection?

19. See  Jonray (Sydney) Pty Ltd v  Partridge Bros Pty Ltd (1969) 89 WN (Pt 1) (NSW) 568; Meriton Apartments Pty Ltd v McLaurin & Tait (Developments) Pty Ltd (1976) 133 CLR 671; Weller v Williams [2010] NSWSC 716 at [16]. 901

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13.24  It has been held that where the holder of an unregistered interest fails to caveat because they reasonably believe it is unnecessary given a family or emotional relationship between the parties, the failure may not constitute postponing behaviour. Consider the discussion by the Victorian Supreme Court in Jacobs v  Platt Nominees [1990] VR 146, which is extracted below.

  Jacobs v Platt Nominees  [1990] VR 146 Facts: Mrs Jacobs held an option to purchase land but refused to caveat it because she did not wish to worsen the relationship with the owners, her father and mother who were the sole directors of Platt Nominees Pty Ltd, the registered proprietor of the land. The solicitor for Mrs Jacobs had advised her to caveat the interest; however, it was clear that she felt that there was no need to do so given the fact that the title holder was her father. Subsequently Mr Platt sold the land to Perpetual Trustee Company Ltd. Mrs Jacobs’ brother signed the transfer on behalf of Mrs  Platt. The issue was whether the priority of Mrs  Jacobs’ unregistered option to purchase should be postponed in favour of the subsequent unregistered interest held by Perpetual Trustee Company Ltd. Crockett, King and Gobbo JJ: In the same judgment Lord Wright repeated the following statement made by Griffith CJ in Butler v Fairclough (1917) 23 CLR 78, at p 91: ‘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 and 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 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 902

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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 and 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. 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 representation but preferred a more general and flexible principle that preference be given to the better equity. They said, at (CLR) p 342; (ALR) p 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 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 that is, 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.’ 903

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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 and 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. It is to be noted that counsel for the appellant had submitted that failure to lodge caveat could never without other conduct suffice to displace a prior equity. It is likely that the language chosen by the learned trial judge was explicable as being directed to the appellant’s counsel’s argument. 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 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. It is, in our view, well established that one of the essential ingredients of estoppel by representation is that the representation must result as stated in Spencer & Bower on Estoppel by Representation, 3rd edition pp 27, 101 in [detriment]. Detriment here is plainly additional to an alteration of position and involves some prejudicial effect to the temporal interests of the representee, to be judged at the moment when the proposer proposes to resile from his representation. The foregoing is evident in the judgment of Dixon J as he then was, in Grundt v Great Boulder Proprietary Gold Mines Ltd (1937) 59 CLR 641 where his Honour spoke of the representee’s claim in these terms, at pp 674–5. 904

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‘His complaint is that when afterwards the other party makes a different state of affairs the basis of an assertion of right against him then, if it is allowed, his own original change of position will operate as a detriment. His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act a source of prejudice.’ His Honour went on to reiterate the statement of principle contained in his earlier decision in Thompson v Palmer (1933) 49 CLR 507 at p 547 where, after setting out how an assumption may be adopted, he said: ‘But, in each case he is not bound to adhere to the assumption unless as a result of adopting it as the basis of action or inaction the other party will have placed himself in a position of material disadvantage if departure from the assumption be permitted.’ The operation of the principle discussed in Thompson v Palmer is illustrated in Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 at p 735 where in the joint judgment of Rich, Dixon and Evatt JJ it was said ‘It must appear that upon the faith of his belief by an act or omission he has placed himself in a position which, if his belief proved incorrect, would be productive of loss.’ There are numerous examples in the authorities of the reiteration of the principle that there must be material disadvantage and that the alteration of position is to be accompanied by detriment: see  Chin v  Miller (1981) 37 ALR 171; Reed v  Sheen (1982) 39 ALR  257, at  p 278 and Legione v  Hatley (1983) 152 CLR 406; 46 ALR 1; 57 ALJR 292 at p 304. It was urged on behalf of Perpetual that this court should adopt the views expressed by Lord Denning MR in WJ Alan and Co Ltd v El Nasr Export and Import Co [1972] 2 OB 189 at p 213 where his Lordship drew a distinction between alteration of position and acting to one’s detriment or prejudice. With great respect to his Lordship, we are unable to reconcile this view with the statements of principle on the doctrine of estoppel that we have referred to. We also note that this view has not met with ready acceptance: see for example, Fontana NV v Mautner (Balcombe J) Estate Gazette, 19 April 1988, at pp 872–4. It was also argued that the cases already reviewed on postponement of equities support the view that an alteration of position without consequent detriment or prejudice suffices. Reliance was placed on statements in Lapin v Abigail (1930) 44 CLR 166, at pp 184, 196 and 204. These passages were said to show that there need only be a causal link that led the subsequent holder to alter his position on the strength of the act of the prior holder in not lodging caveat. In our view, these passages do not purport to address themselves in a comprehensive way to the ingredients of estoppel. Thus Dixon J, as he then was, in the last passage says that the act or default must in some way have contributed to the assumption upon which the subsequent legal owner acted when acquiring his equity. In this context it is not of any great significance that detriment or prejudice was not referred to for the passage did not purport to be a description of the ingredients for estoppel. When one turns to the more specific statements by the same judge in Thompson v Palmer and Grundt v Great Boulder Proprietary Gold Mines Ltd it is obvious that detriment was seen as an essential ingredient of estoppel. Where estoppel was expressly relied upon as sustaining the postponement of a prior equity as in the judgment of Gibbs CJ in Heid’s Case, it is clear that detriment was an essential ingredient as the following passage, at 335, shows: ‘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.’ 905

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Australian Property Law

We are accordingly of the view that to the extent that the learned trial judge proceeded upon the basis that an alteration of position without detriment sufficed to found an estoppel, there was an error of law on his part. As to the more general broad principle in the joint judgment of Heid’s Case, it may be relevant to consider and give weight to the presence or absence of detriment for, in the final evaluation of the circumstances and the decision as to where the better equity exists, it would be a rare case where an alteration of position without more would carry the same weight as one where there was also prejudice and loss. The actual consequences of this conclusion to which we have come on the second main argument as to possible error will depend on whether there was in fact detriment made out. This will now fall to be addressed in an examination of the issues of fact. In this area the substance of the appellant’s argument was that the learned trial judge had failed to take into account or gave insufficient consideration to a number of relevant circumstances, in particular the fact that the option had been granted to her by her parents who were the sole owners of Platt Nominees following the particular involvement of her mother. It was also argued that a number of the findings made against the appellant were not properly open. As has already been indicated, the learned trial judge did not in the final analysis limit himself only to the appellant’s failure to lodge a caveat and he included a review of the circumstances. The learned trial judge accepted the two reasons given by the appellant for not lodging caveat after the grant to her of the option on 29 July. His Honour concluded that the appellant was at all times acting with only her own interests in mind and that she refrained from lodging caveat for the purpose of preventing some person interested in the land knowing of the option so as not to disadvantage herself. The learned trial judge went on to find that the appellant’s desire not to upset her father was founded only on her fear that he might attempt to sell the motel to a third person. These findings were challenged on the basis that they were not open on the evidence and that they were made without regard to the way in which the option had been secured through the intervention of the appellant’s mother. There was evidence from both the appellant and her mother as to how the option came to be given. This evidence was not contradicted and it established that the mother supported her daughter’s plan to buy the property and would not have agreed to a sale in breach of the option in favour of their daughter. There was also evidence to the effect that the appellant did not know that her father was negotiating to sell the property to Perpetual. Though she knew that there had been negotiations earlier, she believed that these negotiations had irrevocably come to an end and as at 29 July there was no reason to believe the option was not granted in good faith. There was no basis for implying that she at any time thereafter believed that her father was negotiating to sell the motel, nor did the learned trial judge make any finding to that effect. On the contrary there was evidence from the appellant again not contradicted and not the subject of any explicit adverse finding against her that she incurred costs on the basis that she would be exercising the option. There was also evidence that she told people at the motel, such as staff, tradespeople and consultants about the option. The timing of the exercise of the option was reasonably explicable on the basis of the father’s return from overseas and his concern as to possible intervention by the bank which was owed a substantial sum of money. There was thus a body of evidence creating the inference that the appellant was not aware of any negotiations to sell the motel in breach of her option and that it was reasonable for her to believe that there would not be a sale in defiance of her option, given her mother’s support. Neither the mother nor her daughter knew at  any material time, that Mr  Platt had secured authority to sell the property without the concurrence of Mrs Platt on 16 August 1988 and the appellant was entitled to proceed on the basis that there would never be a sale in breach of the option. This went beyond a matter of an expectation that no fraud would be committed by another. It was founded on the option being granted to the appellant by her parents. As to them, 906

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though her relationship with her father had not been a happy one, her mother was entirely supportive and would not have authorised any sale that undermined the option granted to the appellant. It was argued that this had not been articulated at the trial as a reason for the appellant not lodging the caveat. This is true, but that is not a decisive consideration. Moreover, an evinced desire not to upset her father necessarily raised the family relationship and the past and future involvement of the mother. In any event the evidence was plainly there and had to be considered as a circumstance relevant both to the omission to lodge caveat and to the general question as to whether there had been any act or omission on the part of the appellant that should lead to her interest being postponed. In our view the learned trial judge did not apparently treat the foregoing as a relevant circumstance. Before considering the consequences of this, it is necessary to consider the other criticisms made of the findings as to the surrounding circumstances. The learned trial judge found that the appellant was at all times acting with only her own interests in mind and that she avoided a caveat to prevent any person interested in the land from discovering her interest and generally sought to keep the option a secret. The first finding is probably not of great consequence since it represents more a comment as to motive rather than a compound finding of fact. It is difficult however, to reconcile this finding with the evidence as to the appellant’s concern about the possible consequences to her father of having, in effect, sold the motel again to Perpetual. The second finding is of more importance for it carries with it the implication that the appellant foresaw a possible further purchaser. In our view there was no evidence to support such a finding for there was nothing to suggest that the appellant knew of any negotiations to sell after she secured her option. Moreover, it gives no weight to the fact that she might reasonably have expected that her parents would not join in selling in breach of her option. It was in this context that the learned trial judge described the father as controlling the registered proprietor, a view that again gives no recognition to the fact that the mother was effectively co-owner of the property or at any rate at all times the mother and the daughter reasonably believed this to be the case. Where the balancing of equities and more particularly issues of possible conduct are involved, it is an extremely adverse finding that the appellant in effect deliberately omitted to lodge caveat to advantage herself against a subsequent purchaser. In our view this finding was not open and was inconsistent with the evidence and, though it is true that the learned trial judge said his conclusion on the matter of priority would still be the same if he were wrong in this view, his conclusion deprived the appellant of possible positive findings in her favour. There were a number of what were described as matters of background that occupied some time both at  the trial and on the appeal. We refer to the finding that the appellant had not informed her father’s solicitor, Mr Banks or the estate agents acting for Platt Nominees about her option. As to this, the evidence was that the father had not himself wished Mr Banks to be involved in preparation of the option. In those circumstances it was not for the appellant to take a course that was peculiarly the prerogative of her father. It was said that if Banks had been told he might have been able to dissuade his client from a fraudulent sale. The difficulty with this argument is that it does not sit easily with the appellant’s evidence that Banks said he knew unofficially about the option. Banks was not called. As to the estate agents, here again there was no evidence that they were playing any further role given the grant of the option and the absence of any ground for suspecting any further negotiations. It is true that the learned trial judge found the appellant was not on good terms with her father who was known to be a person liable to change his mind. But here again, the critical matter of the role of the mother both in bringing about the option and securing its integrity was not adverted to. This factor was similarly not adverted to with respect to other matters that were said to bear on the appellant’s view as to her father’s possible future conduct. … 907

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Australian Property Law

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 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 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 caveat until 19 September, some 14 days after acquiring its equitable interest. This again was inconsistent with any settled practice of immediate lodging of 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 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. S 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: 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 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 lodgings 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 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 908

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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 p 160, repeated in Heid’s Case at p 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 & Canal Co v R (1875) LR 7 HL 496. As was said in the joint judgment in Heid’s Case at p 341: ‘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, 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 circumstances 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. The remaining circumstances that were canvassed by the learned trial judge do not, at the end of the road, detract from the importance of the circumstance we have just discussed. In any event, as indicated earlier we are unable to sustain a number of the findings of fact made in relation to these other circumstances. 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 accordingly. The judgment of the court below both as to the claim and counterclaim is set aside and there will be declarations in the terms contained in paras 1, 2 and 4 of the relief sought in the notice of appeal.

Commentary 13.25 In Jacobs v Platt the Victorian Supreme Court concluded that failure to lodge a caveat should not assume too much significance, particularly in circumstances where it is shown that there is no general expectation that a caveat will be lodged. In their joint judgment, Crockett, King and Gobbo JJ held that there was no settled practice to caveat all options to purchase and therefore a failure to caveat could not reasonably amount to a representation that no option to purchase existed. Further, it was not ‘reasonably foreseeable’ by Mrs Jacobs that her failure to lodge a caveat would, given the fact that her family was involved, expose herself to any risk. Their Honours noted that Mrs Jacobs had: … secured the option from her parents in such a way that it was inconceivable that her father and mother would join together to sell the motel in breach of the option. It was in short not reasonably foreseeable that her failure to lodge a 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 a caveat was entirely consistent. 909

13.25

Australian Property Law

This decision focuses upon two issues. First, the justification for failing to caveat and second, the foreseeability by the prior interest holder that any such failure would increase the risk that a subsequent interest may be created. In particular, the decision raises the issue of emotional behaviour. Mrs Jacobs did not lodge a caveat because she did not wish to ‘upset’ her father. The Full court found that this was reasonable in the circumstances and as such, viewing the omission as a representation on which the second purchaser relied to its detriment, based on estoppel, was ‘wholly inapposite’.20 Subsequently, in IGA Distribution Pty Ltd v  King & Taylor Pty Ltd [2002] VSC 440, Nettle J commented on the effect of Jacobs v Platt and noted at [219]: The decision in Jacobs makes clear that mere change of position is not enough to have the effect of postponing an interest earlier in time to one subsequently created. Consistent with ordinary principle, it is necessary for a party who seeks to reverse the order of priorities to go further and show that it has suffered detriment the consequence of the failure of the earlier interest holder to caveat. It is true that the Appeal Division’s observations as to the need for detriment were made in the context of a consideration of whether failure to caveat could amount to estoppel by representation. The court dealt separately with what it termed the second method of deciding the postponement question, namely, whether in all the circumstances the conduct of the earlier interest holder is such that in justice and fairness it ought be postponed to the subsequent taker. But given that what is in issue is a question of competing equities, it is difficult to envisage anything short of detriment which would make it inequitable for the prior interest holder to insist upon priority.

In Re S & D International Pty Ltd (No 4) (2010) 79 ASCR 595 Jobson J (in distinguishing the facts of Jacobs v  Platt) held at  [198] that ‘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’. See also: Avco Financial Services Ltd v Fishman [1990] 1 VR 90; T D Castle, ‘Caveats and Priorities: The “Mere Failure to Caveat”’ (1994) 68 ALJ 143. The extent to which a prior interest holder is able to foresee  that their behaviour, in failing to take protective measures, will contribute to the creation of a subsequent equitable interest is a significant factor in a merit analysis between unregistered interests. If the circumstances indicate that a prior interest holder could not, in the circumstances, foresee  the creation of a subsequent interest and could not envisage that the failure to lodge a caveat might contribute to any such assumption then its relevance to the priority assessment is diminished. As further outlined by Nettle J in Mimi v Millennium Developments Pty Ltd [2003] VSC 260 at [25]: Jacobs v Platt Nominees recognises, as indeed was recognised by Barwick CJ in J and H Just Holdings, that there may be situations in which failure to caveat, when combined with other circumstances, justifies 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.’ When that occurs priority may be reversed.

In Re S & D International Pty Ltd (No 4) (2010) 79 ACSR 595 the court concluded that the Jacob’s 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. In particular, the court noted at [198] that in the Jacobs case ‘there were good reasons for the prior interest holder 20. See also Milenkovic v Belleli [2015] VSC 349 at [204]. 910

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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.’ Where circumstances establish a reasonable and fair basis for not lodging a caveat, such as, for example, an expectation that this type of protection is not needed given strong family ties or where alternative protection has already been obtained, the failure to lodge a caveat may not be the determinative. Much will depend upon why the prior interest holder has failed to caveat and further, whether the prior interest holder was aware that their failure might contribute to the creation of a subsequent interest. As outlined by Ginnane J in Dai v Liu [2018] VSC 189 at [105]: A prior equitable interest will be postponed where an agent or representative is armed with apparent authority to go out into the world and deal with the property without any apparent restriction. This is particularly so if the prior interest holder is aware of circumstances that ought to have given them some indication or warning of the creation of a contrary interest, but nonetheless fail to lodge a caveat or otherwise protect their position. The failure to lodge a caveat will be a relevant factor, although not necessarily a decisive factor, in determining whether the former interest is postponed to the latter interest. The extent of detriment incurred by the subsequent interest holder in reliance on the belief that no other interest existed will be of great significance

Where the transaction involves an electronic conveyance, a decision to lodge a priority notice rather than a caveat may be important. As outlined earlier in the chapter, the purpose of the priority notice is to reserve priority on title for the identified dealing in order to prevent any fraudulent displacement of that transaction by some other transaction. The priority notice helps reduce the difficulties with the registration gap, but it will automatically lapse upon the expiration of 60 days, and it can only be extended for a further 30 days. This means that the priority notice provides a different level of protection than the caveat. Lodging a priority notice does not prevent a caveat from being lodged and depending upon the circumstances, protection from both the priority notice and the caveat may be required.

The Relevance of Notice 13.26  The doctrine of notice is directly relevant to a general law priority dispute involving a bona fide purchaser for value and a prior equitable interest holder. In the context of a dispute between unregistered interests over Torrens title land, however, notice is not a determinative factor because the priority rule mandates an holistic evaluation of the merits. This means that the fact that any notice a subsequent unregistered interest has of the existence of a prior interest will constitute one factor in an overall priority assessment. The test expounded by Mason and Deane JJ in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 makes it clear that no one factor is determinative. Thus, any notice that a subsequent interest holder may acquire of the existence of a prior unregistered interest in the land becomes merely one additional factor to take into account in a comprehensive evaluation of the merits of each interest. 13.27 In Moffett v Dillon [1999] 2 VR 480 Brooking J in the Victorian Supreme Court argued that priority disputes between unregistered interests should be regulated by two distinct priority rules: the broad rule whereby a prior equitable interest will postpone a later one if both are equal (the orthodox priority principles); and a separate and distinct rule where a subsequent equitable interest holder taking with notice of a previous interest, takes subject to that interest. An extract of the decision in Moffett v Dillon follows. 911

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Australian Property Law

  Moffett v Dillon  [1999] 2 VR 480 (CA) Facts: Moffett entered into a contract to sell land that he owned to Dillon. Dillon subsequently gave Moffett an equitable charge which was for the purpose of securing the payment of all money due under the contract of sale. Moffett lodged a caveat over the charge. Dillon then entered into an unregistered equitable mortgage with Westpac Bank. One of the issues for the court was whether the prior equitable charge held by Moffett should have priority to the subsequent equitable mortgage of Westpac Bank. As the prior equitable charge had been caveated, Westpac Bank took their subsequent equitable mortgage with notice of the existence of the prior interest. The court examined the relevance that notice by a subsequent interest holder should have in the context of a priority assessment. 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, para 5, 91 et seq, to be treated as having the same consequences as notice. In General Finance Agency & Guarantee Co of Australia Ltd (In Liq) v Perpetual Executors & Trustees Association of Australia Ltd (1902) 27 VLR 739 Robinson sold land to Grant. Three months later he borrowed money from a finance company on the security of the land he had already sold, creating an equitable mortgage in favour of the finance company. The company brought an action for a declaration that its equitable mortgage ranked in priority to the equitable interest of Grant as purchaser. Holroyd J thought there was no reason for postponing the prior equity of the purchaser but went on to hold that in any event the fact that, as he found, the company had notice of the sale to Grant at the time it took its security was itself sufficient to defeat the company’s claim to priority. An unqualified statement is to be found in the judgment of Knox CJ in Lapin v Abigail (1930) 44 CLR 166 at 182: ‘If the holder of the subsequent equity acquired it with notice of the prior equity, his claim for priority necessarily fails; but the fact that he took without notice or that it is not proved that he had notice of the prior equity amounts to no more than a fact to 912

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be considered in connection with the other circumstances on the question whether the conduct of the holder of the prior equity is such as to entitle the holder of the subsequent equity to priority over him.’ [My emphasis] A little later — at 183–4 — the Chief Justice said 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.’ In the same case Dixon J said, at 204: ‘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 … 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 original 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 his equity.’ In the same case the Judicial Committee, in the course of discussing the circumstances in which a prior equity would be postponed to a subsequent one, observed ((1934) 51 CLR 58 at 70): ‘It is unnecessary here to add that when these questions need to be considered, it is always understood that the purchaser or mortgagee has not either express or constructive notice of the prior charge.’ Like the statement of Knox CJ, this observation is unqualified. In Courtenay v Austin (1961) 78 WN (NSW) 1082 Austin, the registered proprietor of land, sold it to the Courtenays and Butler, and the resulting transfer and mortgage back were lodged for registration. Before registration they were uplifted by Austin’s solicitors, without the consent of the purchasers or their solicitors. The very next day Austin sold the land again, this time to Denton Subdivisions Pty Ltd, at a much higher price. At the time of its purchase the company had, so Hardie J found, notice of the interest of the Courtenays and Butler as owners of the land. The fact that the holder of the subsequent equity had notice of the prior one was fatal to its claim to priority. At 1097 his Honour said: ‘In deciding questions as to the priority of equities, the conduct of both parties needs to be considered. If the holder of the subsequent equity has notice, actual or constructive, of the earlier equity, his claim to priority is defeated at its threshold. He himself and not the holder of the prior equity is, apart from the defrauding party, responsible for his being defrauded by the holder of the legal or statutory estate. In the present case notice of the equitable estate of the plaintiffs which I have already held is to be imputed to the Denton Company prior to completion of its purchase defeats at the outset its claim that on equitable principles the prior estate of the plaintiffs as purchasers should be postponed.’ An appeal to the High Court was unsuccessful: IAC (Finance) Pty Ltd v Courtenay (1963) 110 CLR 550. At 590 Taylor J, after dealing with the submission that the prior equity should be postponed and the propositions of law advanced, added: ‘But these observations have no application where, as here, the later equitable interest is acquired with full knowledge of the existence of the earlier interest.’ I would take his Honour’s reference to ‘full knowledge’ to reflect the facts of the case and not as suggesting that actual knowledge as opposed to ‘notice’ was necessary. Both Hardie J and Taylor J appear to have laid down a rule without exceptions. In the same case Kitto J observed, at 575–6, that the prior equity was not to be postponed unless the act or omission 913

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proved against its holder had 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. At 576–8 Kitto J went on to summarise the findings of the trial judge bearing on the question whether the holder of the subsequent equity had notice of the prior interest and whether there was anything to induce a belief that the prior interest had ceased to exist. The requirement that the holder of the subsequent equity should not have notice of the prior one at the time of acquisition of his own interest is also expressed in the reference to innocent acquisition by Kitto J in Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (1965) 113 CLR 265 at 276: ‘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 passage is cited by Gibbs CJ (in whose judgment Wilson J concurred) in Heid v Reliance Finance Corporation Pty Ltd (1983) 154 CLR 326 at 333, by Hope JA (speaking for the Court of Appeal) in the same case, reported in (1982) 1 NSWLR 466 at 480, and by Marks J (speaking for the Full Court) in King v AGC (Advances) Ltd [1983] 1 VR 682 at 687. It is cited in Meagher Gummow & Lehane, Equity Doctrines and Remedies, 3rd ed, p 226, as a prelude to the discussion of priorities. Plainly Kitto J’s reference to innocent acquisition meant that the purchaser must be ‘innocent as to notice’, to use the phrase of Megarry & Wade, Law of Real Property, 5th ed, p 143. His Honour did not have in mind the principle, discussed by him at 278 and derived from Phillips v Phillips (1861) 4 De GF & J 208; 45 ER 1164, that the conveyance of the later equitable interest is innocent in the sense that it passes only what the conveyor is justly entitled to. 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 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 Conv R 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 273–4 and McPherson JA at 287– 9, 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. Reference may also be made to the views expressed by Professor Butt in Land Law, 3rd ed, para 1936, where the holder of a later equitable interest who acquired it with notice of the earlier is described as ‘the author of his or her own predicament’. Similarly, according to Halsbury’s Laws of Australia, Title 185 Equity, para 185–para 255:

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‘If the holder of a later equity has actual or constructive notice of an earlier claim, his or her claim to priority fails because he or she and not the holder of the prior equity is responsible for being defrauded.’ In The Laws of Australia, Subtitle 28.2, General Land Law (the work of Professor Butt), it is said, in para 48: ‘A later equitable interest cannot prevail over an earlier interest if the holder of the later had notice of the earlier at the time the later was acquired. There is an exception where the holder of the earlier interest has been guilty of some omission which induced a belief on the part of the later holder, at the time of acquiring the later interest, that the earlier interest no longer existed.’ 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, p 172; Helmore, The Law of Real Property in New  South  Wales, 2nd ed, p 507; Leake on Property in Land, 2nd ed, p 354; Ashburner’s Principles of Equity, 2nd ed, p 55–p 56; Underhill & Hayton, Law Relating to Trusts and Trustees, 15th ed, 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, 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. The decision is cited in Dart, Vendors and Purchasers, 6th ed, p 825. The rule operates to prevent the overreaching 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; Cave v Cave (1880) 15 Ch D 639 at 646–7; Westminster Bank Ltd v Lee [1956] Ch 7 at 18–20; National Provincial Bank Ltd v Ainsworth [1965] AC 1175 at 1237–8 per Lord Upjohn (compare what Lord Wilberforce said at 1254); Megarry & Wade, Law of Real Property, 5th ed, pp 146–147; Megarry (1955) 71 LQR 480 at 481–2; Lewin on Trusts, 16th ed, p 598; Pomeroy’s Equity Jurisprudence, 5th ed, 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). 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 915

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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) 72 ALJR 1243, except in relation to the use made of constructive notice in O’Brien’s case outside the field of competing interests in property. According to Story’s Equity Jurisprudence, 8th US ed, para 395: ‘Another class of constructive frauds consists of those where a person purchases with full notice of the legal or equitable title of other persons to the same property. In such cases he will not be permitted to protect himself against such claims; but his own title will be postponed, and made subservient to theirs. It would be gross injustice to allow him to defeat the just rights of others by his own iniquitous bargain. He becomes, by such conduct, particeps criminis with the fraudulent grantor; and the rule of equity, as well as of law, is, Dolus et fraus nemini patrocinari debent. And in all such cases of purchases with notice, courts of equity will hold the purchaser a trustee for the benefit of the persons whose rights he has thus sought to defraud or defeat.’ (Footnotes omitted.) The significance of notice is extensively discussed in Pomeroy’s Equity Jurisprudence. The following passages are from para 591 and para 688, much authority being cited in the footnotes to the latter paragraph: ‘When a person is acquiring rights with respect to any subject-matter, the fact whether he is so acting with or without notice of the interests or claims of others in or upon the same subject-matter is regarded throughout the whole range of equity jurisprudence as a most material circumstance in determining the extent and even the existence of the rights which he actually requires. In conformity with this view, the general rule has been most clearly established, that a purchaser with notice of the right of another is in equity liable to the same extent and in the same manner as the person from whom he made the purchase. The same rule may be thus expressed in somewhat different language; a person who acquires a legal title or an equitable title or interest in a given subject-matter, even for a valuable consideration, but with notice that the subject-matter is already affected by an equity or equitable claim in favour of another, takes it subject to that equity or equitable claim. On the other hand, a person who has acquired a title, and paid a valuable consideration, without any notice of an equity actually existing in favour of another, may by that means obtain a perfect title, and hold the property freed from the prior outstanding equity. The third, and in its practical effects by far the most important, rule is that a party taking with notice of an equity takes subject to that equity. The full meaning of this most just rule is that the purchaser of an estate or interest, legal or equitable, even for a valuable consideration, with notice of any existing equitable estate, interest, claim, or right, in or to the same subject-matter, held by a third person, is liable in equity to the same extent and in the same manner as the person from whom he made the purchase; his conscience is equally bound with that of his vendor, and he acquires only what his vendor can honestly transfer. The applications of this rule are as numerous as are the various kinds of equitable interests. The following are some of the most important: A purchaser with notice of a trust, either express or implied, becomes himself a trustee for the beneficiary with respect to the property, and is bound in the same manner as the original trustee from whom he purchased. A purchaser or mortgagee with notice of the equitable lien of a vendor for unpaid purchase price takes the land subject to that lien. A purchaser or mortgagee of the legal estate, with notice of an equitable lien created by a deposit 916

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of title deeds, or by a prior defective mortgage, or by any other means from which an equitable lien can arise, is bound by the lien. A purchaser with notice of a prior contract to sell or to lease takes subject to such contract, and is bound in the same manner as his vendor to carry it into execution. These examples are of ordinary occurrence.’ Para 1253 is also worthy of specific mention. 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 (in liq) (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 & Remedies, 3rd ed, paras 427–435 and para 813; 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 Drew 73 at 78–79; 61 ER 646 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 Corporation 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 (in liq) (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 185–6 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 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 none the less exceptions 917

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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 Corporation Pty Ltd (1983) 154 CLR 326 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 … I now return to the decision presently under appeal. The judge was right in this case to hold that the charge had not lost its priority over the subsequent mortgage. This being so, it is necessary to consider the second question, or set of questions, determined by him, namely, what amounts were secured by the charge. His Honour was of the view that it did not secure: • • •

the amount of the judgment ultimately entered in proceedings arising out of the dishonour of the promissory note ($16,310.88); the amount of $54,217 assessed by the Senior Master for damages; the amount of $10,587.88, being the taxed costs payable pursuant to the order of the Senior Master.

The only amount determined by his Honour to be secured by the charge was $6,309.06, being what was said to be due for interest in the notice of rescission. It will be recalled that the charge secures ‘all moneys due and payable by me to the said Russell Lindsay Moffett pursuant to’ the contract of sale. His Honour upheld the argument that the amount for which judgment was ultimately entered in respect of the promissory note did not fall within these words. At the hearing below the parties overlooked the fact that the promissory note had been given, not for the amount of the deposit ($15,000), but for that amount together with a further sum evidently representing one month’s interest. As a result no argument was directed below to the possible significance of that fact and it is not mentioned in the reasons for decision. The argument put on behalf of Dillon, and accepted by his Honour, was that there was for present purposes no money due and payable pursuant to the contract since the obligation to pay the deposit had been discharged by the giving of the promissory note. His Honour upheld the submission that the promissory note had been taken not in conditional payment of the deposit but in absolute satisfaction of the obligation to pay the deposit. The judge was also of the view that the bringing of the action on the deposit reinforced the view that the promissory note had been taken in complete satisfaction. The bank submitted that his Honour’s decision was correct in this regard. The law on the subject is not in dispute. It is stated in Byles on Bills of Exchange, 26th ed, p 436: ‘Whether a bill is taken in complete satisfaction, or merely as conditional payment, is a question depending on the facts of each case, the onus lying on the party alleging that the bill operated as a complete satisfaction of the original debt, the presumption of fact being the other way; since, as already stated, if a bill or note is taken on account of a debt and nothing is said at the time, the legal effect of the transaction is that the 918

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original debt remains, but the remedy for it is suspended till maturity of the instrument in the hands of the creditor.’ In addition to the authorities cited in that work reference may be made to Tilley v Official Receiver (1960) 103 CLR 529; National Australia Bank Ltd v  KDS Construction Services Pty Ltd (1987) 163 CLR 668 at  676; Bolt & Nut Co (Tipton) Ltd v  Rowlands Nicholls & Co Ltd [1964] 2 QB 10. Once the negotiable instrument is dishonoured, the debt in conditional satisfaction of which it was given revives and a cause of action also arises on the negotiable instrument. In my opinion the evidence does not establish that the parties intended that the promissory note should be taken in absolute satisfaction as opposed to conditional payment and accordingly the presumption of fact required by the law is that the remedy for the original debt was suspended until the dishonour of the promissory note and thereupon revived. There is no evidence whatever concerning any oral or written negotiations that may have preceded the giving and taking of the promissory note; all we have is the statement in Moffett’s affidavits that Dillon gave him the note ‘in or in lieu of payment of the deposit’. Those words are the construction placed by the deponent on what occurred. They do not even profess to be the deponent’s interpretation of a conversation. They may be; on the other hand, they may be only his interpretation of the consequences of the bare fact of the making of the contract followed by the bare fact that the deposit is not paid in cash and the note is given and taken. Moreover the words ‘in or in lieu of payment’ are of uncertain import. Even if they could — and they certainly cannot — be treated as an accurate statement of words which were spoken between the parties they would not warrant, or give any support to, the conclusion that the parties intended the note to be taken in absolute satisfaction. It has been said that an intention to take a negotiable instrument in absolute payment must be strictly shown and will not be deduced from ambiguous expressions like ‘in payment’: (1958) 100 CLR 231 at 244. Compare Cruickshank & Co Ltd v Ewington (1905) 24 NZLR 957. Counsel for the bank did not, as I understood his submission to us, contend that the fact that the note was taken for a somewhat larger sum than the deposit either warranted or gave any support to the absolute acceptance view of the parties’ intentions. In any event, I do not think it does. As regards the discrepancy between the amount of the deposit and the amount of the note, it is also worth mentioning that the general rule — that a bill is taken as conditional payment only — applies even where the creditor, at the debtor’s request, takes a bill from a third person: Byles, p 439. The circumstance that the note was not payable until one month had passed was not relied on by counsel for the bank, and this is understandable, since the negotiable instrument will often not be payable for some time and the cases do not treat that mere giving of time as showing or helping to show that the bill or note was taken in absolute payment. I would respectfully differ from the judge and hold that the general rule is not displaced in this case and that the note was taken as conditional payment only. But what was the effect of the bringing of an action, and the recovery of judgment, on the note? In my opinion this did not have the effect of disabling Moffett from suing to recover the deposit. The authorities show that, where a negotiable instrument has been taken as conditional payment only, the bringing of an action and the recovery of judgment on the instrument do not, unless the judgment is satisfied, extinguish the cause of action by the operation of the doctrine of merger. This was laid down by the Court of King’s Bench in Drake v Mitchell (1803) 3 East 251, 102 ER 594 and by the Court of Appeal in Wegg Prosser v Evans [1894] 1 QB 108. There is an intervening decision of the Court of King’s Bench to the same effect in Tarleton v Allhusen (1834) 2 A & E 32; 111 ER 13. The principle laid down is that the cause of action for the original debt will not merge in a judgment obtained on a negotiable instrument which was taken in conditional payment only unless the judgment has been satisfied. It does not depend — as the bank argued before us — upon the  adventitious circumstance that in some of the cases the judgment recovered was against one only of a number of joint debtors on a bill given by him alone. See further Seddon 919

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v Tutop (1796) 6 TR 607, 101 ER 729; Roycroft v Uglum [1922] 1 WWR 78; Douglas Properties Ltd v Olde World Antiques etc Ltd (1980) 28 AR 108. In the last-mentioned decision — of the Alberta Court of Queen’s Bench — there was a single debtor liable for rent. The case is not one of the giving of a negotiable instrument as conditional payment of a pre-existing debt. It accepts, in reliance upon Drake v Mitchell and Wegg Prosser v Evans, that where a plaintiff possesses two rights of action the pursuit of one to judgment does not extinguish the other unless the judgment is satisfied. Two further decisions of the Alberta Court of Queen’s Bench support the view that in the present case the obtaining of the judgment did not extinguish the obligation to pay the deposit: Rafael v  Allison [1988] 1 WWR 570 and First City Capital Ltd v Ampex Canada Inc (1989) 75 CBR 109. In my opinion the obligation to pay the deposit was extinguished neither by the taking of the promissory note nor by the obtaining of judgment on it. It has not been argued that the obligation was extinguished by the rescission of the contract, and I therefore say nothing about the authorities dealing with this question. The bank’s contention was that, the obligation to pay the deposit having been extinguished in one or other of the two suggested ways, there was, as regards the amount of the deposit, no money due and payable pursuant to the contract of sale within the meaning of the charge. The direct question with which we are concerned on this branch of the case is one of construction of the charge; it is only indirectly that we are concerned with principles of law concerning satisfaction and merger. But to reject the argument that the obligation to pay the deposit disappeared by reason either of satisfaction or of merger is to reject the only bases on which it was contended that the deposit does not fall within the charge. It must be borne in mind, however, that the charge secures moneys due and payable pursuant to the contract of sale and that, as I would say, the promissory note, while given in consequence of the making of the contract of sale, was not given pursuant to it, no matter how broad a view of the ambit of the charge may reasonably be taken as a matter of construction. In my opinion, what is secured by the charge, leaving aside interest, is the sum of $15,000 payable under the contract as the deposit. The amount secured is not the amount of the promissory note, which was for $15,187.50, nor is it the amount of the promissory note together with further interest and costs which gave rise to the judgment for $16,310.88 entered in the Supreme Court … I would allow the appeal, with an order for costs, including reserved costs, in favour of Moffett against both the bank and Dillon, and vary the order below by substituting for the words in para 1 thereof ‘the sum of $6,309.06’ the following words: (a) the sum of $15,000 together with interest thereon at a rate two per cent higher than the rate from time to time fixed under s 2 of the Penalty Interest Rates Act 1983 and computed from 24 September 1985 until payment of the said sum of $15,000; (b) the sum of $54,217; and (c) the sum of $10,587.88. Moffett’s counsel asked us, if the appeal was allowed, to cause the first undertaking given by the bank below to be varied by substituting for the amount mentioned in the undertaking the amounts held by this Court to be secured by the charge. The bank’s counsel did not demur to this suggestion, but it will be necessary for us to confirm that the undertaking may be taken to have been given in the varied terms. The cross-appeal should be dismissed, with costs payable by the bank to Moffett. 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 920

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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 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 Corporation 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 enquiry as to which security is objectively the more effective and it also connotes, 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 enquiry 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 enquiry 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 Chapter 8 of Meagher, Gummow and Lehane, Equity Doctrines & Remedies, 3rd ed, para 803–para 860, but see especially the ten categories of exception from the general rule referred to in para 807–para 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 is between two (or more) holders of equitable (or possibly legal) interests (whether registrable or not) and indefeasibility can only become relevant after registration. 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 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

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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 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 Theam Swee v Equiticorp Finance Group Ltd [1992] 1 AC 472 (PC) and Gough: Company Charges, 2nd ed, Ch 42, p 1095–p 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 third 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 & Guarantee Co of Australia Ltd v Perpetual Executors & 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 and Lehane (3rd ed) para 803. In that case Holroyd J preferred to follow the reasoning of Lord Cairns, LC in Shropshire Union Railways & 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 922

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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 Vice Chancellor Kindersley 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 and H Just (Holdings) Pty Ltd v Bank of NSW (1972) 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 p 687. … 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 (in liq) (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 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 923

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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 characterise 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 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 enquire 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 establishing the existence of notice in the bank. What the 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 is the essence of the present difference of opinion. The better view, although I would not wish to resolve it 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, eg, Butt, Land Law in Australia, para 1936; The Principles of Equity (ed Parkinson) 924

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(1996) p 75; Sykes, Law of Securities (5th ed) p 405; Meagher, Gummow and Lehane (3rd ed), Equity, para 849; Sir Frederick Jordan: Chapters on Equity in New South Wales, p 66–p 67 and Pomeroy’s Equity Jurisprudence (5th ed) 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 encumbrancers 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 encumbrancers at  the time when they took their securities and paid their money had notice of the encumbrance 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 160–164 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 pp 285–286 and by Menzies J, who observed that ‘eminent Lord Chancellors have expressed diametrically opposite conclusions upon the same question’: at pp 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  p 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 enquiry may be cut short by it being demonstrated that the later holder knew of the earlier interest when he or she 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. 925

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I would otherwise agree with the reasoning and conclusions of Brooking JA as to the resolution of this appeal, in particular as to the amount secured by the appellant’s charge. In other circumstances the words ‘pursuant to’ may be given a narrower construction. Indeed as a proper use of the English language they more frequently demonstrate the narrower meaning suggested in argument, but this charge has to be looked at in the circumstances of its creation and the meaning properly to be given to it in the light of its language and those circumstances. It would be totally unrealistic and unsatisfactory to say that the additional security granted was intended to cover only specific failures to carry out particular monetary obligations in the contract of sale but not the consequences of any such failures. Indeed, apart from the deposit and the interest component of the payments owing, the vendor could not claim the moneys owing except upon tender of a transfer of the land. The collateral security here given was intended to secure the vendor against non-performance of the contract of sale and its terms and that must, in my opinion, include damages payable for non-performance, as are here claimed. I would dismiss the cross-appeal and allow the appellant’s appeal in the manner proposed by Brooking JA.

Commentary 13.28  The judgment of Brooking JA in Moffett v Dillon suggests that in the context of a

priority dispute between unregistered interests, two separate tests must be applied: a merit analysis that holistically examines all of the circumstances to determine the better equity and a notice test examining whether the subsequent interest holder took the interest with notice of the prior interest. According to Brooking JA, where notice can be established, the ‘deeply rooted rule’ is 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’. Ormiston JA agreed with the conclusions of Brooking JA concerning the merit analysis, but did not concur with his application of the notice test. Ormiston JA felt that while the argument that Brooking JA made about notice was ‘attractive both in its logic and its simplicity’, there were instances where notice simply could not automatically postpone a prior interest; for example, where a deed of priority was entered into or where the circumstances proved the existence of an estoppel by the prior interest holder. In such cases, the existence of notice by the subsequent interest holder should not automatically postpone the subsequent equity. Further, Ormiston JA argued that notice is itself ‘a point of some nicety’ and its relevance is best treated as a significant factor within a merit analysis rather than a determinative factor in a distinct rule. This was clearly the approach adopted by McPherson JA in Platzer v  Commonwealth Bank of Australia [1997] 1 Qd R 266, where although his Honour concluded that notice by a subsequent equitable interest holder of the existence of a prior interest was ‘fatal’ to its claim, the conclusion was reached via a holistic analysis of the merits of each interest including the delay by the prior interest holder in lodging a caveat. A two-tiered test such as that proposed by Brooking JA in Moffett v Dillon segregates ‘notice’ from the more general equality assessment, producing a situation where ostensibly ‘equal’ interests are artificially prioritised according to the determinative factor of notice. The conclusions of Ormiston JA in Moffett v  Dillon [1999] 2 VR 480 endorse a more holistic and balanced merit evaluation. There is no compelling reason why a subsequent unregistered interest holder should have a test, akin to the bona fide purchaser for value without notice rule which is a rule that only applies to the acquisition of a subsequent legal interest. As outlined by Storey, ‘The purchaser, in all cases must hold a legal title or be entitled to call for it, in order to give him the full protection of this defence’: Commentaries

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on Equitable Jurisprudence, 1886, Vol 1, p 64. A separate notice rule creates unusual distinctions when dealing with registered volunteers and, as pointed out by S Rodrick (‘Resolving Priority Disputes Between Competing Equitable Interests in Torrens System Land — Which Test?’ (2001) 9 APLJ 172), to apply a ‘distinct notice test’ to disputes between unregistered equitable interests may result in a subsequent unregistered equitable interest holder acquiring priority when a registered volunteer may not. In Meadow Springs Fairway Resort Ltd (In liq) v Balanced Securities Ltd (No 2) (2008) 245 ALR 726, Siopsis J concluded at  [106] that the ‘distinct and fundamental’ rule endorsed by Brooking J in Moffett v  Dillon could be applied to the facts of the case. Similarly, in Richardson v  Aileen Pty Ltd; Application by DJ Hughes [2007] VSC 104 at  [51], where Mondie J concluded that ‘in general’ notice by a subsequent interest holder will amount to postponing behaviour. In Re S & D International Pty Ltd (No 4), Robson J preferred to focus on the conclusions of Ormiston J in Moffett, noting at [186] a preference for an approach that upheld the guiding principle of ‘resolving 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’. See also Milenkovic v Belleli [2015] VSC 349 at [205]–[206], where AsJ Lansdowne, after referring to the judgement of Ormiston J in Moffett, concluded that the correct approach ‘requires that in determining a priorities dispute all relevant circumstances must be considered, with particular emphasis on the conduct of the holder of the earlier interest as it affected the grant of the later interests, and, if they arise, questions of notice’.

13.29  Revision Questions 1. How does Brooking JA in Moffett v  Dillon treat the issue of notice by a subsequent interest holder? How does the approach of Ormiston JA differ? 2. Do you think it is appropriate to apply the bona fide purchaser for value without notice rule to a competition between unregistered equitable interests? 3. Should the priority rule for resolving disputes between unregistered equitable interests be different in form to that which applies to disputes between general law equitable interests or should the same rule apply with a broader scope? 4. Should notice by a subsequent interest holder always be ‘fatal’ in a dispute between unregistered equitable interests? Can you think of situations where notice would not be fatal? 5. Do you think that the conclusions of the Victorian Supreme Court in Jacobs v  Platt [1990] VR 146 holding that a failure to lodge a caveat should not be treated as ‘postponing’ conduct in circumstances where the prior unregistered interest holder could not, in the circumstances, reasonably believe that there was a need for protection, are sound in the context of priority analysis? How does subjective assessment fit into a merit consideration? 6. Where an electronic conveyance is carried out, is it appropriate to treat a priority notice in the same way as a caveat for the purposes of determining a priority dispute?

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Chapter 14

Easements Nature of an Easement 14.1 Easements and natural rights 14.2 Profits à prendre 14.3 Carbon rights 14.4 Extract: Carbon Credits (Carbon Farming Initiative) Act 2011 — s 39 14.4 Extract: Carbon Credits (Carbon Farming Initiative) Act 2011 — s 40 14.4 Rentcharge 14.5 Essential Elements of an Easement 14.6 Dominant and servient tenement 14.7 The easement must accommodate the dominant tenement 14.8 Dominant and servient owners must be different 14.9 The easement must be capable of forming the subject matter of a grant 14.10 Case: Re Ellenborough Park 14.11 Case: Riley v Penttila 14.12 Commentary 14.13 Ancillary rights 14.14 Different Forms of Easement 14.15 New easement rights 14.15 Extract: Property Law Act 1969 — s 121 14.15 Grants and reservations 14.16 Express easements and statutory powers 14.17 Implied easements of necessity and common intention 14.18 Easements of necessity 14.19 Case: Adealon International Proprietary Ltd v London Borough of Merton 14.20 Commentary 14.21 Case: North Sydney Printing Pty Ltd v Sabemo Investment Corp Pty Ltd 14.22 Commentary 14.23 Common intention easements 14.24 Continuous and apparent easements 14.25 Case: McGrath v Campbell 14.26 Commentary 14.27 Easements arising from construction 14.28 Case: Dabbs v Seaman 14.29 928

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Commentary 14.30 Easements arising under the non-derogation principle 14.31 Case: Wheeldon v Burrows 14.32 Commentary 14.33 Revision Questions 14.34 Easements by Prescription 14.35 Case: Hampshire Automotive Centre Pty Ltd v Centre Com (Sunshine) Pty Ltd 14.36 Commentary 14.37 Construction of Easements 14.38 Case: Westfield Management Ltd v Perpetual Trustee Ltd 14.39 Commentary 14.40 Extinguishment and Modification of Easements 14.41 Extract: Conveyancing Act 1919 (NSW) — s 89 14.41 Extract: Transfer of Land Act 1958 (Vic) — s 73 14.41 Abandonment 14.42 Case: Treweeke v 36 Wolseley Road Pty Ltd 14.43 Commentary 14.44 Case: Bookville Pty Ltd v O’Loghlen 14.45 Commentary 14.46 Extinguishment on the basis of a change in circumstances 14.47 Unity of ownership 14.48 Revision Questions 14.49 Answer Plan 14.50

Nature of an Easement 14.1  An easement is an intangible interest in land that confers upon the holder a right

that is enforceable over one piece of land, known as the burdened land or the servient tenement, for the benefit of another piece of land, known as the benefited land or the dominant tenement. Despite its incorporeal nature, the easement is a form of real property and is enforceable in rem. As an incorporeal right, the easement does not confer possessory rights but rather, the benefit of a specific right. This means that the easement allows its owner to exercise a right against the servient tenement according to its scope and terms, but it does not confer any physical ownership in the land. The nature of the easement has been described by C J Gale, Gale on Easements, 1986 at [3] as follows: An easement may be defined to be a privilege without profit, which the owner of one neighbouring tenement has on another, existing in respect of their several tenements, by which the servient owner is obliged to suffer or not to do something on his own land, for the advantage of the dominant owner.

The easement evolved from what were originally known as ‘servitudes’ under Roman law. The connection that easements have with Roman law and their subsequent evolution under English common law was summarised by Sir William Holdsworth in Historical Introduction to the Land Law, Clarendon Press, Oxford, 1927, 265 (quoted by the English Court of Appeal in Re Ellenborough Park [1956] Ch 131): 929

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The industrial revolution, which caused the growth of large towns and manufacturing industries, naturally brought into prominence such easements as ways, watercourses, light and support; and so Gale’s book became the starting point of the modern law, which rests largely upon comparatively recent decisions. But, though the law of easements is comparatively modern, some of its rules have ancient roots. There is a basis of Roman rules introduced into English law by Bracton and acclimatised by Coke … The law, as thus developed, sufficed for the needs of the country in the eighteenth century. But, as it was no longer sufficient for the new economic needs of the nineteenth century, an expansion and an elaboration of this branch of the law became necessary. It was expanded and elaborated partly on the basis of the old rules, which had been evolved by the working of the assize of nuisance, and its successor, the action on the case; partly by the help of Bracton’s Roman rules; and partly, as Gale’s book shows, by the help of the Roman rules taken from the Digest, which he frequently and continuously uses to illustrate and to supplement the existing rules of law.

Easements and natural rights 14.2  Easement rights should be distinguished from other non-proprietary rights over

land. For example, all land ownership carries with it natural rights flowing from the character of the land. Thus, rights relating to the use of natural resources already on the land or rights to take advantage of light, shade, or water running through the property are all rights naturally associated with land ownership. An easement is an additional right, created for the benefit of the dominant tenement and burdening the servient tenement. An easement generally arises or is created in circumstances where the owner of land needs the benefit of a right that does not naturally flow with that land in order to fully utilise the land. A classic example is a right of way. For example, land may be subdivided such that the only way to effectively access it is via a different block of land. In such a situation, the landowner may acquire a separate right of access, exercisable against the different block of land. What is significant about this separate right is that it is enforceable against a block of land that the holder does not own and, therefore, has no possessory rights in. Despite this, the holder of the easement acquires an incorporeal right which is enforceable against that servient tenement for the benefit of land that is vested in him.

Profits à prendre 14.3  Not all incorporeal rights in land constitute easements. Some rights that are

acquired by a dominant tenement holder against a servient tenement holder are known as profits à prendre (a derivation of the French phrase, ‘right of taking’). A profit à prendre is similar to an easement in that it confers upon the holder a right of entry over the land. However, unlike the easement, the profit entitles the holder to take natural resources from the land such as produce, timber, minerals, petroleum or wild game: Duke of Sutherland v Heathcote (1892) 1 Ch 475. The right includes taking a portion of the soil itself: Re Refund of Dues under Timber Regulations [1935] AC 184 at 193. In Paine & Co Ltd v St Neots Gas & Coke Co [1939] 3 All ER 812 at 823, Luxmoore LJ set out the difference between an easement and a profit as follows: An easement differs from a profit à prendre, although both may be classed under the head of servitudes in that the owner of an easement cannot maintain trespass, the only remedies available to him for disturbance being by abatement or by an action for nuisance … for he is asserting a right which of necessity excludes the possibility of possession of the servient tenement, or any part of it …

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The distinction was also articulated in Halsbury’s Laws of England, 3rd ed, Vol 12, Butterworths, London, 1955, p 522 at [1129] where the authors conclude that: … an easement only confers a right to utilize the servient tenement in a particular manner, or to prevent the commission of some act on that tenement, whereas a profit à prendre confers a right to take from the servient tenement some part of the soil of that tenement or minerals under it or some of its natural produce, or the animals ferae naturae existing upon it.

Common forms of profits that endure today include the right to quarry a mine to extract minerals (Emerald Quarry Industry Pty Ltd v  Commissioner of Highways (1976) 14 SASR 486) and the right to take wild animals from the land: Mason v Clarke [1955] AC 778. It will depend on circumstances and judicial analysis whether the right to take timber from another person’s land constitutes a profit à prendre. The general rule is that the fructus naturales (the property) must form a part of the land and must pass to a holder prior to its severance from the soil although it could remain in the land for further growth. Thus, as Mason J in the High Court noted in Australian Softwood Forests Pty Ltd v AttorneyGeneral (NSW); Ex Rel Corporate Affairs Commission (1981) 148 CLR 121 at 131: … if the trees were to be left on the land for the advantage of the purchaser so that he would derive benefit from further growth, then the contract was for the sale of an interest in land. If, on the other hand, the purchaser was to enter and take the timber immediately, he would derive no benefit from the land and the contract was one for the sale of goods. This was the criterion stated by Lord Coleridge CJ in Marshall v Green (1875) 1 CPD, at pp 38–39.

Ultimately, on the facts Mason J concluded that the right did constitute a profit à prendre because the trees were integrated with the land and therefore could not be regarded as chattels. A further argument raised in the case against the grower having a profit à prendre was that the interest was more in the form of an imperative obligation to remove and cut the trees rather than a right. However, Mason J concluded at [22] that this characterisation did not preclude a profit from arising: All the instances given in the text books and legal dictionaries of profits à prendre are of ‘rights’ to take something off the land of another. I have not been able to discover a case in which an obligation to take something off a person’s land has been considered to be a profit à prendre. But I do not think that this negates the possibility that the grower’s rights amount to an interest in the nature of a profit à prendre. Property in the trees evidently passes to him before planting and their growth in the ground is for his benefit. The fact that he has an obligation, rather than a right, to cut and remove them at maturity on notice from the company is not in the circumstances of this case inconsistent with his having an interest in land. As he has an interest in land and a licence to enter the land in order to take possession of the fruits of his interest, what he has is something in the nature of a profit à prendre, if not a profit à prendre in the strict sense.

This decision can be contrasted with the conclusions of the New South Wales Supreme Court in Clos Farming Estates Pty Ltd v Easton (2001) 10 BPR 18,845, where the court held that a right to establish a vineyard and then take the produce could not be regarded as a right to take integrated produce from the land. In that case, Bryson J made a distinction between fructus naturales and fructus industriales, noting that the latter, which really involved the production of annual crops, could not be substantially regarded as a ‘part of the land’. On appeal, Santow JA agreed with Bryson J concluding at [58] that the rights that had been conferred upon the holder were highly intrusive and were ‘not just limited rights of entry to take away natural property, but include rights to enter and plant and tend the vines and the right to recover payment for the costs associated with such works and the sale of any produce. The rights considered as a whole are far greater than any 931

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rights contemplated in the traditional concept of a profit à prendre.’ The conclusions of Santow JA were subsequently approved in Registrar-General of New  South  Wales v  JEA Holdings (Aust) Pty Ltd (2015) 88 NSWLR 321, where Bathurst CJ and Beazley J at [64] concluded that interference with possession that amounted to an effective interference with ownership rights could be sufficient to deny the validity of an easement or a profit. In this respect, their Honours approved of the earlier decision of the House of Lords in Moncrieff v  Jamieson (2007) 1  WLR  2620, where Lord Scott held at [47] that the right which is the subject of an easement must be such that the servient owner retains possession and, subject to the reasonable exercise of the right in question, control of the servient land. See also: Stolyar v Towers [2018] NSWCA 6 at [51]–[52] per Gleeson JA. Profits are created in the same way as easements, either expressly by deed or agreement, or in equity where the formal deed requirements have not been complied with, or by prescription where a person has openly and consistently utilised the right to obtain resources from the land in compliance with the statutory period for prescriptive rights under the doctrine of lost modern grant. Profits may be general, entitling a range of holders to access the servient land and take resources, or they may be exclusive, entitling the holder to the sole right to remove resources. Further, like easements, they may be appurtenant to a specifically designated servient tenement or in gross where the dominant tenement is not specified. Profits may be extinguished by express release, agreement, merger or where it is clear that the right is being misused. For an excellent discussion on the nature of profits, see: G Gadsden, The Law of Commons, Sweet & Maxwell, London, 1988, p 12 and more generally Jackson, The Law of Easements and Profits, Butterworths, London, 1978. In Ellison v  Vukicevic (1986) 7 NSWLR 104, the New  South  Wales Supreme Court concluded that a profit à prendre is a ‘peculiar kind of interest’ and one in which ‘the familiar rules’ relevant to property may not apply. Young J noted that the profit carries fundamentally different assumptions to those applicable to corporeal interests. His Honour noted that the principle that when selling a corporeal interest in land, unless the contrary is stated, the entire interest is deemed to pass, does not apply to profits. Such an assumption is inappropriate in the context of a profit because the grantor, by definition, is only parting with a part of his or her rights over the land. Like an easement, the profit à prendre may be modified or extinguished by a court where there is a change in the user of the land benefitted by the covenant, or in a change in the neighbourhood or other circumstances that a court may deem material and the profit ought to be deemed obsolete because it would impede the reasonable use of the land without securing a practical benefit, or there is an agreement to modify or extinguish the profit.1

Carbon rights 14.4  Carbon rights are increasingly prevalent because of the importance ascribed to

sequestration capability within a framework where emission reduction is valued. At the Commonwealth level, the Carbon Credits  (Carbon Farming Initiative) Act  2011  (Cth) (CCCFI) sets out that a carbon credit is an interest which can arise where greenhouse gas emissions are mitigated or avoided. According to the CCCFI, the carbon credit relates to the land but, pursuant to s 150, is verified as a form of assignable personal property.

1. Conveyancing Act  1900 (NSW) s  89; Land Act  1994 (Qld) s  373N, s  373O. Section  88B of the Transfer of Land Act 1958 (Vic), which allows a mortgagee to apply to remove a restrictive covenant or easement that has not been consented to when exercising the power of sale, does not apply to the profit à prendre. 932

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Most carbon credits arise from agricultural or forestry activities on land such as carbon sequestration from tree planting, revegetation or reforestation or projects that seek to avoid land clearing or deforestation. The CCCFI Act allows the Torrens Registrar to make an entry or notation relation to project under the CCCFI which is supported by funding from the Emission Reduction Fund, on the Register. This is set out in s 39 of the CCCFI Act which is extracted below: EXTRACT Carbon Credits (Carbon Farming Initiative) Act 2011 — s 39 Entries in title registers — general Scope (1) This section applies to an eligible offsets project. Entries (2) The  relevant land registration official  may make such entries or notations in or on registers or other documents kept by the official (in electronic form or otherwise) as the official thinks appropriate for the purposes of drawing the attention of persons to: (a) the existence of the eligible offsets project; and (b) the fact that requirements may arise under this Act in relation to the project; and (c) such other matters (if any) relating to this Act as the official considers appropriate.

If carbon previously sequestered on the land is released back into the atmosphere it will generate a reversal that may result in a demand for the relinquishment of carbon credits. If carbon credits are not relinquished, the Regulator will impose a carbon maintenance obligation (CMO) on the project and the land. The Torrens Register may notify a CMO on the Register. This is set out in s 40 of the Carbon Credits (Carbon Farming Initiative) Act 2011, which is extracted below: EXTRACT Carbon Credits (Carbon Farming Initiative) Act 2011 — s 40 Entries in title registers — land subject to carbon maintenance obligation Scope (1) This section applies to one or more areas of land if those areas of land are subject to a carbon maintenance obligation. Entries (2) The  relevant land registration official  may make such entries or notations in or on registers or other documents kept by the official (in electronic form or otherwise) as the official thinks appropriate for the purposes of drawing the attention of persons to the obligation.

The Regulator has a public Emission Reduction Fund (ERF) register, which is separate to the central land Register under the Torrens system, and which contains information regarding ERF projects, including any relinquishment requirements and CMOs so that 933

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anyone interested in land subject to a sequestration offsets project is notified. The Carbon Credits (Carbon Farming Initiative) Act 2011 treats the recording of carbon credits and carbon maintenance obligations in a different way to other land interests under the Torrens system. The holder cannot apply for an entry or notification to be made on the Register as this is ultimately up to the Registrar’s discretion. Where an entry is made by the Register, it will provide notification to all those parties dealing with the land. As outlined by V Johnson and B France-Hudson, ‘Implications of Climate Change for Western Concepts of Ownership: Australian Case Study’ (2019) 42(3) UNSW Law Journal 869 at 887: … entries or notifications made under the  Carbon Credits Act  are a poor fit with existing notification mechanisms in the Torrens system. For example, compared to caveats, Carbon Credits Act entries neither provide notice that an estate or interest is being claimed in land, nor do they prevent dealings with land title. Moreover, unlike priority notices, Carbon Credits Act entries are not ‘placeholders’ for expected registrable instruments. Nevertheless, Carbon Credits Act notifications do appear to uphold the fundamental purpose of notifying others about matters relating to land. For a system of land title by registration to ‘suddenly and unexpectedly’ saddle a person interested or entitled to deal with land with ‘[an] interest … which could have been, but was not made the subject of … a caveat’ would be subversive. However, unlike the caveat system, the  Carbon Credits Act  neither allows a proponent to apply for entries or notifications to be made on the Register for their project, nor compels the Registrar to make any notifications or entries, which is the key database of information which would be searched by a person intending to deal with land.

At the state level, carbon sequestration rights are verified as either a profit à prendre or a land interest. For example, the Conveyancing Act  1919 (NSW) specifically deems forestry rights, which include the category of carbon rights, to constitute profits à prendre: s 88AB(1). In Queensland, the rights of a party to the natural resource product, arising pursuant to a natural resource agreement, are deemed by the Forestry Act  1959 (Qld) s 61J(5), to constitute a profit à prendre and registrable property within the application of Division 4B of the Land Title Act 1994 (Qld). In Tasmania, carbon rights are deemed to constitute profit à prendre rights under the Forestry Rights Registration Act 1990 (Tas)  s 5(3). In South Australia, the Forest Property Act 2000, s 12 sets out that for the purposes of registration, a forest property agreement is to be treated as a profit à prendre. Section 7(2) goes on to state that where the forest property agreement is unregistered, it will amount to an equitable interest and where registered, s 7(3) sets out that it will have priority over the interests of those who consented to its registration. By contrast, Victoria, Western Australia and South  Australia acknowledge that carbon sequestration rights amount to new statutory interests. For example, in Victoria, s 4(2) of the Climate Change Act 2017 (Vic) sets out that a forest carbon right is an interest in land. Section 4(3) goes on to say that it is not an easement or a right of way. This effectively means that s 88B of the Transfer of Land Act 1958 (Vic), which allows an easement or a restrictive covenant not consented to, to be removed by a mortgagee exercising a power of sale, would have no application. In Western Australia, the Carbon Rights Act 2003, s 6 sets out that once registered, a carbon right amounts to an interest in land, an hereditament and an encumbrance. The status of profits within the Torrens system depends upon the particular state. For example, the Real Property Act 1900 (NSW) s 42(1)(b) makes it clear that all registered proprietors take subject to the ‘omission or misdescription … of any profit à prendre … created or existing upon the land’. What this means is that where a profit has not been protected by caveat, it may gain the protection afforded to paramount interests only in circumstances where it can be established that it has been omitted or misdescribed. This will arise where a profit has been omitted from a title during the process of having that title converted from general law to Torrens title land. 934

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Alternatively, a profit may be ‘omitted or misdescribed’ where it has been created over preexisting Torrens land in accordance with all the formal creation requirements, however the profit has subsequently been left off title: James v Registrar-General (1967) 69 SR (NSW) 361. Prescriptive profits would not gain this protection unless the right has been formalised and the documents lodged with the Registrar. However, it is arguable that in New South Wales neither prescriptive profits nor prescriptive easements are enforceable against registered proprietors. In Williams v State Transit Authority (2004) 60 NSWLR 286 at [140], Mason P noted that there is a ‘relatively unbroken line of authority in this State precluding the creation of easements after land comes under the Act except by way of registrable instrument’ and that there were ‘obvious reasons why a court should be cautious about any change to settled law in relation to real property’. The same rationale can be applied to prescriptive profits. If the right is an interest in land rather than a profit, and it is not registered, it will be treated in the same way as other unregistered interests in land are treated. (See further discussion in Chapter 11.)

Rentcharge 14.5  Rentcharges have their origin in feudal England where the practice of ‘reserving’

a rent over land was common. Rentcharges are still created in England; however, they are unusual in Australia. A rentcharge is a payment, made annually or periodically, by a landowner. The holder of the charge retains an incorporeal interest in the land to which the charge relates but it does not confer upon the holder any form of corporeal estate in the land because there is no tenurial relationship involved. It is, therefore, an incorporeal hereditament that burdens one piece of land without providing a specific benefit to another piece of land. In this sense, a rentcharge is a right that exists in gross and that does not relate to any specific land that the holder might have. In National Executors and Trustees Co of Tasmania v Edwards [1957] Tas SR 182, Burbury CJ concluded that fluctuation is not fatal to a rentcharge and a charge that conferred a royalty on the value of all minerals taken from the land did constitute a valid rentcharge even though its value might vary according to the level and nature of the mining undertaken. See also Bromley v Tryon [1952] AC 265. Remedies for breach of a rentcharge include allowing the holder to take possession of the income of the land. See, for example, s 190 of the Property Law Act 1958 (Vic).

Essential Elements of an Easement 14.6  There are four primary characteristics of an easement as set out by G C Cheshire

in The Modern Law of Real Property, 7th ed, Butterworths, London, 1954, and endorsed by Lord Evershed MR in Re Ellenborough Park [1956] Ch 131. These characteristics are: i. there must be a dominant and a servient tenement; ii. the easement must accommodate the dominant tenement; iii. the dominant and servient tenement must not be owned and possessed by the same person; and iv. the easement right must be capable of forming the subject matter of a grant.

Dominant and servient tenement 14.7  An easement is a right that is appurtenant to land and therefore it must provide a benefit to a dominant tenement and impose a burden over a separate servient tenement. Where there is no land that benefits from an easement the easement is known as an 935

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easement in gross. Easements in gross can be created by statute (usually for the benefit of local councils); however, they do not exist under common law in Australia. It is not possible for an easement to be created over land that is owned by the same person. In such a situation, because the owner has title and possession over both pieces of land there is no need to create an additional easement right. Thus, in interpreting the scope and nature of an easement, it is necessary to wait until the dominant and servient tenement are owned and possessed by different persons. As noted by Young J in Finlayson v Campbell [1997] NSWSC 1050 in the context of the construction of the easement right at 1059: … there is a lot to be said for the point of view that one looks at the situation not so much as at the date of creation of the easement but as at the date when it becomes of practical value when the same person ceases to be the proprietor of both the dominant and the servient tenement.

The easement must accommodate the dominant tenement 14.8  As a land interest, the easement confers a right that is enforceable against land, in order to provide benefit to land. It is, therefore, imperative that the right accommodate the dominant tenement rather than provide a personal benefit to the dominant tenement’s owner: Ackroyd v Smith (1850) 10 CB 164; 138 ER 68. If this were not the case, an infinite variety of rights might acquire an in rem status despite their dissociation with the land. In  Hill v  Tupper (1863) 2 H & C 121; [1861–1873] All ER Rep 696, a case examining the issue of whether a right to use canal boats on a river for pleasure could constitute an easement, Pollock CB noted (at 126): A new series of incorporeal hereditament cannot be created at the will and pleasure of the owner of property; but he must be content to accept the estate and the right to dispose of it subject to the law as settled by decisions or controlled by Act of Parliament. A grantor may bind himself by covenant to allow any right he pleases over his property, but he cannot annex to it a new incident, so as to enable the grantee to sue in his own name for an infringement of such a limited right as that now claimed … it is not competent to create rights unconnected with the use and enjoyment of land, and annex them to it so as to constitute a property in the grantee.

Similarly, Martin B in Hill v Tupper [1861–1873] All ER Rep 696 at 698 concluded: No case has been cited to show that such a right as this can be created, or that an owner can carve out his property into an indefinite number of hitherto unknown estates. To admit the right here claimed would be to open a door to the creation of such a variety of pieces and parcels of interests in land, and to such an indefinite increase of possible estates, that we ought not to do it.

The way in which courts should determine whether or not a right accommodates the dominant tenement was explained by G C Cheshire in The Modern Law of Real Property, 7th ed, Butterworths, London, 1954 at 24 in the following way: We may expand the statement of the principle thus: a right enjoyed by one over the land of another does not possess the status of an easement unless it accommodates and serves the dominant tenement, and is reasonably necessary for the better enjoyment of that tenement, for if it has no necessary connection therewith, although it confers an advantage upon the owner and renders his ownership of the land more valuable, it is not an easement at  all, but a mere contractual right personal to and only enforceable between the two contracting parties. 936

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This suggests that in order to accommodate land, an easement right must not only be connected with the land, it must also be reasonably necessary for its enjoyment. This does not necessarily mean that because the easement enhances the commercial value of the land, the easement will accommodate the dominant tenement. This is a relevant factor but is not decisive.2 Establishing the correlation between the right and the land it benefits may be straightforward; however, it is not always easy to determine whether that right is, in the circumstances, ‘reasonably necessary’. Indeed, courts may interpret the relevance of a right according to the current social conditions and it may be better ‘to put the issue in terms of prevailing patterns and trends of conduct so that some more specific content is given to the idea of necessity’.3 In R v The Registrar of Titles; Ex parte Waddington [1917] VLR 603, Hood J concluded that the relevant test should be whether the right claimed is for purposes wholly unconnected with the land. Thus, his Honour concluded that a right which was not directly connected with the enjoyment of the dominant tenement but could not be regarded as wholly unconnected could, provided there was no illegal purpose, constitute a valid easement. In Clos Farming Estates Pty Ltd v  Easton (2001) 10 BPR 18,845, Santow J concluded at [31] that the test requires a real and intelligible connection between the right and the normal enjoyment of the dominant tenement: … a natural connection between the dominant and servient tenements. The right must be reasonably necessary for the enjoyment of the dominant tenement and not merely confer advantage on the owner of that tenement, as would a mere contractual right; Finlay 91 WN (NSW) 730 (DC). Reference was made by the Trial Judge to Hill v Tupper (1863) 2 H & C 121 and In Re Ellenborough Park. … Bryson J concluded that whether the right granted accommodated and served the dominant tenement depended on whether the right granted was connected with the normal enjoyment of the dominant tenement. That is a question of fact, dependent on the nature of the dominant tenement and the right granted. It was not enough that the land be a convenient incident to the right. Rather the nexus must exist in a real and intelligible sense. Additionally, Bryson J recognised that facilitation of the business or commercial use in which the dominant land is involved may, in limited circumstances, be nonetheless sufficient to create the requisite nexus, provided the criteria for an easement are satisfied.

See also Nelson v Walker (1910) 10 CLR 560. A right that amounts to virtual possession of the servient tenement cannot be regarded as a right that accommodates the dominant tenement. In Copeland v  Greenhalf [1952] Ch 488, the defendant and his father before him had carried on business as wheelwrights for many years. Their home and workshop adjoined a road and in part confronted a strip of land on the opposite side of the road, some 150 feet long and of a width varying from 15 to 35 feet, which gave access from the road to an orchard. During the 50 years in which the defendant and his father had worked on the land, they had regularly placed vehicles, wheels and other articles on the land on the opposite side of the road to await repair or removal after repair. They had also from time to time carried out repairs to vehicles on the land. They had always left a way to permit access to and from the orchard from and to the road. On a claim by the plaintiff, the owner in fee simple of the orchard and the strip of land, for an injunction to restrain the defendant from continuing to place articles on the land, the defendant contended that he was entitled to an easement so to use the land by 2. Maio v City of Sterling (No 2) [2015] WASC 189 at [58] per Le Miere. 3. See further A J McLean, ‘The Nature of an Easement’ (1966) 5 Western Law Review 32. 937

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virtue of s 2 of the Prescription Act 1832 (UK). Upjohn J concluded at p 506 that the right claimed by the defendant went ‘wholly outside any normal idea of an easement, that is, a right of the occupier of a dominant tenement over a servient tenement’. His Honour felt that the right claimed was really the entire beneficial use of the strip of land so that as many goods could be left on it as possible. According to Upjohn J at 506, this did not constitute an easement right but was ‘virtually a claim to possession’. It is clear that rights such as a right to park are capable of accommodating the dominant tenement. As outlined by Bryson J in Clos Farming Estates Pty Ltd v  Easton (2001) 10  BPR  18,845 at  [39], ‘if the right granted in relation to the area over that it is to be exercisable is such that it would leave the servient owner without any reasonable use of his land, whether for parking or anything else, it could not be an easement though it might be some larger or different grant. The rights sought in the present case do not appear to approach anywhere near that degree of invasion of the servient land. If that is so … I would regard the right claimed as a valid easement’. In Moncrieff v Jamieson [2007] 1 WLR 2620 Lord Scott suggested at [59] that the relevant test in determining whether a right is too extensive to constitute an easement should not be whether the servient owner retains ‘reasonable use’ over the land but rather, whether the servient owner retains ‘possession and, subject to the reasonable exercise of the right in question, control of the servient land’. See also White v Betalli (2007) 71 NSWLR 381 where McColl JA argued that a by-law in a strata plan that provided the right to store a small watercraft could not give rise to a valid easement because it attempted to convey on the dominant owner rights of occupation that would substantially deprive the servient owner of proprietorship.4 In Jea Holdings Australia Pty Ltd v Registrar-General [2013] NSWSC 587, Windeyer J at [24] felt that when considering the effect of a grant of easement on a servient owner’s proprietorship one ought to ‘consider its effect on the servient owner’s proprietorship of the entirety of the servient tenement’. This would mean that ‘some manner of user affecting a fixed area of land might be a valid easement if that area formed part of a larger servient tenement but the same user of the same fixed area of land could be invalid as an easement if it were part of a smaller servient tenement’. In Stolyar v Towers [2018] NSWCA 6, the court examined the validity of a right to park and garage a vehicle. One of the issues explored was whether the right could be upheld because it was so substantial it interfered with the ownership rights of the servient tenement holder. On the facts, Towers (the owner of the dominant tenement) had no garage, but held the benefit of an easement over the servient tenement that was owned by Stolyar. The rights granted under the easement to Tower were extensive and included (i) rights to stand, park and garage vehicles for an unlimited time, with no express limit on the number (or types) of vehicles that may be parked;  (ii) the right to replace any structure currently on the easement area with a structure of the same size and character; (iii) the right to keep closed any doors or gates on any garage, but not to lock doors or gates preventing use of, or access to, the structures; and (iv) the right to enter the servient tenement to effect repairs or replace any structure. The existing garage was single with no door, and there was a space in front of it to park another vehicle. The Towers regularly used both spaces to park their vehicles. Mr Stolyar objected. He argued that whenever the Towers parked a vehicle in front of the single garage, he was unable to perform a ‘three-point turn’ to reverse into or out of the double garage. The Towers argued that the Stolyars had wrongfully interfered with their easement rights. The Stolyars argued 4. See also The Owners of East Fremantle Shopping Centre West Strata Plan 8618 v Action Supermarkets Pty Limited [2008] WASCA 180 at [61]–[62] per Buss JA. 938

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in return that the rights conferred under the easement were too extensive because they interfered with their ownership rights in the servient tenement and therefore the easement was invalid. The New South Wales Court of Appeal held that the easement was valid and did not deprive the Stolyars of their ownership rights. The Court of Appeal held that in order to prove that the rights conferred under the easement were too substantial, it was necessary to prove that it was impossible to turn a car around in the area in front of the double garage or elsewhere without encroaching onto the easement. This had not been proven on the facts. Gleeson JA made the following comments at [70]–[72]: It may be accepted that the right of vehicle parking and garaging necessarily interfered with Mrs Stolyar’s possession of the easement strip. However, … the rights granted by the easement did not amount to joint ownership of the easement strip, nor did they substantially deprive Mrs Stolyar of her proprietorship or possession of the area actually affected by the easement. The present case is not like Clos Farming Estates where the rights to the vineyard were inconsistent with the proprietorship and possession of the servient land by the servient owners. … The Stolyars’ contention that the easement substantially deprives Mrs Stolyar of her proprietorship or possession of the whole of Lot A because the Stolyars are unable to use the double garage and the driveway of Mrs Stolyar’s land, is not established given the absence of evidence concerning the inability to turn motor vehicles around in the area in front of the double garage or along the driveway by making more than three turns.

A right which relates to business conducted on the land rather than the land itself cannot be regarded as a right that accommodates the dominant tenement: Attorney-General v Horner [1913] 2 Ch 140. In making this determination a court must carefully consider the nature of the right in order to determine whether a right that relates to the business will also relate to the land. For example, in Moody v Steggles (1879) 12 Ch D 261, a case where the owner of a public house was empowered to affix a signboard on the wall of the defendant’s house, the court concluded that the right was a valid easement. Fry J reasoned at 266: It is said that the easement in question relates, not to the tenement, but to the business of the occupant of the tenement, and that therefore I cannot tie the easement to the house. It appears to me that that argument is of too refined a nature to prevail, and for this reason, that the house can only be used by an occupant, and that the occupant only uses the house for the business which he pursues, and therefore in some manner (direct or indirect) an easement is more or less connected with the mode in which the occupant of the house uses it.

Dominant and servient owners must be different 14.9  This is an obvious proposition because a person who owns a range of different

properties is clearly entitled to use one so as to benefit the other. However, if the dominant and servient tenement are owned by the same person but possession to one or both lies in a third party, an easement may be become necessary and may be created. EXAMPLE Sarah owns two adjacent properties called A and B. A has a path that enables access to B. If Sarah retains B but leases out A, she will need to acquire an easement. Sarah holds a fee simple with title and possession over B (the dominant tenement) but only holds a fee simple reversion (title only) over A and therefore, in order to ensure that she is able to exercise her right of way against the tenant’s exclusive possession, Sarah will need to create a valid easement. 939

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The position was summarised by Farwell LJ in Hyman v Van Den Bergh [1908] 1 Ch 167 at 177: … it is well settled … that the tenant of the servient can by his acquiescence allow the creation of the easement over his landlord’s land, and cannot in the absence of express agreement be compelled to take, or to allow any steps to be taken, to prevent it. Rights under this section are acquired or lost, as the case may be, by virtue of the acts or acquiescence of the occupier, not by virtue of his title, and the acts or the acquiescence of a disseisor during his occupation of the premises are as effectual as those of an owner in fee.

The easement must be capable of forming the subject matter of a grant 14.10  This requirement encapsulates a range of fundamental property assumptions. First,

as a matter of general principle, all proprietary interests must be ascertainable. In the words of Lord Wilberforce in National Provincial Bank Ltd v Ainsworth [1965] 2 All ER 472, before any right or interest can be classified as proprietary ‘it must be definable, identifiable … and have some degree of permanence and stability’. The need for clarity is particularly significant in the context of easement rights because it is important to ensure that the servient tenement owner is clearly aware of the limitations that have been imposed over their land. Easement rights, as a form of incorporeal proprietary right, have the potential to be vague and unclear. It is therefore necessary, as G C Cheshire explained in The Modern Law of Real Property, 7th ed, Butterworths, London, 1954 at 24, to ensure that only rights which ‘we can imagine one man granting to another’ are validated as easements. Rights that are unclear, ambiguous, and not, in a fundamental sense, ‘grantable’ will not satisfy these criteria. Many potential easement rights may be uncertain and therefore excluded from the category of easement rights. The primary consideration for the courts in this area is to determine what level of uncertainty will, ultimately, be fatal. Easements that may offend this requirement are often those which have arisen either impliedly or by prescription. In such circumstances, the absence of any express articulation means that the precise scope and nature of the right can be unclear. Rights that are inherently imprecise may also infringe this requirement. Recreational or amusement rights are generally incapable of forming the subject matter of an easement grant because they are open-ended and capable of a broad interpretation. Similarly, rights to roam or wander at large over land, jus spatiandi, are generally regarded as incapable of forming the subject matter of an easement grant and are not known to law as easement rights: Attorney-General v Antrobus [1905] 2 Ch 188 at 198 per Farwell J. 14.11  The English Court of Appeal in Re  Ellenborough Park [1956] Ch  131 argued, however, that a right to use a pleasure garden for recreational purposes, a jus spatiandi right, could form the subject matter of an easement. The court hold that this right was definable because it was appurtenant to a private residence and, further, that it provided a clear utility and benefit to the dominant tenement and was therefore better regarded as a ‘beneficial attribute’ rather than a recreational right. The decision is extracted below.

— Re Ellenborough Park — [1956] Ch 131 Facts: In 1855 land surrounding Ellenborough Park was sold in plots to individual purchasers. Each purchaser acquired the fee simple together with an easement for the use of roads and footpaths and drains made on the estate ‘and also the full enjoyment … at all times hereafter in common with the other persons to whom such easements may be granted of the pleasure ground set out and made in front of the said plot of land … in the centre of the square called 940

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Ellenborough Park … subject to the payment of a fair and just proportion of the costs charges and expenses of keeping in good order and condition the said pleasure ground’, as well as the benefit of covenants by the vendors to keep the park as an ornamental pleasure ground and not to build on it and covenants by the purchasers to pay a fair proportion of the expenses of keeping the pleasure ground in good order. In 1880 the owner of the park died and the park and other land vested in his trustees. One of the issues was whether the owners of the plots had any enforceable easement rights over the park. Sir Raymond Evershed, MR: … Omitting, for the moment, these last-mentioned few houses, it is clear from the deed from which we have quoted, and from the other deeds in like form made (as must be assumed) in respect of the remaining premises in Ellenborough Crescent, that the original common vendors were engaged on a scheme of development of this part of the White Cross Estate designed to produce a result of common experience; namely, a row of uniform houses facing inwards on a park or garden which was intended to form, and formed in fact, an essential characteristic belonging, and properly speaking ‘appurtenant’, to all and each of them. In substance, instead of each house being confined to its own small or moderate garden, each was to enjoy in common, but in common exclusively with the other houses in the crescent, a single large ‘private’ garden. In our judgment, the substance of the matter is not in this respect affected by the fact that some few houses in the immediate proximity of, but not actually fronting on, the park were also entitled to share the privilege. This extension of the privilege may no doubt be unusual and (at first sight at any rate) out of line with the conception of the square and its surrounding houses as a symmetrical unit. It has, therefore, a bearing on the question of the ‘connection’ between the right enjoyed and the ‘connection’ between the right enjoyed and the premises of the relevant house owners; and must be discussed under the head of Dr Cheshire’s first condition. In our judgment, the language of the deed of 1864 is clear to the effect that the right of enjoyment of the garden was intended to be annexed to the premises sold, rather than given as a privilege personal to their purchaser. The enjoyment was not exclusive to those premises alone; it was to be held in common with the like rights annexed to the other houses in (and in some few cases in close proximity to) the square or crescent. But it was not contemplated that like rights should be otherwise extended so as to belong in any sense to premises not forming part of (or at least closely connected with) the square or their owners. The position of the grant in the deed and its language show that, in the respects we have mentioned, the right granted was intended and treated as in pari materia with the rights of way and drainage similarly conferred. The relevant part of the deed opens with the general formula ‘Together with all ways … easements rights and appurtenances to the said plot of land … appertaining.’ The rights of way (admittedly easements properly so called) follow immediately the general formula, being linked to it by the words ‘and particularly’. The next two words are ‘And also’, which, in turn, introduce the garden rights now in question in language which repeats the phrase used in relation to the rights of way — ‘in common with the other persons to whom such easements may be granted.’ In our judgment, if the construction of this part of the deed does not tend to the conclusion that the garden rights, like the rights of way, were particular examples of the general grant of easements and rights appurtenant to the plot conveyed, it is at least made clear that the garden rights were (so far of course as they properly could be) of the same character quoad the land conveyed as the rights of way and drainage. It was conceded that the rights, if effectual and enforceable, were conditional, that is, on the house owners making their appropriate contributions to the cost of upkeep. In this respect, again, they were analogous, by the terms of the deed, to the rights of way over Crescent and Walliscote Roads. As a complement to the rights of enjoyment of the garden, subject to the condition of contribution, was the covenant by the vendors against building on the park and to the effect that the park should at all times remain as an ornamental garden. Counsel for the owners of the park did not seriously challenge the contentions of counsel for the owners of the houses that in their context the words of the covenant to which we have last 941

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referred could fairly be construed as implying a negative covenant on the vendors’ part against any user by them of the park otherwise than as a garden. There is clear authority that, if such be the substantial effect of the covenant, its benefit and burden will run with the land. The last consideration appreciably reinforces the view which we take of the meaning and intention of the deed to attach the garden rights in all respects like the rights of way and drainage to the land conveyed. It remains to interpret the actual terms of the grant itself — ‘the full enjoyment of the pleasure ground set out and made …’ Counsel for the owners of the park fastened on the presence of the word ‘full’, and the absence of any indication of the way in which the pleasure ground was to be used — or of any limitations on its use — and contended that the right or privilege given was a jus spatiandi in its strict sense, that is, a right to go or wander on the park and every part of it and enjoy its amenities (and even its produce) without stint. We do not so construe the words in their context. Although we are now anticipating to some extent the question which arises under the fourth of Dr Cheshire’s conditions, it seems to us, as a matter of construction, that the use contemplated and granted was the use of the park as a garden, the proprietorship of which (and of the produce of which) remained vested in the vendors and their successors. The enjoyment contemplated was the enjoyment of the vendors’ ornamental garden in its physical state as such — the right, that is to say, of walking on or over those parts provided for such purpose, that is, pathways and (subject to restrictions in the ordinary course in the interest of the grass) the lawns; to rest in or on the seats or other places provided; and, if certain parts were set apart for particular recreations such as tennis or bowls, to use those parts for those purposes, subject again, in the ordinary course, to the provisions made for their regulation; but not to trample at will all over the park, to cut or pluck the flowers or shrubs, or to interfere in the laying out or upkeep of the park. Such use or enjoyment is, we think, a common and clearly understood conception, analogous to the use and enjoyment conferred on members of the public, when they are open to the public, of parks or gardens such as St James’s Park, Kew Gardens or the gardens of Lincoln’s Inn Fields. In our judgment, the use of the word ‘full’ does not import some wider, less well understood or definable privilege. The adjective does not in fact again appear when the enjoyment of the garden is later referred to. It means no more than that to each plot was annexed the right of enjoyment of the park as a whole — notwithstanding that it was divided by Walliscote Road. Nor does any difficulty arise out of the condition as to contribution, and counsel for the owners of the park did not, indeed, so suggest. The obligation being a condition of the enjoyment, each house would be bound to contribute its due (that is, proportionate) share of the reasonable cost of upkeep. We do not forget that, as was proved in the evidence, an arrangement was made in 1924 between the then owners of the park and the owners of the houses concerned for regulating, in a mutually convenient way, the future management and upkeep of the garden, and for meeting its cost. Whether such arrangement had or still has any, and, if so, what legal effect, is a question that has not been considered before us, and on which we express no view. We have been concerned with the proper interpretation of the original deeds of grant. If these were effective on their true construction (as must now be considered) to confer legal and enforceable rights capable of passing to the hands of the owners of the houses, and being available against the owners of the park, it is not suggested that these rights have since been varied or lost by virtue of the 1924 arrangement or any other act of the persons at any time interested in such rights. … We turn next to Dr Cheshire’s fourth condition for an easement — that the right must be capable of forming the subject-matter of a grant. As we have earlier stated, satisfaction of the condition in the present case depends on a consideration of the questions, whether the right conferred is too wide and vague, whether it is inconsistent with the proprietorship or possession of the alleged servient owners, and whether it is a mere right of recreation without utility or benefit. 942

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To the first of these questions the interpretation which we have given to the typical deed provides, in our judgment, the answer; for we have construed the right conferred as being both well defined and commonly understood. In these essential respects the right may be said to be distinct from the indefinite and unregulated privilege which, we think, would ordinarily be understood by the Latin term ‘jus spatiandi’, a privilege of wandering at will over all and every part of another’s field or park, and which, though easily intelligible as the subject-matter of a personal licence, is something substantially different from the subject-matter of the grant in question, viz, the provision for a limited number of houses in a uniform crescent of one single large but private garden. Our interpretation of the deed also provides, we think, the answer to the second question; for the right conferred no more amounts to a joint occupation of the park with its owners, no more excludes the proprietorship or possession of the latter, than a right of way granted through a passage or than the use by the public of the gardens of Lincoln’s Inn Fields (to take one of our former examples) amount to joint occupation of that garden with the London County Council, or involve an inconsistency with the possession or proprietorship of the council as lessees. It is conceded that in any event the owners of the park are entitled to cut the timber growing on the park and to retain its proceeds. We have said that in our judgment, under the deed, the flowers and shrubs grown in the garden are equally the property of the owners of the park. We see nothing repugnant to a man’s proprietorship or possession of a piece of land that he should decide to make of it and maintain it as an ornamental garden, and should grant rights to a limited number of other persons to come into it for the enjoyment of its amenities. Counsel for the owners of the park relied, on this part of his case, on the recent decision of Copeland v Greenhalf ([1952] 1 All ER 809) and the ratio of the judgment of Upjohn J. The relevant facts were that a claim was made to a prescriptive right to deposit, and leave for an indefinite time, vehicles on an undefined part of a strip of land which was subject to a right of way. It appeared that the claimant was by trade a wagon repairer, and that the vehicles were deposited by him on the land in the course of his business and while awaiting repairs. It further appeared that wagons were commonly repaired while remaining so deposited. On these facts the learned judge — very justifiably (if we may say so) — found that the claimant was occupying and seeking the right to occupy an unspecified part of the land for the purpose of his business, and carrying on such business on the land so occupied. The learned judge said (ibid, at p 812): … in my judgment the right claimed here goes wholly outside any normal idea of an easement, that is, the right of the occupier of a dominant tenement over a servient tenement. This claim really amounts to a claim to a joint user of the land by the defendant. Practically he is claiming the whole beneficial user of the strip of land on the south-east side of the track so that he can leave there as many or as few lorries as he likes for any time that he likes and enter on it by himself, his servants and agents, to do repair work. In my judgment, that is not a claim which can be established as an easement. It is virtually a claim to possession, if necessary to the exclusion of the owner, or, at any rate, to a joint user, and no authority has been cited to me which would justify me in coming to the conclusion that a right of this wide and undefined nature can be the proper subject-matter of an easement. It seems to me that for this claim to succeed it must really amount to a right of possession by long adverse possession. I say nothing, of course, as to the creation of such rights by grant or by covenant. I am dealing solely with the question of a claim arising by prescription. We do not think that the facts of Copeland v Greenhalf bear any real relation to the present case, and the judgment of Upjohn J constitutes no authority relevant to our decision. The third of the questions embraced in Dr Cheshire’s fourth condition rests primarily on a proposition stated in Theobald’s The Law of Land (1929), at  p 263, where it is said that an easement ‘must be a right of utility and benefit and not one of mere recreation and amusement.’ It does not appear that a proposition in similar terms is stated by Gale. The passage in Theobald 943

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is justified by reference to two cases: Mounsey v Ismay (1865) (3 H & C at p 498), and Solomon v Vintners’ Co (1859) (4 H & N at p 593). The second of these cases was concerned with a right of support, and appears to be relevant for present purposes only on account of an intervention in the course of the argument on the part of Pollock CB and Bramwell B (ibid, at  p 593), in which it was suggested that one who had for a long period played racquets against the wall of a neighbour would have a right not to have the wall pulled down. We were also referred in argument to the Scottish case in the House of Lords of Dyce v Lady Hay (1852) (1 Macq 305), and to the earlier case before Lord Eldon LC therein referred to of Dempster v Cleghorn (15) (1813) (2 Dow 40). The former of these two cases was concerned with a claim on the part of the inhabitants of Aberdeen to roam at will over a piece of land bordering on the River Don, and for such purpose to use every part of the land to the practical exclusion of any right of user on the part of the owner. The case was therefore one involving what could strictly be called a claim by a large and ill-defined number of people to a jus spatiandi. In Dempster v Cleghorn (in which the only decision was to refer the matter back to the Court of Session) the dispute was between certain persons, inhabitants of the City of St Andrews and others, claiming the right of playing golf on the St Andrews’ Golf Links, and a tenant whose rabbits were said to be interfering with the proper maintenance of the golf course. Lord Eldon LC observed that the case had excited great warmth of feeling — which indeed may sufficiently appear from the allegation that some of the rabbits on the course were English rabbits. Neither that case nor Dyce v Lady Hay appear to us to lend real support to the proposition stated by Theobald, at least in its application to such a case as the present. But the observations of Martin B, who delivered the judgment of the court in Mounsey v Ismay (the first case mentioned in Theobald) are much more to the point. The case concerned a claim under the Prescription Act, 1832, for the freemen and citizens of a town on a certain day to enter on a close for the purpose of holding horse races thereon. The opinion of the court was that the right claimed failed in any event to qualify as an easement by reason of the absence of a dominant tenement. Martin B, considered, without deciding, the question whether an easement of the kind claimed could in any case exist as an easement in gross: and proceeded as follows (3 H & C at p 498): But, however this may be, we are of opinion that to bring the right within the term ‘easement’ in s 2 [of the Prescription Act, 1832] it must be one analogous to that of a right of way which precedes it and a right of watercourse which follows it, and must be right of utility and benefit, and not one of mere recreation and amusement. The words which we have quoted were used in reference to a claim for a right to conduct horse races and, in our judgment, the formula adopted by Theobald should be read in the light of that circumstance. In any case, if the proposition be well-founded, we do not think that the right to use a garden of the character with which we are concerned in this case can be called one of mere recreation and amusement, as those words were used by Martin B. No doubt a garden is a pleasure, and on high authority it is the purest of pleasures; but, in our judgment, it is not a right having no quality either of utility or benefit as those words should be understood. The right here in suit is, for reasons already given, one appurtenant to the surrounding houses as such, and constitutes a beneficial attribute of residence in a house as ordinarily understood. Its use for the purposes, not only of exercise and rest but also for such normal domestic purposes as were suggested in argument — for example, for taking out small children in perambulators or otherwise — is not fairly to be described as one of mere recreation or amusement, and is clearly beneficial to the premises to which it is attached. If Martin B’s test is applied, the right in suit is, in point of utility, fairly analogous to a right of way passing over fields to, say, the railway station, which would be none the less a good right, even though it provided a longer route to the objective. We think, therefore, that the statement of Martin B, must at least be confined to the exclusion of rights to indulge in such recreations as were in question in the case before him, horse racing or perhaps playing games, and has no application to the facts of the present case. 944

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As appears from what has been stated earlier the right to the full enjoyment of Ellenborough Park, which was granted by the conveyance of 1864 and other relevant conveyances, was in substance no more than a right to use the park as a garden in the way in which gardens are commonly used. In a sense, no doubt, such a right includes something of a jus spatiandi inasmuch as it involves the principle of wandering at  will round each and every part of the garden except, of course, such parts as comprise flower beds, or are laid out for some other purpose, which renders walking impossible or unsuitable. We doubt, nevertheless, whether the right to use and enjoy a garden in this manner can with accuracy be said to constitute a mere jus spatiandi. Wandering at large is of the essence of such a right and constitutes the main purpose for which it exists. A private garden, on the other hand, is an attribute of the ordinary enjoyment of the residence to which it is attached, and the right of wandering in it is but one method of enjoying it. On the assumption, however, that the right now in question does constitute a jus spatiandi, or that it is analogous thereto, it becomes necessary to consider whether the right which is in question in these proceedings is, for that reason, incapable of ranking in law as an easement. Farwell J twice indicated that in his opinion the jus spatiandi is an interest which is not known to our law; and we think it is true to say that this principle has been widely accepted in the profession without sufficient regard being had, perhaps, to the exact language in which Farwell J expressed himself or the circumstances in which his view of the matter was propounded. The first of the two cases in which he intimated that a jus spatiandi is not known to the law was International Tea Stores Co v Hobbs. The actual decision in that case had nothing to do with a jus spatiandi, nor did the facts which were before the learned judge require of themselves any pronouncement by him on that subject. The question which was in issue was whether the right or privilege of using a way by a lessee over the land of his lessor passed under the Conveyancing Act, 1881, s 6, on a subsequent conveyance to the lessee of the demised property, notwithstanding that the enjoyment of the way had been wholly permissive and precarious. That being the issue it is not surprising that the arguments of counsel on both sides, as reported in the Law Reports, did not travel outside it. It appears, however, from Farwell J’s judgment that, in the course of Lord Coleridge’s submission on behalf of the defendant that the user by the lessees of the way had been merely permissive and precarious and was, therefore, outside the scope of s 6, he had introduced a right of user of a park and gardens as an illustration of the argument which he was presenting. Farwell J in his judgment described and dealt with the illustration as follows ([1903] 2 Ch at p 171): But then Lord Coleridge says that such use was wholly permissive … In all these cases the right of way must be either licensed or unlicensed. If it is unlicensed it would be at least as cogent an argument to say ‘True you went there, but it was precarious, because I could have sent a man to stop you or stopped you myself any day.’ If it is by licence, it is precarious of course in the sense that the licence, being ex hypothesi revocable, might be revoked at any time; but if there be degrees of precariousness, the latter is less precarious than the former. But, in my opinion, precariousness has nothing to do with this sort of case, where a privilege which is by its nature known to the law — namely, a right of way — has been in fact enjoyed. Lord  Coleridge’s argument was founded upon a misconception of a judgment of mine in Burrows v Lang ([1901] 2 Ch  502), where I was using the argument of precariousness to show that the right which was desired to be enjoyed there was one which was unknown to the law — namely, to take water if and whenever the defendant chose to put water into a particular pond; such a right does not exist at law; but a right of way is well known to the law. The instance suggested by Lord Coleridge in his argument illustrates my meaning: he put the case of a man living in a house at his landlord’s park gate, and having leave to use and using the drive as a means of access to church or town, and to use and using the gardens and park for his enjoyment, and asked, Would such a man on buying the house with the rights given by s 6 of the Conveyancing Act acquire a right of way 945

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over the drive, and a right to use the gardens and park? My answer is ‘Yes’ to the first, and ‘No’ to the second question, because the first is a right the existence of which is known to the law, and the latter, being a mere jus spatiandi, is not so known. Farwell J was a judge of great learning and all his judicial utterances merit and are accorded more than ordinary respect, but in his, as in all, judgments more weight should be attached to that which was necessary for the decision of the case than to that which was merely obiter. It is plain that Farwell J’s reference, in the passage quoted, to the jus spatiandi formed no necessary part of his judgment and it is to be noted that he did not refer to any authority in support of it. It must, nevertheless, be conceded that in the view of a very learned judge the right of a man to use, as appurtenant to his own property, the gardens and park of another is a right the existence of which is not known to the law, even though that right be expressly granted. The second of the two cases in which the jus spatiandi was considered by Farwell J was A-G v Antrobus. That was an action which was brought by the Attorney-General at the relation of the chairman of the local parish council and certain gentlemen interested in the preservation of public rights in open spaces and footpaths against the then owner of the land on which Stonehenge stands, for an order for the removal of certain fences which the defendant had erected round Stonehenge. It will be seen accordingly that the object of the action was to establish public, as distinct from private, rights; and the public rights, as so asserted, were to have free access to Stonehenge by means of roads running up and through the same, such rights being founded on an alleged trust, created by a lost grant or declaration or by lost statute, for the free user by the public of Stonehenge as a place of resort and for the free access of the public thereto by means of the said roads. At the trial, as appears from the judgment of Farwell  J the plaintiffs produced no evidence that Stonehenge was subject to a trust for its free user by the public, but asked the court to presume a lost grant or statute because for many years past the public had been in the habit of visiting the place. This the learned judge declined to do. He found as a fact ([1905] 2 Ch at p 201) that there had, for many years past, been a large amount of traffic to Stonehenge as the end and object of the journey; that the journeys had been made for the purpose of visiting the stones and of staying there for such period as each visitor might find pleasant for the purposes of inspection, instruction and general enjoyment. In refusing to presume a lost grant or statute conferring on the public the right of free user of Stonehenge the learned judge said ([1905] 2 Ch at p 198): It is impossible for the court … to make any such presumption as is suggested. The public as such cannot prescribe, nor is jus spatiandi known to our law as a possible subject-matter of grant or prescription: ‘and for such things as can have no lawful beginning, nor be created at this day by any manner of grant, or reservation, or deed that can be supposed, no prescription is good’. (Quoted by Lord Selborne in Dalton v Angus (1881) (6 App Cas at p 795), from Potter v North (1669) (1 Vent 387).) He also said (ibid, at p 199): … the right of walking around and inspecting the stones is not one which could be the subject-matter of a grant … Later in his judgment, when considering whether certain of the tracks which led to Stonehenge were public highways, he said (ibid, at p 205): The whole object of the journeys was to see the stones, and as there can be no legal right of visiting, walking about, and inspecting the stones in the public, these visits must be deemed to have been by the permission of the owner … He also said ([1905] 2 Ch at p 206): Further, the tracks which lead into the circle cease there and do not cross, and the public have no jus spatiandi or manendi within the circle. The claim, therefore, is to use tracks which in fact lead nowhere. 946

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Now it is quite true that in this judgment Farwell J said that the jus spatiandi is not ‘known to our law as a possible subject-matter of grant or prescription’ and that this formula is on its face wide enough to exclude the purported grant in express terms of such a right to a purchaser as appurtenant to his property. But no such grant was in question in the case, which was solely concerned with the alleged rights of the public as a whole; and in our judgment the learned judge was addressing his mind to those rights and to those alone, and he held that as they could not be the subject-matter of a grant he was unable to presume a lost grant which purported to create them. He held also that a jus spatiandi cannot be acquired by public user as an easement and this is clearly so if only for the reason that there can be no dominant tenement to which the easement could be said to be appurtenant. It does not necessarily follow from this, however, that no such jus could be acquired by individuals by prescription and still less does it follow (which is the material point for present purposes) that no such jus could be created in favour of an individual for the better enjoyment of his property by a grant which was express in its terms. As in International Tea Stores Co v Hobbs so in A-G v Antrobus Farwell J refrained from citing authority in support of his observations with regard to the jus spatiandi. It will be noted that in both of these cases the learned judge said that a jus spatiandi is ‘not known to our law’ and the question arises what precisely he meant by using that phrase. He  may have meant (a) that it was unknown to our law because it found no place in the Roman law of servitudes; (b) that it was repugnant to the ownership of land that other persons should have rights of user over the whole of it; (c) that the law will not recognise rights to use a servient tenement for the purposes of mere recreation and pleasure, or (d) that such rights are too vague and uncertain to be capable of definition. Which of these meanings the learned judge had in mind it is difficult to know; and, indeed, he may have had some other meaning. If, however, one attributes to the phrase ‘not known to the law’ its ordinary signification, ie, that it was a right which our law had refused to recognise, it is clear, we think, that he would at least have expressed himself in less general terms had his attention been drawn to Duncan v Louch. That case was not, however, cited to him in either International Tea Stores Co v Hobbs or in A-G v Antrobus for the sufficient reason that it was not relevant to any issue that was before the learned judge on the questions which arose for decision. There is no doubt, in our judgment, but that A-G v Antrobus was rightly decided; for no right can be granted (otherwise than by statute) to the public at  large to wander at  will over an undefined open space nor can the public acquire such a right by prescription. We doubt very much whether Farwell J had in mind, notwithstanding the apparent generality of his language, a so-called jus spatiandi granted as properly appurtenant to an estate; for the whole of his judgment was devoted to a consideration of public rights, and although this cannot be said of the observations as to the gardens and park in International Tea Stores Co v Hobbs the view which he there expressed was entirely obiter on a point which was irrelevant to the case and had not been argued. Inasmuch, therefore, as  this observation is unsupported by any principle or any authority that are binding on us, and is in conflict with the decision in Duncan v Louch we are unable to accept its accuracy as an exhaustive statement of the law and, in reference, at least, to a case such as that now before the court, it cannot, in our judgment, be regarded hereafter as authoritative. Duncan v Louch, on the other hand, decided more than a hundred years ago but not, as we have observed, quoted to Farwell J in either of the two cases which we have cited, is authoritative in favour of the recognition by our law as an easement of a right closely comparable to that now in question which, if it involves in some sense a ‘jus spatiandi’, is nevertheless properly annexed and appurtenant to a defined hereditament. Duncan v Louch was an action brought by the plaintiff as owner of premises, No 15 Buckingham Gate, Adelphi, London, on account of obstruction by the defendant of what the plaintiff alleged to be a right of way from Buckingham Gate over or across Terrace Walk to a watergate on the Thames River. On the trial before Wightman J it 947

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was objected on the defendant’s part that, though the plaintiff had alleged a right of way from terminus to terminus, the right which he had in fact proved under his documents of title was a right to use Terrace Walk for the purposes of pleasure, that is, to pass and repass over every part of the close. The objection was overruled by the trial judge. The plaintiff showed cause before the Queen’s Bench why the rule nisi obtained by the defendant for a verdict in his favour should be discharged; and the matter, as so often was the case in like circumstances, strictly turned on the narrow question whether the alleged variance between the allegation and the proof was fatal to the plaintiff’s case. The decision in the plaintiff’s favour was to the effect that, although the right proved exceeded the allegation, nevertheless the former necessarily embraced the latter. The argument on the defendant’s part thus appears from the report (6 QB at p 910): If this be a right of way, it is a right only of using the way for the purpose of passing from terminus to terminus, and not of walking for pleasure between the intermediate points. But the right is in fact one of a kind altogether different. It is like the privilege which the builder of a square, who reserves the centre for a garden common to all the  houses, grants to the owners and tenants of the houses of walking about the garden, on condition of keeping it in order. Whether Mr Peacock’s argument assumed that such a right as he had cited by way of analogy was one recognised by the law, Lord Denman CJ in his judgment, in terms, so held. He said (ibid, at p 913): I think there is no doubt in this case. Taking the right, as Mr Peacock suggests, to be like the right of the inhabitants of a square to walk in the square for their pleasure … I cannot doubt that, if a stranger were to put a padlock on the gate and exclude one of the inhabitants, he might complain of the obstruction … Similarly, Patteson J (ibid): I do not understand the distinction that has been contended for between a right to walk, pass and repass forwards and backwards over every part of a close, and a right of way from one part of the close to another. What is a right of way but a right to go forwards and backwards from one place to another? And Coleridge J in his judgment, described the right proved as an ‘easement’. The reasoning of the decision and the circumstances of the case, no less than the language used, particularly by Lord Denman CJ involve acceptance as an easement of a right such as that with which, according to our interpretation of the effect of the relevant deeds, we are here concerned. … we agree with Danckwerts J in regarding Duncan v Louch as being a direct authority in favour of the owners of the houses. It has never, so far as we are aware, been since questioned, and we think it should, in the present case, be followed. For the reasons which we have stated, Danckwerts J came, in our judgment, to a right conclusion in this case and accordingly the appeal must be dismissed.

14.12  The conclusions of Evershed MR in Re Ellenborough Park were raised again by the Victorian Supreme Court in Riley v Penttila [1974] VR 547, a case examining recreational rights attached to a park reserve. The case is extracted below.

— Riley v Penttila — [1974] VR 547 Facts: A subdivision created a number of allotments that abutted onto an area described as ‘Outlook Park Reserve’. The purchaser of each allotment acquired a transfer of the fee simple along with ‘liberty for the said transferee, his heirs, executors, administrators and transferees, registered proprietor or proprietors for the time being of the said lot … and his and their tenants 948

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for the time being thereof … to use and enjoy (in common with the registered proprietor or proprietors for the time being of all or any other of lots 27 to 41 both inclusive on the said plan of subdivision) the land shown as Outlook Park Reserve … for the purposes of recreation or a garden or a park but subject to such rules and regulations respecting the user and enjoyment for the purposes aforesaid of the said Outlook Park Reserve as shall from time to time be made by me my heirs executors administrators until I or they shall have transferred or caused to be transferred all of such last-mentioned lots …’. The subdivider, Keam, expressly conferred the benefit of this right to each purchaser. It eventuated that this land was used for a range of different activities. A portion of it was fenced off for a tennis court. Other areas were used as a garden and playground area. In 1971 the defendants purchased one of the allotments abutting a fenced-off garden area. They subsequently began excavating that section of the reserve to install a swimming pool. A total of 18 neighbouring landowners, each holding the benefit of an express right conferred to them, objected to the swimming pool. They claimed that they were entitled to use and enjoy the reserve in common with each other and that the actions of the defendants interfered with this right. The defendants counterclaimed by asserting that they held the disputed area pursuant to an adverse possession claim. Gillard J considered, inter alia, whether the recreational right was an easement right. Gillard J: Three questions emerge for determination: (a) What was the nature of the right or liberty granted by Keam to his transferees? (b) Are the defendants entitled to be registered as the proprietor of the disputed area? (c) Do any and which of the plaintiffs have any and what right at the present time over the disputed land? The last question may be worded in the alternative in this way. Assuming the right to be in the nature of an easement, (i) has the easement been impliedly released or abandoned quoad Keam, quoad the defendants? (ii) has the easement been otherwise extinguished? (iii) despite any proof of abandonment or extinguishment, what is the effect of the right still appearing on the certificate of title of each of the plaintiffs, other than the Browns and the Campbells? If any plaintiff’s right should be established against the defendants, then there may be an ancillary question as to his entitlement to relief claimed by him. The defendants, it will be remembered, have pleaded both laches and acquiescence.

Liberty to use and enjoy the reserve It was submitted on behalf of the defendants that the grant was so indefinite, indeterminate and uncertain as to be unenforceable as an easement: cf Pwllbach Colliery Co Ltd v Woodman per Lord Summer. At most it was said it was a licence granted to the original transferee and was never intended to be appurtenant to the proprietary right transferred by Keam of each allotment. First it pointed out there were a variety of descriptions in the grant. In some cases ‘the liberty’ to use the reserve was to be enjoyed with the registered proprietors of lots 23 to 44 and in others 27 to 41. The rights to make rules and regulations were given to a majority of those lot holders after all the lots had been transferred. Where there was this variation in the number of lot holders no regulations could validly be made to cover all lots. But Keam made no rules and regulations. His grant could not depend on the issue of rules by him and would be quite unaffected by his failure to make rules. The grant to each plaintiff was made subject to such rules and regulations as are specified in the instruments of transfer to the predecessor of such plaintiff. But if there were no rules and regulations made, the grant to such plaintiff would not be affected by such absence. It simply meant that the grant was made to each transferee and, in terms, was quite unequivocal as to the right or privilege to use the reserve. It simply meant that the grant was not qualified until rules were made by the specified person or persons to regulate the control of the reserve. But it was urged that to make a grant an effective one it must be controlled by rules. I cannot accept this submission. The only possible qualification of 949

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the grant was that the enjoyment was to be shared, and therefore, the enjoyment should be of a reasonable character. The grant in relation to any plaintiff must be considered with respect to ‘the liberty’ being more limited in some cases than in others, in that the number of persons with whom the liberty is to be shared may be expressed to be greater in some than in the other cases. But each plaintiff’s right must be considered separately. I repeat, although this is a joint action, it is really some seventeen or eighteen actions heard together, and each plaintiff’s grant must be interpreted in the light of that fact. A grant to a particular plaintiff cannot be affected by the fact that a grant to another plaintiff may be different. So far as the disputed land was concerned, Brigadier Moran and the predecessors of each of the other plaintiffs were granted the ‘liberty’ to use the disputed area as a part of the defined area of the reserve. It was then submitted that the grant lacked the characteristics of an easement. In Cheshire’s Modern Law of Real Property, 11th ed, p 503, it is pointed out there are four characteristics that must be present to constitute an easement. First, there must be a dominant and a servient tenement; secondly, an easement must accommodate the dominant tenement; thirdly, the dominant and servient owners must be different persons; fourthly, a right over land cannot amount to an easement unless it is capable of forming the subject matter of a grant. Now in this case the first and third characteristics are present, but it was submitted by the defendants that the second and fourth features were missing. Despite Mr Waldron’s attempt to distinguish the case and to emphasise the features in that case not present in the present proceedings, these submissions fly in the face of the decision of the Court of Appeal in Re Ellenborough Park; see also George Wimpey & Co Ltd v Sohn. In Commonwealth v Registrar of Titles, Griffith, CJ, said: ‘As long ago as 1852 Lord St Leonards said in Dyce v Hay: “The category of servitudes and easements must alter and expand with the changes that take place in the circumstances of mankind”.’ (See  also Attorney-General of Southern Nigeria v  John Holt & Co (Liverpool) Ltd, Ward v Kirkland.) This view was adopted by the Court of Appeal in the Ellenborough Park case, when, as here, a challenge was made to the grant to use a pleasure ground, in that two characteristics were alleged to be missing. In that case in a building scheme the vendor had granted ‘also the full enjoyment … at all times hereafter in common with the other persons to whom such easements may be granted of the pleasure ground … but subject to the payment of a fair and just proportion of the costs charges and expenses of keeping in good order and condition the pleasure ground’. It was said there the right granted was too wide and vague and constituted mere rights of recreation to people possessing no quality or utility to the land conveyed to the grantees. A similar argument has been advanced in the present case for the defendants. But for the reasons given by the Court of Appeal for rejecting that argument in the Ellenborough Park case, so I reject the argument here. First, the grant here is in much more explicit terms than in the Ellenborough Park case. In my opinion, there is greater certainty to be assigned to the expression ‘the liberty to enjoy the reserve for the purpose of recreation or a garden or a park’ than the expression ‘full enjoyment of a pleasure ground’, particularly where the metes and bounds of the reserve are so explicitly set out in the lodged plan. As a matter of interpretation, the Court of Appeal said that what was granted by the use of the words ‘enjoyment of a pleasure ground’ was impliedly for the purpose of the grantees enjoying a large private garden with their modest curtilages around their houses. No such implication is required to be drawn in the present case. The purposes of the grant are clearly stated. ‘The liberty’ was given in respect of each of the lots on the registered plan of subdivision in relation to the reserve clearly defined on such plan of subdivision, and unlike the Ellenborough Park case, the lots of the plaintiffs, other than of the Campbells and the Browns, abutted onto the reserve proper and had obvious scope for enjoyment as a garden or a park or any form of recreation appurtenant to the occupation of the lots transferred. Indeed, Mr Pizzey senior showed how the right could be enjoyed with an occupation of a lot. Other lot holders, as Brigadier Moran pointed out in his evidence, did not erect rear fences to cut off their lots from the reserve. There was a 950

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clear physical connexion between the right over the reserve and the premises of the relevant house owners. The use of the reserve for specified purposes accommodated and served the lots abutting onto the reserve. To adopt the words of Romer LJ, in Miller v Emcer Products Ltd: There is no doubt as to what was intended to be the dominant and servient tenements respectively and the right was appurtenant to the former and calculated to enhance its beneficial use and enjoyment. Secondly, the Court of Appeal noticed that the position of the grant of the use of the pleasure ground in the conveyance followed immediately after the grant of the easements of way and drainage. In the original transfers from Keam a similar position obtained in this case. It is true, as Mr Waldron was at pains to point out, in the Ellenborough Park case the right was expressed to be enjoyed ‘with the other persons to whom such easements may be granted’ thereby indicating that the grantor intended by the expression to create an easement. While this might have some effect on their Lordships’ interpretation of the provision, nevertheless the descriptive words of the grant could not convert into an easement what was never an easement in law, because of, say, the absence of one of the features referred to above. Thirdly, although in the Court of Appeal decision it was accepted that because of the nature of the covenant entered into by the vendor there could be implied a restrictive covenant imposed upon the owner as to his user of the pleasure ground, and accordingly, the benefit and burden of such covenant would run with the land, nevertheless in this case, by the instrument of transfer Keam expressly granted the privilege to his named transferee ‘his heirs executors administrators and transferees registered proprietor or proprietors for the time being of lots numbered so and so and his and their tenants’. These words, so far as they could go, indicated that the right was not intended by Keam to be restricted to and personal to the transferee, but was also intended to benefit the successors in title of the lot transferred. On the other hand, there was no suggestion in the building scheme that Keam intended to dispose of the fee simple of the reserve. And the creation of each easement was noted on his title. Having regard to the verbiage of the instrument of transfer by Keam the grant was intended not for use only of the transferee personally, but was intended to be useful and accommodating to the occupation of the lot transferred. The Court of Appeal pointed out it was a question of fact whether or not the right conferred was connected with the normal enjoyment of the property. Having heard how the reserve was and is being used and of its potentiality for the enjoyment of local residents entitled to use it in the future, I am satisfied there was a direct nexus between the right and the occupation and enjoyment of the lots transferred. It was and is useful and accommodating to the occupation of the lots transferred. Turning to the other characteristic alleged to be missing, Cheshire at p 506 stated: ‘Every easement must originate in a grant, either express, implied or presumed. It follows from this that no right can have the status of an easement unless it is the possible subject matter of a grant. This in turn requires that its nature and extent should be capable of exact description. Its sphere of operation must be precise and certain. If it is too vague and so indeterminate as to defy precise definition it cannot rank as an easement.’ This matter has already been touched upon but at the risk of unnecessary repetition, it is pointed out there was a creation of a right by the instrument of transfer, which when registered, had the same efficacy as if made under seal, and shall be as valid and effective to all intents and purposes as a deed duly executed and acknowledged: see s 40(2) of the Transfer of Land Act 1958. In fact, therefore, the instrument when registered may be said to be a grant of a right. Can such type of right form the subject of a grant so as to constitute an easement in law? The Ellenborough Park case has established that a right of enjoyment in a pleasure ground could be the subject matter of an easement. In my opinion, the right conferred in the present case is even stronger. It is a positive easement which gave the transferees and their successors entitled to the various lots a right to do something on or to Keam’s land: cf Lord Denning MR, in Phipps v Pears. In terms 951

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the nature of the right granted here and the area over which it was granted was more certain than the rights considered in the Ellenborough Park case or for that matter in the case of Miller v Emcer Products Ltd; Heywood v Mallalieu; Maurice Toltz Pty Ltd v Macey’s Emporium Pty Ltd; or Treweeke v 36 Wolseley Road Pty Ltd. It was submitted, however, that the right conferred by Keam was so indeterminate as to defy precise definition. It was urged the enjoyment of the area for recreation was the kind of jus spatiandi which the Court of Appeal suggested in the Ellenborough Park case could not form the subject of an easement. In my opinion, enjoyment of a defined area for recreation not given to the public, but given to a limited number of lot holders is just as certain as the rights referred to in the above cases, or the right to walk for pleasure referred to in Duncan v Louch, which was approved in the Ellenborough Park case by the Court of Appeal [1956] (Ch 131) at 184–185. Having regard to the decision of the Court of Appeal on the right there granted, it seems to me that the right set out in the instrument of transfer to each of the transferees from Keam was sufficient to found an easement. It was more than a mere personal advantage to the transferee of the lot. It was capable of being the subject of a grant at law. In fact, as already noticed, it was in form a grant at law. For gracious living it has been found for a very long time, as the English authorities well illustrate, necessary to have space in areas around a house for the purposes of a garden and recreation, and even of a park. Undoubtedly, it adds to the enjoyment of the occupation of such house property. Although each block here, according to modern standards, would be regarded as a large allotment, nevertheless it would undoubtedly add to the enjoyment and occupation of each block to have the added liberty of using the contiguous large private area, closed to the public, for the purpose of recreation, garden, or a park. Accordingly, so far as it is necessary to find as a fact I am satisfied on the evidence that the grant constituted a right in the nature of an easement appurtenant to and for the enjoyment of the lots transferred. In so far as it is a matter of law, the grant, in my opinion, possessed all the four characteristics referred to by Cheshire.

Commentary 14.13 In Re Ellenborough Park [1956] Ch 131, Evershed MR emphasised the importance of rights to walk and enjoy park areas. His Honour concluded at  143 that on the facts, the right was a beneficial attribute, appurtenant to the surrounding homes and that: Its use for the purposes, not only of exercise and rest but also for such normal domestic purposes as were suggested in argument — for example, for taking out small children in perambulators or otherwise — is not fairly to be described as one of mere recreation or amusement, and is clearly beneficial to the premises to which it is attached in.

The subsequent decision in Riley v Penttila makes it clear that recreational rights are not necessarily void for vagueness. As in Re Ellenborough Park, the court in Riley v Penttila rejected the idea that recreational rights are too wide and vague to constitute easement rights. Gillard J emphasised the utility of the recreational rights granted by Keam. His Honour noted that a right to enjoyment of a specific area for recreational purposes, which has been given to a defined number of landholders and that benefits a particular area of land, is capable of forming the subject matter of a grant. In this respect his Honour at 552 distinguished the grant in Riley v Penttila from that in Re Ellenborough Park noting the explicit nature of the words — ‘the liberty to enjoy the reserve for the purpose of recreation or a garden or a park’ as opposed to the broader, less specific wording used in Re Ellenborough Park, ‘full enjoyment of a pleasure ground’. His Honour also distinguished Re Ellenborough Park by suggesting that the physical connection between the right over the reserve and the land held by the relevant owners was more direct and that these two factors in combination precluded any potential uncertainty. Further, Gillard J commented on the 952

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importance of recreational rights ‘for gracious living’, noting that it is ‘necessary’ to have space for a garden and recreation and that an extended private recreational facility adds significant enjoyment and benefit to a residence. In City Developments Pty Ltd v  Registrar General (2000) 135 NTR 1, Thomas J, after examining Riley v Penttila, concluded that there was no reason in law why an easement could not be granted for recreational purposes. His Honour noted at  [39] that ‘the test for an easement is whether the use for recreational purposes enhances the enjoyment of adjoining properties even though separated by other land, provided it confers some benefit on the dominant tenement’. The facts of both Re Ellenborough Park and Riley v Penttila involved the express grant of recreational rights. In Mulvaney v Jackson [2002] EWCA Civ 1078, Latham LJ considered whether recreational rights could arise under a prescriptive easement. His Honour made the following observations at [23]: As to the fourth characteristic, the Court of Appeal in In re Ellenborough Park held that an easement to use land as a communal garden was capable of forming the subject matter of a grant. However there is no doubt that there is a real difference between a case in which the easement claimed is said to have been the subject matter of an express grant, and one which is said to arise by reason of prescription or under s 62 of the Law of Property Act 1925. In the former case, the issue is simply one of construction of the grant. And the court will undoubtedly lean in favour of the creation of an easement if the intention of the parties was clearly to that end. In the latter case, the court has the more difficult task of assessing the evidence as to alleged use in order to determine whether the claimed right has been established. But if it is clear from that evidence that use has been made of the land for the requisite period which is capable of amounting to an easement, it seems to me that a court should not be deflected from declaring the existence of an easement which can be sensibly formulated by the fact that, of necessity, its parameters may not be so clearly defined as they could be in a deed.

Subsequently, in Casuarina Rec Club Pty Ltd v  The Owners Strata Plan 77971 [2011] NSWCA 159 at [77], Macfarlan J approved of Re Ellenborough Park, noting that the fact that a right enhances the value of a property was relevant but not decisive. In Laming v  Jennings [2018] VSCA 335, Jennings claimed inter alia, a prescriptive easement, as to part of the property of an adjoining neighbour, Laming. Jennings used the land between 1986 and 2015 for activities that included mowing and maintaining the grass, removing and planting trees, playing games, using furniture, and erecting a clothesline. The land owned by Laming was derived from a subdivision of a larger block that was originally owned by Telstra. Laming acquired the land in 2015. The trial judge found in favour of Jennings and upheld the prescriptive easement. One of the grounds of appeal raised by Laming was that the easement was a recreational easement that was too vague and wide to form the subject matter of an easement. The Court of Appeal upheld the appeal, holding that a recreational right can form a valid easement but generally only over communal rather than private land. The court held that unilateral recreation rights over private land, which had no communal character, created the potential for inconsistency between the rights of recreation and the rights of ownership, particularly where the recreational rights were not clearly articulated. Unclear rights cannot be validated as property because certainty as to rights and interests is one of the central purposes of property law. Kyrou, McLeish and Niall JJA stated at [150]–[154]: … the easement differs from the easements for use in common with other rights holders recognised in the cases. The difference is that, here, the easement permits use in circumstances where the only other party with rights in respect of the land is the owner. Moreover, the 953

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owner has full rights of ownership, subject to the easement. The potential for inconsistency between the rights of recreation and ownership gives rise to a need to know with certainty what activities or uses of the land are permitted by the easement. Certainty as to the rights and interests attaching to land is one of the central purposes of property law, and the law will not recognise an easement which undermines that purpose. While it is established that rights to use a communal space devoted to recreation are sufficiently certain, there is no case of which we are aware which has upheld a unilateral right of recreation of the kind found here. As set out above, the judge used the term ‘recreation’ to describe the use which the Howards and the Jennings made of the disputed land after 1986. We have found that the term was not intended to encompass use of the land as a backyard. We have also observed that it is undesirable that the terms of an easement require resort to extrinsic material for their interpretation. In those circumstances, ‘recreation’ must have its ordinary meaning. The cases to which we have referred show that this is capable of defining a valid easement. But even if ‘recreation’ identifies sufficiently what it is that the holder of the present easement is entitled to do, falling short of use as a backyard, it is not at all clear how that entitlement relates to the rights of the applicant as owner. As the matter proceeded before us, counsel dealt with hypothetical questions about potential areas of doubt and dispute in the enjoyment of the granted easement. The scope for debate about the respective rights of the parties in various circumstances was starkly illustrated. For example, who would have priority if both owners wished to hold a party on the disputed land? Who may decide what is planted or stored on, or removed from, the land? Can either party camp on the land? It is true that there may also be scope for disagreements and uncertainty between an owner of land and the holders of easements for communal recreation on that land. However, the potential for such issues to arise is significantly limited by the circumstance that the communal nature of the space as one for recreation is intrinsic to its essential character. That provides an important starting point for deciding any dispute between the owner and common holders of the right, and identifies the essential restriction on the owner. It therefore helps to define the easement itself, and the extent to which it limits the rights of the registered proprietor of the land. In the case of a unilateral easement for recreation, that is not the case. There, the owner is not required to ensure that the land remains imprinted with the character of a communal recreational space, but is entitled to use it for myriad non-recreational purposes. That entitlement may give rise to all manner of issues about the scope of the easement.

In order for a right to be capable of forming the subject matter of an easement, it is also necessary for the right to be reasonably proportionate, taking into account the nature of ownership rights of the servient tenement holder. In  Clos Farming Estates  the relevant right in issue affected nearly 85 per cent of the servient tenement. The court concluded that the core determinant was the extent to which owner of the servient tenement could to use the servient tenement. Santow JA concluded at [38], that the right in issue ‘effectively precluded [the servient owners] from engaging in any real farming or agricultural type activities attendant on its possession’. As such, the residual rights of the servient owners were ‘totally subordinated to the over-arching rights of Clos Farming’: at  [46]. Consequently, when the right was placed in context with the restrictions that applied to the entirety, ‘the servient owner’s rights were so attenuated that they no longer met the description of exclusive possession’. This argument was raised subsequently in RegistrarGeneral of New  South Wales v  Jea Holdings (Aust) Pty Ltd [2015] NSWCA 74,  where the respondent had contended that the grant of use as a car park deprived the owner of the servient tenement the effective use of the land and therefore the right could not be held to constitute a grant of easement. Bathurst and Beazley JJA rejected this claim and distinguished the findings on the facts in Clos Farming. Their Honours held that if the 954

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interference with possession amounts to an effective interference with ownership rights, that may be sufficient to deny the validity of an easement, however on the facts that had not occurred because Jea Holdings continued to enjoy a very substantial use of the land. Jea  Holdings retained the right to use the servient tenement for parking for itself, its servants, agents and invitees, and it could be added for matters such as advertising on fencing and so on. It also held the valuable right to use both the airspace above and the subterranean land below. Given this, the Court of Appeal concluded that the right in issue was capable of forming the subject matter of an easement because it was proportionate and did not fundamentally deprive the servient tenement owners of their exclusive possession.

Ancillary rights 14.14  The rights that accompany the easement will include not only the primary right granted, but all ancillary rights reasonably necessary for the effective and practical functioning of the primary right: Todrick v  Western National Omnibus Co Ltd [1934] Ch  561. To come within the definition of an ancillary right it must be established that the easement is necessary rather than convenient. Ancillary rights may not qualify as an easement in their own right. However, in combination with the primary right, they may be incorporated into the overall scope of an easement. The importance and scope of ancillary rights to the effective functioning of the easement was outlined by the House of Lords in Moncrieff v Jamieson (2007) 1 WLR 2620 at [26] per Lord Hope: The essence of a servitude is that it exists for the reasonable and comfortable enjoyment of the dominant tenement. Whether it originates in writing by means of an express grant or is to be inferred from other provisions not expressly creating a servitude, practical considerations may indicate that it will carry with it other rights which, although they would not qualify on their own as servitudes, are necessary if the dominant proprietor is to make reasonable and comfortable use of the property in favour of which it was granted.

On the facts of Moncrieff v Jamieson the issue was whether a right to load and unload vehicles on a servient tenement also included a right to park on that servient. One of the potential difficulties with this argument lay in the fact that parking on the servient tenement could be characterised as a right of exclusive possession. Lord Hope concluded that ancillary rights had to be within the scope of contemplation when the vehicular right was created and that on the facts, given the unusual fact that parking was not possible on the dominant tenement, this type of ancillary right did come within the application of the easement. It is clear, however, that the ancillary right should not interfere with the underlying ownership rights of the servient tenement owner with respect to the land. In Brydall v The Owners of Strata Plan 66794 (2009) 14 BPR 26,831, McDougall J concluded that a ‘full and free’ right to park cars on the site of the easement could not be exercised in circumstances where the owner of the servient tenement also used the land in question for parking. His Honour stated at  [18] that, ‘To the extent that the owner of the servient tenement or those authorised by it park vehicles on the area of land in question, the full and free right granted by the easement is cut down. Its wide import is constrained.’5

5. See also Berryman v Sonnenschein [2008] NSWSC 213 at [19] per Einstein J; and The Owners of East Fremantle Shopping Centre West Strata Plan 8618 v Action Supermarkets Pty Ltd (2008) 37 WAR 498 at [65] per Buss JA noting that the ‘right to park’ is a new, but valid easement. 955

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Different Forms of Easement New easement rights 14.15  Easements may arise over a variety of different forms of right. That is, provided the

rights in issue comply with the characteristics set out above, are validated in accordance with the formality requirements for the creation of legal and equitable interests in land, and are capable of being made the subject of an easement. Common easement rights include the right of way, the right of support, the right of drainage, and rights relating to the flow of light and air. However, the categories are not closed. New easement rights may be created. As observed by Lord St Leonards LC in Dyce v Lady Hay (1852) 1 Macq 305 at 312: ‘The category of servitudes and easements must alter and expand with the changes that take place in the circumstances of mankind’. In Commonwealth v Registrar of Titles (Vic) (1918) 24 CLR 348, Griffith CJ considered whether a right to the uninterrupted access and enjoyment of light and air could constitute an easement. While old authority sets out that there is no natural right to access to air coming across another’s property (Webb v  Bird (1863) 13 CBNS 841) it has been held that an easement of air through a defined channel is acceptable: Bass v  Gregory (1890) 25 QBD 481 (a ventilator shaft for a cellar); and Cable v  Bryant [1908] 1 Ch  259 (aperture in a stable). Griffith CJ in Commonwealth v  Registrar of Titles (Vic) (1918) confirmed this and specifically noted that the categories of new easement rights are not closed and that in light of modern knowledge, the right to a free passage of moving air and to the enjoyment of light is as important as a right to the free passage of running water. In this respect, his Honour noted at  353 that easement rights ‘must alter and expand with the changes that take place in the circumstances of mankind’ (quoting Dyce v  Hay (1852) 1 Macq HL 305 at  312). His Honour suggested that future rights may include rights for solar access. Such rights are increasingly significant with greater attention being given to renewable energy. There have, however, been difficulties in defining the scope and nature of solar easements. As noted by M E Hermann, ‘Solar Easements and Solar Access’ (1979–1980) 16 Willamette Law Review 303 at 304: ‘Practitioners and homeowners have encountered difficulties in determining the burdened area since the path of the sun curves across the sky and the angle of the curve varies with the season’. In some countries this has been dealt with through the introduction of specific legislative provisions: see, for example, in the United States, Virginia: VA code s 55,354, which requires a description of the vertical and horizontal angles expressed in degrees. Professor Bradbrook has argued, in, ‘Solar Access Law: 30 Years On’ (2010) 27 Environmental and Planning Law Journal 5; and Victorian Law Reform Commission Final Report: Easements and Covenants (2010) VLRC 22 at [2.33] that restrictive covenants are preferable for solar access as they can better regulate scope.6 Solar easements are a type of negative right that confers solar rights between dominant and servient owners by burdening the servient owner’s use of the property. They can prevent a servient owner from altering the property in a manner that blocks solar light from falling on all or a part of the dominant tenement. Solar easements are popular in the United States, where they have received legislative recognition requiring the rights to provide information regarding the size of the affected space, the manner of termination and compensation. These are important private rights that guarantee a solar corridor for the dominant tenement owner and compensation entitlements for the servient tenement owner. They are particularly important in a decarbonizing framework where renewable 6. See also P Babie, ‘How Property Shapes Our Landscapes’ (2012) 38(2) Monash Law Review 1. 956

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energy is gaining increasing traction. See: S C Bronin, ‘Solar Rights’ (2009) 89 Boston University Law Review 1217. In Australia, no legislation expressly allows for the creation of a solar easement. This means that any such easement must be created at common law. The only state to implement a rule against the recognition of a right to light is Western Australia. Section 121 of the Property Law Act 1958 (Vic) sets out that no right to access or use of light or air can be granted for a term exceeding 21 years without the consent of the Governor. It is extracted below: EXTRACT Property Law Act 1969 — s 121 121. Easement of light and air only by registered grant or instrument After the coming into operation of this Act no right to the access or use of light or air to or for any land shall be granted or be capable of coming into existence — (a) for a term exceeding 21 years, without the written consent of the Governor; and (b) in any case, unless the grant or other instrument creating the  right, is registered against the title to the servient tenement.

Climate change adaptation strategies are likely to trigger changes to existing property right frameworks and put pressure on the common law to reconfigure property rights. The future is likely to see the rapid evolution of property rights, such as the solar easement and the expansion liability rules connected to such natural resource adaptation. See further: J B Ruhl, ‘Climate Change Adaptation and the Structural Transformation of Environmental Law’ (2010) 40 Environmental Law 236.

Grants and reservations 14.16  An easement is usually created simultaneously with the grant of an estate in land. Thus, where a person purchases land from an owner or property developer requiring additional rights over adjoining or proximate land, an easement right may be created to complement the acquired land. Similarly, where a vendor sells land but retains adjoining or proximate land, an easement right may be reserved to complement the retained land. It is important to appreciate the distinction between the grant of an easement and the reservation of an easement. An easement will be granted where the owner of the servient tenement grants a right over that land to the owner of the dominant tenement in order to accommodate the dominant tenement. By contrast, an easement will be reserved where the owner of  the dominant  tenement reserves a right over land for him or herself when transferring the  servient tenement in order to further accommodate the dominant tenement. The distinction between the grant and the reservation is based upon the idea that when grantors seek to reserve grants, they are in control and should take care to reserve what they require, given that they are aware of what the land requires. On the other hand, grantees should not be subject to the same exacting requirements because they lack the same level of control. See further: G Taylor, ‘Easements Implied in a Grant: Away with Continuous and Apparent’ (2012) 38(2) Monash University Law Review 128.

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EXAMPLE An easement ‘grant’ A owns two adjoining blocks of land described as 1 and 2. A sells block 1 to B and retains block 2. When transferring block 1 to B, A also grants to B a right of way over the land he has retained (block 2) to further accommodate the land that B is acquiring (block 1). In effect, A transfers to B a fee simple over block 1 and the benefit of an easement against block 2. In this situation, B acquires a fee simple in block 1 and an easement grant against block 2.

EXAMPLE An easement ‘reservation’ A owns two adjoining blocks of land described as 1 and 2. A sells block 1 to B and retains block 2. When transferring block 1 to B, A also reserves to himself a right of way over the land he has sold (block 1) to further accommodate the land that A is retaining (block 2). In effect, A transfers to B a fee simple over block 1, encumbered by a right of way in favour of block 2. This means that A has a fee simple in block 2 and a reserved easement right against block 1.

Express easements and statutory powers 14.17  The easement is an incorporeal form of land interest and its creation is governed by the rules relating to the creation of property interests in land. Thus, where the easement is expressly created, the deed of grant or the transfer containing the reservation must be executed by way of a deed in order to be validated at law. (See Chapter 10 for a full discussion of the relevant requirements for the proper execution of a deed.) In most states a validly created easement will constitute a paramount interest that is unaffected by the registration of subsequent inconsistent interests. (See  Chapter 11 for a full discussion of the scope of protection conferred under the Torrens legislation in each state.) However, easements over Torrens title land may also be registered. For example, s 46 of the Real Property Act 1900 (NSW) sets out that easements may be created by the execution of an appropriate transfer form. Any such easement must be recorded on the folio of both the dominant and the servient tenement. Section 47 states that once the easement is registered, all the benefits of indefeasibility will follow. It is clear, however, that the registration of the dominant tenement will not in itself confer indefeasibility over any appurtenant easements. The easements must be registered separately and noted as an encumbrance on the registered title of the servient tenement holder. As noted by Brennan CJ in Parramore v Duggan (1995) 183 CLR 633 at 635: … the registered proprietor of land to which an easement is appurtenant has an indefeasible title to that land but not to the easement, so that the easement cannot be enforced unless the certificate of title of the registered proprietor of the servient tenement states that that title is subject to the easement or unless the easement falls within s 40(3)(e) of the Act.

Implied easements of necessity and common intention 14.18  Implied easements may arise as a result of necessity or common intention. In both of these situations, the failure to expressly grant or reserve an easement will not preclude it from being upheld because the easement is consistent with the implied intentions of the parties and/or is necessary for the proper use of the dominant tenement. 958

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Easements of necessity 14.19  An easement of necessity will arise whenever it is clear that an additional right over a servient tenement is necessary for the full enjoyment of the dominant tenement. The most obvious example of a ‘necessary’ easement is a right of way. Often, when adjoining land is sold, the land that is sold or the land that is retained requires a right of way in order to prevent it from being landlocked. If such an easement is not expressly created, it may be impliedly granted or reserved where the circumstances indicate that the parties impliedly intended a grant or reservation. In C J Gale, Gale on Easements, 1986 at [3-109], the easement of necessity is defined as follows: A way of necessity, strictly so called, arises where, on a disposition by a common owner of part of his land, either the part disposed of or the part retained is left without any legally enforceable means of access. In such a case the part so left inaccessible is entitled, as of necessity, to a way over the other part …

The easement of necessity is founded upon the implied intention of the parties rather than general public policy considerations: Nickerson v  Barraclough [1981] Ch  426; North Sydney Printing Pty Ltd v Sabemo Investment Corp Pty Ltd [1971] 2 NSWLR 150. Thus, the mere fact that land may end up being landlocked is not, in itself, sufficient to justify the implication of a right of way; an implied intention to grant or reserve such a right must be established. This raises a number of consequences. In the first place, the relevant intention must be assessed at  the date when the transfer of land has occurred. Second, intention cannot be unilaterally formed. It is not possible to infer an easement of necessity over land that has been acquired by adverse possession: Wilkes v Greenway (1890) 6 TLR 449. Third, the circumstances must indicate that the easement was absolutely necessary as opposed to being merely convenient or useful: Bolton v Clutterbuck [1955] SASR 253. Easements of necessity are based upon the assumption that the parties intended the easement because it was vital to the proper usage of the dominant tenement. Hence, an easement providing vehicle access to a property that already has pedestrian access will be unsuccessful under the ‘necessity’ ground because it cannot be said that such a right is imperative to the dominant tenement: MRA Engineering Ltd v Trimster Co Ltd (1987) 56 P & CR 1. Further, the requirement that the ‘necessity’ must arise at the point when the dominant tenement is acquired and not at some future date when the plans have changed and a new need arises means that the scope for assessing ‘necessity’ is restricted. 14.20  The scope and range of the easement of necessity was reviewed by the English Court of Appeal in Adealon International Proprietary Ltd v  London Borough of Merton [2007] All ER 225, which is extracted below.

—  Adealon International Proprietary Ltd v London Borough of Merton  — [2007] All ER 225 Facts: The claimant was the owner of freehold land, referred to in the proceedings as the red land. The area of the red land was approximately 525 square metres. The defendant council was the registered proprietor of land which lay to the north of and immediately adjacent to the red land. This was referred to as the green land. The area of the green land is approximately 3,237 square metres. The green land was bounded to the North by the ‘High Path’. The red land has no direct access to High Path, and cannot lawfully obtain access to the trunk road A24, without planning permission which has been consistently refused. Until 1989 the red and green land were in common ownership. The claimant claimed, inter alia, an implied right of way in order to access Merantun Way. Permission was given to access Merantun Way 959

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by the defendant in 2001. However, it became clear that planning permission would probably not be granted to allow such access. Consequently, the claimant had no legally enforceable right of access. The defendant council subsequently transferred the green land to Kempstone with no express reservation of any easement in favour of the claimant. In the absence of any reserved right of way, the red land became landlocked. The claimant argued that a reservation of way of necessity must, therefore, be implied. The trial judge argued that there was no basis for implying an easement over the council’s land to High Path, either as an ‘easement of necessity’ or on the basis of ‘common intention’ at the time of the 1989 transfer. As to the former, a detailed review of the authorities led her Honour to the conclusion that as a matter of law an easement of necessity could only arise where the land of one party to a transaction was wholly surrounded by the land of the other. Her Honour also held that there was no easement by common intention because the evidence indicated that it was not the common intention of the parties that the red land should have access to High Path over the green land. The principal intention was to retain and use the red land in a way which contemplated access to and egress from the land by way of the highway to the south. When the green and red land were split, there was of course no express reservation of easement and no evidence that anyone contemplated the need for this. The Court of Appeal concentrated on the issue of easement of necessity. Carnwath LJ: The Claimant (‘Adealon’) is the owner of a strip of land (‘the red land’), of about 525 square metres, lying along the A24 Merantun Way to the south. The Defendant council (‘the council’) owns the land adjacent and to the north (‘the green land’), which extends to about 3,237 square metres and is bounded on the north by another road, High Path. The red land has no direct access to High Path, and cannot lawfully obtain access to the trunk road A24, without planning permission which has been consistently refused. Until 1989 the red and green land were in common ownership. Adealon claims that, on the severance of the two plots at that time, it became entitled by operation of law to an ‘easement of necessity’ over the green land, to give it access to High Path. It further claims that the right of way is for both vehicular and pedestrian traffic. The judge (HH Judge Kirkham, sitting as a judge of the High Court) dismissed the claim to an easement of necessity. She indicated that, if she had upheld the claim, she would have determined that it was for vehicular and pedestrian traffic. In the appeal the former conclusion is challenged by the company, and the latter by the council. The proceedings had begun in August 2003, as a claim by the company for trespass by the council on the red land. However, by a compromise agreed immediately before trial, the other issues were settled, subject to the claim for damages for trespass, which were determined by the judge. There is no appeal from that decision. The only live issue before us relates to the claimed easement.

The history The judge made detailed findings as to the history. It had to be extracted largely from the documentary evidence, which does not appear to have been very complete. The only witnesses were Mr Manzoor Hussain, a director of Adealon, whose statement was accepted without crossexamination; and Mr Joy, an officer with the council, who gave evidence on the physical layout, and the planning history, and was ‘cross-examined very briefly, and on very limited points’. For present purposes it is sufficient to note the following points in the chronology, based on the judgment supplemented by Mr Hussain’s witness statement: i)

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From the mid-1980s, a company called Boastdean Ltd had owned a site including both the red and green land, together with land to the south which was part of a disused railway. There was a warehouse on the green land, used as a cash and carry store, with a hardstanding on the land behind it to the south. There was a U-shaped ‘in and out’ drive which ran around both sides and the rear of the building.

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(I note that a plan attached to the particulars of claim indicates that the southern part of the ‘drive’ adjoined what became the boundary of the red land. At this stage I shall proceed on that basis, although there appears to be no specific evidence to support it.) ii) In 1988, the land owned by Boastdean immediately to the south of the red land was acquired for the construction of what became the trunk road A24. That road was completed and opened to traffic by February 1989. In December 1988 a traffic order had been made prohibiting the use of this stretch of the road by pedestrians. iii) Mr Hussain became interested in the site through a company called Parbrook Ltd, registered in Liberia, of which he was the beneficial owner. In 1989 Parbrook acquired the shares in Boastdean. iv) On 23  October  1989 ‘as part of the overall transaction’ Boastdean transferred the green land to a company called Kempstone Ltd (a company incorporated in the Isle of Man), in which Mr  Hussain also had ‘a beneficial interest’. Boastdean retained the red land. Mr Hussain gave this explanation in his statement: The reason part of the land only was sold to Kempstone was that I, through Parbrook Ltd, had found an investor in Jersey who wanted a stand-alone company in which to participate. It was agreed to use Kempstone Ltd for such purpose. Parbrook at the time had other interests in various ventures and in any case wanted to exercise a degree of control over the proposed venture as it did not want Kempstone to “run off” with the deal on its own.

His intention was to seek to develop both parcels together ‘as a joint venture’ with Kempstone. At that time the green land was mortgaged to Dunbar Bank plc.

v) In November 1989 an application was made for outline planning permission for the erection of light industrial buildings on the whole site, with access from High Path only. Conditional consent was granted. As to what followed, I again quote Mr Hussain: Having obtained planning permission, the property market at  the time started to deteriorate. There was hardly any demand for light industrial/office type of premises at the time. Consequently, I started to renegotiate with the architects and Merton Council for a change of use (fresh planning) for a petrol station and some light industrial units. I had reached an agreement with BP to build a petrol station and car wash facilities on part of the land at the time. The petrol station was to face Merantun Way and the industrial units would face High Path. vi) There followed various applications for permission for development of light industrial units and of a petrol filling station with access from Merantun Way. The details are not complete in the evidence. It is sufficient to note one application, made in August 1992, which related to a site including both the green and the red land. It was made for three light-industrial units fronting High Path, and a petrol station with access from Merantun Way and egress to High Path. The owner of the site was said to be Kempstone. It was refused in May 1993 on grounds which included prejudice to traffic flow in Merantun Way. vii) On 29 March 1994, the land owned by Kempstone was sold to the council. At para 17 of her judgment the judge recorded that this was by agreement between Mr Hussain and Dunbar. At para 14 of his witness statement Mr Hussain said: This was at a time when the property market was in serious decline and with no end in sight to the recession, it was considered best that the land be disposed of. Once the land was sold to Merton Council I did not visit the site for some time, as I had other matters to deal with and lots of other commitments back in Australia to take care of. 961

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viii) The council took occupation of both the green and red land, apparently not realising that the red land was under separate ownership from the green land. In January 1995, the council obtained planning permission to build a day-care centre on the whole site, including an area for parking for disabled transport. They built the daycare centre, incorporating the western section of the red land into the garden, taking up the concrete hardstanding. In May 1996, they leased the eastern side of the site, including the eastern section  of the red land, to Merton Association for Disabled People for parking ambulances. ix) In July 2000, Boastdean transferred the red land to Adealon, to which it also assigned all causes of action pertaining to the land. In August 2003, the present proceedings were begun. The judge commented on the evidence of Mr Hussain’s property dealings: Mr Hussain does not give a very full account of matters relevant to the decisions to sell the larger parcel of land to Kempstone and to retain the smaller, rear parcel of land. He refers to negotiations with an investor with a view to entering into a joint venture to develop both parcels of land, but it is not clear, for example, whether any joint-venture agreement was entered into. It appears that Mr Hussain decided to retain the rear land in the hope that anything built on that land would face Merantun Way and have access to it. It seems to me that the expectation, at that time, was that there was likely to be access from the rear land on to the highway. Mr Hussain chose to retain the red land. I infer from all the evidence available to me that Mr Hussain had hoped to be able to develop the land to the south and to do so by gaining access to the highway and not from and to High Path. Initially, the rear land was thought likely to be incorporated into the new highway. That did not happen, but Mr Hussain then sought planning permission for a petrol station and car wash facing Merantun Way. It appears to me that Mr Hussain took the view that it would benefit him to retain the red land. The sale by Dunbar in March 1994 was not a hostile act on the part of the bank. The sale was consistent with Mr Hussain’s desire to dispose of some land and to retain and develop the red land. The judge held that there was no basis for implying an easement over the council’s land to High Path, either as an ‘easement of necessity’ or on the basis of ‘common intention’ at the time of the 1989 transfer. As to the former, a detailed review of the authorities led her to the conclusion that as a matter of law an easement of necessity could only arise where the land of one party to a transaction was wholly surrounded by the land of the other. On this she preferred the authority of Kekewich J in Titchmarsh v Royston Water Co Ltd (1899) 64 JP 56; 48 WR 201; 81 LT 673 over that of Danckwerts J in Barry v Hasseldine [1952] Ch 835; [1952] 2 All ER 317; [1952] 2 TLR 92. (I shall return to this point.) She concluded: At the date of the transfer by Boastdean to Kempstone in 1989, Merantun Way had been built to the south of the red land. The red land was not surrounded by land owned by Kempstone. To the west and east land was owned by third parties. To the south was the highway. On that ground alone, following Titchmarsh, the Claimant has not demonstrated that it is entitled to the grant of an easement of necessity. She also held that there was no ‘common intention’: The evidence indicates that it was not the common intention of the parties that the red land should have access to High Path over the green land. Before the red land and green land were split, Mr Hussain proceeded on the basis that he wished to take advantage of the fact that the red land adjoined the highway. Until the application for planning permission for a petrol station and car wash on the red land was refused, 962

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the intention was to look south, not north. Mr Hussain’s focus was to the south. His principal intention was to retain and use the red land in a way which contemplated access to and egress from the land by way of the highway to the south. When the green and red land were split, there was of course no express reservation of easement and no evidence that anyone contemplated the need for this. Although both points are before us, the argument has understandably concentrated on the issue of easement of necessity, there being no realistic basis to undermine the judge’s factual conclusion on the absence of ‘common intention’.

Easements of necessity A good starting point is Lord Oliver’s succinct statement of the principle in the Privy Council in Manjang v Drammeh (1990) 61 P & CR 194, 196–7: It seems hardly necessary to state the essentials for the implication of such an easement. There has to be found, first, a common owner of a legal estate in two plots of land. It has, secondly, to be established that access between one of those plots and the public highway can be obtained only over the other plot. Thirdly, there has to be found a disposition of one of the plots without any specific grant or reservation of a right of access. Given these conditions, it may be possible as a matter of construction of the relevant grant (see Nickerson v Barraclough) to imply the reservation of an easement of necessity. As that passage confirms, the principle is one of implication from the circumstances of a grant of land, not (as suggested in some of the earlier cases and in academic writings (see eg A J Bradbrook ‘Access to Landlocked Land: a Comparative Study of Legal Solutions’, 10 Sydney L Rev 39 (1983-5)), a free-standing rule of public policy. This was settled by this court in Nickerson v Barraclough [1981] Ch 426; [1981] 2 All ER 369; [1981] 2 WLR 773, where Buckley LJ summarised the correct approach: … in my judgment the law relating to ways of necessity rests not upon a basis of public policy but upon the implication to be drawn from the fact that unless some way is implied, a parcel of land will be inaccessible. From that fact the implication arises that the parties must have intended that some way giving access to the land should have been granted. … Public policy may inhibit the parties from carrying their intention into effect, but I  cannot see  how public policy can have a bearing upon what their intention was. In my judgment, that must be ascertained in accordance with the ordinary principles of construction, the language used and relevant admissible evidence of surrounding circumstances. (p 447) The classic case of an easement of necessity is where the land of one party to a grant is entirely surrounded by that of the other. As between the two of them, it is not difficult to infer that the landlocked property, whether of the grantor or the grantee, was intended to have some form of access over the surrounding land. That was explained by Sir George Jessel MR in Corporation of London v Riggs (1880) 13 Ch D 798; 44 JP 345; 49 LJ Ch 297: It seems to me to have been laid down in very early times — and I have looked into a great number of cases, and among others several black-letter cases. (The black-letter books are described by Sir William Holdsworth at pg 525 Vol 2 of A History of the English Law, 4th ed, Methuen/Sweet and Maxwell, London 1936, as being printed editions of the Year Books, which were early case notes created from the reign of Edward l to Henry Vlll.) It seems likely ‘black-letter cases’ were those taken from the black-letter books. The black-letter books are now thought not to be an accurate transcription of the Year 963

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Book manuscripts; FW Maitland was of the view that ‘of mere, sheer nonsense those old black-letter books are but too full …’ (YB 1,2 Ed ll (SS), xii) — that the right to a way of necessity is an exception to the ordinary rule that a man shall not derogate from his own grant, and that the man who grants the surrounding land is in very much the same position as regards the right of way to the reserved close as if he had granted the close, retaining the surrounding land. In both cases there is what is called a way of necessity; and the way of necessity, according to the old rules of pleading, must have been pleaded as a grant, or, where the close is reserved, as it is here, as a re-grant. (p 806) So much is uncontroversial. But as one moves away from that simple, bipartite model, to one in which the surrounding land is shared with strangers to the grant, the issues become more complex. Where there is a realistic possibility of alternative access over the land of third parties, the case for an easement of necessity is much less clear. In particular, in that situation there is no reason in my view to assume that the same rule should apply to grantor and the grantee. In this context, the presumption of non-derogation from grant works in favour of the grantee, but against the grantor. Further, the grantee may also be able to rely on other forms of implied right, not available to the grantor: see generally Megarry & Wade 6th ed para 18-097 ff. As is said there: The general rule … is that a grant is construed in favour of the grantee. Therefore normally no easements will be implied in favour of a grantor; if he wishes to reserve any easements he must do so expressly. Conversely: In favour of a grantee, easements are implied much more readily, on the principle that a grant must be construed in the amplest rather than in the narrowest way. This contrast can be seen clearly in the leading statement of the applicable law by Thesiger LJ in Wheeldon v Burrows (1879) 12 Ch D 31; 48 LJ Ch 853; 28 WR 196, 49: … two propositions may be stated as that I call general rules governing cases of this kind. The first of these rules is, that on the grant by the owner of a tenement of part of that tenement as it is then used and enjoyed, there will pass to the grantee all those continuous and apparent easements (by which, of course, I mean quasi easements), or, in other words, all those easements which are necessary to the reasonable enjoyment of the property granted, and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted. The second proposition is that, if the grantor intends to reserve any right over the tenement granted, it is his duty to reserve it expressly in the grant. Those are the general rules governing cases of this kind, but the second of those rules is subject to certain exceptions. One of those exceptions is the well-known exception which attaches to cases of what are called ways of necessity. Both of the general rules which I have mentioned are founded upon a maxim which is as well established by authority as it is consonant to reason and common sense, viz, that a grantor shall not derogate from his grant. This distinction becomes particularly relevant when considering the possibilities of alternative access over land of third parties. In the case of the grantee, the application of the presumption should in principle be unaffected by such possibilities. The grantee’s normal expectation is that access, if not otherwise available will be allowed as an incident to the grant, and thus that it will be provided by the grantor over land within his control. Where the roles are reversed, the grantor has no equivalent expectation. On the contrary, the presumption is that any rights he requires over the land transferred will have been expressly reserved in the grant, and the burden lies on the grantor to establish an exception. To that issue the existence of other realistic possibilities of access, even if not legally enforceable at the time of the grant, is clearly relevant. 964

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I have already referred to the judge’s resolution of the apparent conflict between Titchmarsh v  Royston Water Co Ltd (1899) 81 LT 673 and Barry v  Hesseldine [1952] Ch  835. I do not see either as directly relevant to the present case, since neither concerned a claim by a grantor over land of the grantee. Neither is in any event binding on this court. However, since the judge based her decision in part on the earlier case, it may be helpful to offer some comment. Titchmarch was a decision of Kekewich J. The purchaser’s land was bounded on three sides by land of the vendor (although the Plaintiff was a tenant of the farm, the judge felt able to treat it as a simple case ‘between vendor and purchaser’ (p 675)), and on the fourth side by a public road which ran in a steep cutting. The purchaser claimed a right of access to the highway over a private way across the farm, either under the general words of the conveyance, or as an easement of necessity. Both claims failed, the latter on the grounds (in the words of the headnote) that: ‘… the way was not a way of necessity because the Defendants could, though at some expense, cut a way from the public road.’ So understood, the case is unremarkable. However, the judge seemed to go further, apparently holding that there could never be an easement of necessity where the surrounding land was partly owned by strangers to the grant. He referred to a statement in Pomfret v Ricroft (1669) 2 Keb 505, 543, 569; 1 Sid 429; 1 Wms Saund 323, in which the rule was treated as applicable where someone ‘having a close surrounded with his own land’ grants the close to another. He thought that those words were apt to exclude a case where the granted premises are ‘not surrounded by land of the vendor, but abut on one side on land of a stranger’. He added: There is no authority for extending the doctrine to such a case as that. In Gale on Easements, 5th edition, the doctrine is stated in almost precisely the same language with this addition: ‘So, too, if the close be not entirely enclosed by my land, but partly by the land of strangers, for he cannot go over the land of strangers, quaere’. For this reference is made to Rolle’s Abridgement and Viner’s Abridgment. I have referred to these volumes, and have ascertained that the quotation is accurate including the quaere, which is to be found in both works, but I have not come across any comment on either the statement or the quaere. It seems to me that the statement is inconsistent with the doctrine as above explained and with the principle on which it has founded. In Barry v Hesseldine, Danckwerts J took a different approach. The facts were somewhat complex. The grantee’s land was surrounded partly by land of the vendor, and partly by that of other parties, including a disused airfield owned by a third party. For some time following the grant they had been able to obtain access over the airfield by permission of the owner. There was an argument, rejected by the judge, that he had agreed to abandon any claim to access over the vendor’s land. The issue therefore arose as to his legal rights in the event of the permissive right being unavailable. The judge held that he was entitled to an easement of necessity over the vendor’s land, even though his property was not completely surrounded by it. Having referred to the uncertainty on the point expressed in the then current edition of Gale on Easements and in other authorities, including Pomfret v Ricroft, he said: There is therefore no express authority on the point. In my opinion, however, if the grantee has no access to the property which is sold and conveyed to him except over the grantor’s land or over the land of some other person or persons whom he cannot compel to give him any legal right of way, commonsense demands that a way of necessity should be implied, so as to confer on the grantee a right of way, for the purposes for which the land is conveyed, over the land of the grantor; and it is no answer to say that a permissive method of approach was in fact enjoyed, at the time of the grant, over the land of some person other than the grantor because that permissive method of approach may be determined on the following day, thereby leaving the grantee with no lawful method of approaching the land which he has purchased. (p 339) 965

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Although there was no mention of Titchmarch in the judgment, it had been referred to in the course of argument, where it was suggested that Kekewich J’s comments on the law were obiter. Danckwerts J interposed: ‘If the matter depends on implied grant from which the grantor cannot derogate, it seems immaterial that there is adjoining land owned by a third  party.’ (p 837) For reasons discussed earlier, I would respectfully agree with that observation, particularly now that it is clear that the issue is one of implication, not public policy. In so far as Titchmarch is to contrary effect, I would not follow it, although as I have said the decision can be supported on the narrower ground stated in the headnote. However, as already explained, neither case has any relevance to the present case, which concerns implied reservation, not implied grant. For the same reason, I find no assistance in Bolton v Bolton (1879) 11 Ch D 968; 43 JP 764; 48 LJ Ch 467. That was another case relied on by Mr Partridge before us, though not cited to the judge, as showing that there could be an easement of necessity, even though there were prospects of an alternative access over land of a third party. However, that again was a right claimed by the grantee, not the grantor. Of more direct relevance is Pinnington v Galland (1853) 22 LJ Ex 348; 9 Exch 1; 1 CLR 819; 22 LTOS 41. A Mr Dickinson had sold, on the same day in 1839, a piece of land in three separate lots, one to a Mr Dearle, and another to a Mr Moss. An existing track through Mr Dearle’s lot gave access to Mr Moss’ lot and was used for that purpose for several years after the sale, but there had been no express grant or reservation of a right of way. The use was later disputed by the Defendant, Mr Dearle’s successor, but was confirmed by the court. Since it could not be ascertained which grant had come first, Baron Martin considered both alternatives. Assuming the grant to Mr  Moss had come first, the right over the retained land of Mr  Dickinson was covered by well-established principles of implied grant, explained by Sergeant Williams in his notes to Pomfret v Ricroft. … He continued: Secondly, assume that the conveyance to Mr  Dearle was executed the first. In this case the Rye Holme closes were for a short period of time the property of Mr Dickinson after the property in the land conveyed to Mr Dearle had passed out of him. There is no doubt apparently a greater difficulty in holding the right of way to exist in this case than in the other; but according to the same very great authority the law is the same, for (Sergeant Williams’) note proceeds thus: ‘So it is when he grants the land and reserves the close to himself’; and he cites several authorities which fully bear him out. … It no doubt seems extraordinary that a man should have a right which certainly derogates from his own grant; but the law is distinctly laid down to be so, and probably for the reason given in Dutton v  Taylor (1700) 2  Lut  1487, that it was for the public good, as otherwise the close surrounded would not be capable of cultivation. This passage is of assistance to the Appellant to the extent that that same rule was treated as applicable, whether the transaction was treated as a grant or a reservation, and even though (as appears from the plan printed with the report) there were adjoining areas belonging to third parties. However, the facts were very different to the present; and the two-stage analysis of what were essentially simultaneous transactions seems somewhat artificial to modern eyes (cf Hansford v Jago [1921] 1 Ch 322, 335; 90 LJ Ch 129; [1920] All ER Rep 580). In any event, there was no discussion of the significance of alternative possibilities of access over land of third parties. The case cannot therefore be regarded as authoritative on that aspect. It is true that the passage from Baron Martin’s judgment was quoted by Thesiger LJ without adverse comment in Wheeldon v Burrows (above, at p 58). But that, as I read it, was not by way of specific endorsement of the reasoning, but simply by way of confirmation of his earlier analysis, to show — 966

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… that the whole foundation of the judgment … was that the way claimed in the case was a way of necessity, and … that Baron Martin and the court whose judgment he delivered in no way disputed the general maxims to which I have referred. In so far as Baron Martin there treated ‘public policy’ as the basis of the principle, later authority, as I have said, does not support him. Thus, while I do not doubt the correctness of the decision in Pinnington, it provides no support for the present appeal. For completeness I should refer to an Australian case which was not cited to us, but which seems closer to the present on the facts, relating as it does to a claim by a vendor: North Sydney Printing Pty Ltd v Sabemo Investment Co Ltd [1971] 2 NSWLR 150. This also appears to be the fullest judicial discussion of the authorities in the modern cases. It was considered by Sir Robert Megarry VC in Nickerson v  Barraclough at  first instance ([1981] Ch  325, 333-4). I  gratefully adopt his summary of the facts: The North Sydney case was decided in the Supreme Court of New South Wales by Hope J, sitting in Equity. Put very shortly, the facts were that a company sold part of its land, which abutted on to a street. The retained land had no access to a highway, but the company intended subsequently to sell it to the local authority as an addition to a contiguous car park owned by that authority. The proposed sale to the local authority went off, and the company was left with its retained land, which was landlocked. The company then sought a declaration that its retained land had a way of necessity over the land sold; and this claim failed. Over twenty authorities (half of them English) were cited in argument, including Packer v Wellsted (1658) 2 Sid 39; (1658) 82 ER 1422 and Dutton v Taylor, 2 Lutw 1487 … The company contended that it was entitled to a way of necessity by virtue of public policy, and that the intention of the parties was irrelevant. The purchaser contended that public policy was irrelevant, and that the company was entitled to no right of way, since the intention of the parties was that the company should have no such right … The claim failed. The court held that a way of necessity arises to give effect to an actual or presumed intention. On the facts the company’s intention was the contrary: its intention was that the land retained should have no access over the land conveyed, but instead should have access over the car park. I note in particular the Vice-Chancellor’s comment on the differences from the case before him: … the claim to a way of necessity was made by the vendor, and not, as in the present case, by successors in title of the purchaser; and although ways of necessity are in a special position, the law is far more ready to imply the grant of easements than it is to imply their reservation. There is a doctrine against derogating from a grant, but not against derogating from a reservation … (p 334) The case was not referred to in the Court of Appeal, which differed from the Vice-Chancellor on the facts of Nickerson v Barraclough itself. However, I see nothing to throw any doubt on this aspect of his analysis, which is consistent with the view I have already expressed.

Conclusion For these reasons, I would reject Mr  Partridge’s principal submission, which is that Adealon is entitled to an easement of necessity, by operation of law, and regardless of the existence of possible alternatives over land of third parties. … I would therefore uphold the judge’s conclusion that Adealon does not have a right of way over the council’s land. This makes it unnecessary to consider the scope of such a right, had it been created. I prefer to express no view on the judge’s conclusion on that aspect of the case, which is not straightforward. I would simply dismiss the appeal. [Silber J and Mummery LJ concurred]

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Australian Property Law

Commentary 14.21  The decision in Adealon International Proprietary Ltd v London Borough of Merton sets out that an easement of necessity will only arise where it is related to the common intention of the parties at the date of the conveyance and acquisition. Hence, on the facts the subsequent impediments to the development plan could not justify the imposition of an easement of necessity that was never previously envisaged. The ‘necessity’ that forms the basis of the implied easement right must be apparent at the time when the easement was granted or reserved and not at some later point. The reason for this is that the easement of necessity is an exception to the general rule that a grantor cannot derogate from a grant and so if, at the point when the grant is made, there is no evidence of any ‘necessity’, the easement cannot arise. It must be established that the easement of necessity is based upon the presumed intention of the parties. Easements of necessity are not inferred on general public policy grounds alone. 14.22  This was outlined by the court in North Sydney Printing Pty Ltd v  Sabemo Investment Corp Pty Ltd [1971] 2 NSWLR 150, which is extracted below.

—  North Sydney Printing Pty Ltd v Sabemo Investment Corp Pty Ltd  — [1971] 2 NSWLR 150 Facts: North Sydney Printing was the owner of land which was subject to a planning scheme which had zoned the land as reserved for the use of car parking. Subsequently, North Sydney and a neighbour had their land and adjoining land rezoned enabling them to use it for commercial development. North Sydney then re-subdivided its land and sold all sections retaining only one small section known as Lot 4. Lot 4 was next to a council car park which remained zoned for car parking. Prior to the subdivision, Lot 4 was a part of a larger section of land which included a laneway to a public street. Following the subdivision, Lot 4 became landlocked. North Sydney presumed, as a consequence of a Council ordinance, that it was entitled to require the Council to acquire Lot 4 so that the car park could be expanded. However, negotiations with the Council broke down and North Sydney was left with a landlocked subdivision. It argued that an implied easement of necessity arose to burden the subdivided section it had sold. Hope J: The plaintiff claims to be entitled to a right of way of necessity over the laneway and the other small portion of lot 5 on the ground that its land, that is, lot 4, is in fact landlocked and became landlocked in November 1969, although as I have said, it had no intention of any kind in November 1969 to exercise any such right of way or to seek to acquire any right of way over that land. The plaintiff submits that it is entitled to the right of way on the ground that the law will create such a way as a matter of public policy where any land becomes land-locked. It is not a question of giving effect to any actual or presumed intention, so it is submitted, but it is a matter of public policy, and no intention of the parties, and indeed no agreement of the parties can operate to affect the implementation of this rule of public policy. What is the authority for such a view? As has been pointed out on a number of occasions, there is very little reported law on the question of easements of necessity, and some of that which is reported is unsatisfactory to some extent because not infrequently a discussion of a right of way of necessity is mingled with a discussion of other types of rights of way which arise by implication. However, the authorities in favour of the proposition for which the plaintiff contends appear to be as follows. In the first place, in Gale on Easements, 13th ed (1959), at p 98 the learned author describes the circumstances in which a way of necessity arises as follows: ‘A way of necessity arises where, on a disposition by a common owner of part of his land, either the part disposed of or the part retained is left without any legally enforceable means of access. In such a case the part 968

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so left inaccessible is entitled, as of necessity, to a way over the other party.’ Later on the same page, it is said: ‘The principle appears to be based on the idea that the neglect of agricultural land is contrary to public policy. The law on the subject is antiquated and, in some respects, not fully developed.’ In support of the statement that the principle appears to be based on a rule of public policy, two cases are cited. The second of those two cases is Dutton v  Taylor (1701) 2  Lut  1487; 125 ER 819. The case is a difficult one, if only for the reason that it is not reported in the English language. But quite apart from this consideration, it does not appear that it is authority for the proposition contended for. As far as I can make out the report, it states three propositions which counsel for the plaintiff made to the Court in support of the plaintiff’s case; and in one of those three propositions he appears to have stated, among other things, that it was for the public benefit that the land should not remain unoccupied. Presumably the land would remain unoccupied if access could not be had to it from some public way. So far as the decision of the Court is concerned, the report said no more than that judgment of all the Court was for the defendant. On no view of the report can it be regarded as authority for the proposition for which the plaintiff contends. However, the first of the cases which is cited as authority for the proposition in Gale is Packer v  Wellstead (1658) 2 Sid 39 and 111; 82  ER  1244 at  1285, one basis of the justification for holding that the way of necessity in that case was that it would be to the prejudice of the public good that the land should remain unoccupied. Although statements are to be found in various reports that the ways of necessity in the appropriate circumstances arise either by operation of law or by implication of law, I do not think there are any other authorities for the proposition that their creation is based on a matter of public policy, other than the ones I have referred to. If the creation of ways of necessity depends upon a matter of public policy, it would not be entirely clear to me what that policy would be at the present time, having regard to the provisions of the Local Government Act, and the necessity for councils to approve subdivisions and to have regard among other things, to the question of access. One would have thought that the interests of the public in this regard have been given to the care of the relevant council. However, that may be, if the principle does depend upon public policy, then it is submitted for the plaintiff that the question of the intention of both or either of the parties at the time of the severance of one parcel of land from the other, and indeed any agreement, express or implied, between the parties, made at or about the time, is completely irrelevant. Public policy requires that land should not remain landlocked, and whatever the parties wish or intend, the law will provide an access to the land in a case such as the present over the land which has been conveyed away by the owner of the landlocked parcel. The other view as to the basis of the doctrine appears to relate to the actual or presumed intention of the parties. In Gale on Easements, 12th ed (1950), at pp 158–159, the following statement was to be found: Section 2. Easements of Necessity. Another class of easements acquired by implied grant or reservation are those which are usually termed ‘easements of necessity’, though they might with more correctness be called easements incident to some act of the owners of the dominant and servient tenements without which the intention of the parties to the severance cannot be carried into effect … Easements called ways of necessity are thus described in Rolle’s Abridgement: ‘If I have a field enclosed by my own land on all sides, and I alien this close to another, he shall have a way to this close over my land, as incident to the grant, for otherwise he cannot have any benefit by the grant. And the grantor shall assign the way where he can best spare it.’ So, too, if the close aliened be not entirely enclosed by my land, but partly by the land of strangers; for he cannot go over the land of strangers. 969

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This passage was cited with apparent approval by Danckwerts in Barry v Hasseldine [1952] Ch 835 at 838. It will be seen that the author of the twelfth edition of Gale on Easements had a different notion of the basis of the doctrine from the author of the thirteenth edition. In the twelfth edition the basis is said to be that they are easements which are incident to some act of the owners of the dominant and servient tenements without which the intention of the parties to the severance cannot be carried into effect. In Barry v Hasseldine [1952] Ch 835, Danckwerts J held that a way of necessity was established notwithstanding the fact that there was a permissive access over the land of a stranger. However, among other things, his Lordship in the case dealt — and be it said, dealt exhaustively — with a question of fact whether the person in whose favour the right was said to have been created had agreed to abandon his right to a claim to a way of necessity over the defendant’s land. Danckwerts J held that no such agreement was established. However, it is clear that his Lordship took the view that if such an agreement were established, the way of necessity would not have been created. This approach, it seems to me, is quite inconsistent with a view that they would be created by the law as a matter of public policy simply on the ground that land became landlocked. Applying the test which was referred to in Gale on Easements, 12 ed, namely, a test which is related to the carrying into effect of the intention of the parties to the severance, no doubt in many cases no actual intention is held by one, or indeed by either of the parties to the transaction, and in many cases the law must presume such an intention; but it is to the actual or presumed intention that the test is related. This view seems to me to be more consistent with some later decisions, and with various dicta which are to be found in a number of cases. In Wilkes v Greenway (1890) 6 TLR 449, a claim to a right of way of necessity was made by a person who had obtained a title to land by adverse possession for a period of more than 12 years. During that time he had had access to the land over a private way across adjoining land, and he claimed to be entitled to a way of necessity over that private way, notwithstanding that he had not had the uninterrupted 20 years’ use of the way which the law would otherwise require to give him a prescriptive right to an easement over the way. The judge of first instance held that he was entitled to that right, holding that since a defined way was necessary to the enjoyment of the gardens, the law would presume that somehow or other by legal means, by grant or otherwise, that right of approach must have been granted, without which possession could not have been taken. This decision was reversed on appeal to the Court of Appeal, and in the judgment of the Court it was said (1890) 6 TLR 449: The one point argued before us has been whether, assuming the premises to have passed to the defendant by virtue of the Statute of Limitations to create ways of necessity. The statute does not expressly convey any title to the possessor. Its provisions are negative only. We cannot import into such negative provisions doctrines of implication that would naturally arise where title is created either by express grant or by statutory enactment. The title to the premises is not a title by grant. The doctrine of a way of necessity is only applied to a title by grant, personal or Parliamentary. Upon the hypotheses we are obliged to assume the title to the right of way can only be maintained if the statute gives it, which statute, however, does not apply to a right of way. This view seems to me to be quite inconsistent with a proposition that where land is landlocked, the law, as a matter of public policy, will give that land access in order that the land will not remain useless and unoccupied. A similar view seems to have been expressed by Parke B in Proctor v  Hodgson (1855) 10  Exch 824; 156 ER 674. The headnote states: ‘A right of way of necessity can only arise by grant express or implied’, but that statement is in more explicit terms than those used by Parke B. His statement on the matter appears in the course of argument at 196, and is simply, ‘All ways of necessity arise from a presumed grant.’ 970

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In Davies v Sear (1869) LR 7 Eq 427 at 432, Lord Romilly MR said, ‘In that state of things it is contended, that to argue that this way through the archway was a way of necessity is absurd, as other means of access could be, and were, used; but notwithstanding the apparent plausibility of this argument, I am of opinion that this is, and was, a way of necessity; that it was apparent that it was, that the Defendant has notice that it was, and that it is not in his power to dispute that it was. In the first place he saw distinctly the archway; he bought the house subject to the archway; for what purpose did he suppose that the archway was made, unless as a mode of access? He contends now that he can build up the archway and throw it into his house.’ Lord Romilly then went on further to consider the facts and formed the view that there was a way of necessity through the archway, and it is apparent that he was having regard to the actual or presumed intention of the parties and not to any policy of the law unrelated to that intention. In Bolton v Clutterbuck [1955] SASR 253, 268, Ross J said: ‘In my view, no reservation of an easement, whether of necessity or otherwise, should be implied unless upon the evidence the Court can reasonably infer an intention common to both parties that the property conveyed should be subject to the easement claimed.’ As authority for this proposition, his Honour referred to Gale on Easements, 12th ed (1950), at p 158, and to a dictum of Lord Parker in Pwllbach Colliery Co Ltd v Woodman [1915] AC 624 at 646; [1915] All ER Rep 124. In the latter case, Lord Parker said: My Lords, the right claimed is in the nature of an easement, and apart from implied grants of ways of necessity, or what are called continuous and apparent easements, the cases in which an easement can be granted by implication may be classified under two heads. His Lordship then went on to consider those two heads, but he clearly assumes that a way of necessity arises by implied grant. Some statements which appear to be made on the same assumption are to be found in Re Webb’s Lease; Sandon v Webb [1951] 1 Ch 808 at 816. Thus Evershed MR, having referred to the prima facie rule that a grantor cannot claim a right or privilege as against a grantee unless it has been expressly reserved to him by the grant, states that there are exceptions to the rule, and the first of the exceptions is stated by him to a right of way to the grantor’s premises, which will be impliedly reserved over the premises granted if it is necessary to enable access to the former to be had. It seems to me that the balance of authority establishes that a way of necessity arises in order to give effect to an actual or presumed intention. No doubt difficulties could arise in some cases because of differing actual intentions on the part of the parties, but it seems to me that at the least one must be able to presume an intention on the part of the grantor, in a case such as the present, that he intended to have access to the land retained by him over the land conveyed by him before one can imply the grant or reservation of a way of necessity over the land conveyed. In the present case, there was no such intention, and indeed the actual intention of the grantor was to the contrary. Its intention was that there should be no access over any part of lot 5, and that access should be had by joining lot 4 to the land of the council, which fronted Ward Street. If this consolidation had occurred, then lot 4 would have had access to a public way. As I have said, the plaintiff had in November 1969, and has now, a right to compel that consolidation, that is, the owner of lot 4 has a legal power to compel the joining of his lot with the land owned by the council, which will produce an access from a public way into lot 4, and so allow lot 4 to be used and not left useless. In these circumstances, I do not see how an intention to have access to lot 4 over any part of lot 5 can be presumed, or imputed to the parties or either of them. Indeed, I do not think it can be contended that if the principle upon which the doctrine of ways of necessity is based is related to giving effect to the intention of the parties in relation to the severance, any right of way of necessity could have arisen in the present case. The only basis for holding that such a right was created in the present case would be that the law inevitably makes provision for access over the land conveyed by the person in the position of the present plaintiff, regardless of that person’s intention and regardless of the other circumstances of the case. 971

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Accordingly, in my opinion, the plaintiff has not established that, quite apart from the provisions of the Real Property Act 1900, it was entitled, upon the transfer of lot 5 to the first defendant in November 1969, to any way of necessity over any part of lot 5.

Commentary 14.23 In North Sydney v  Sabemo the New  South  Wales Supreme Court concluded that the determination of whether a right is one of necessity or otherwise is not founded upon general public policy principles but, rather, the specific and common intention of the parties at the time when the right arose. Hence, as in Adealon, if at the point when the right was supposed to have arisen the parties cannot prove an implied intention because the circumstances underlying the need for such a right have arisen subsequently, an easement of necessity will not be recognised. Significantly, the court in North Sydney v Sabemo emphasised the fact that easements of necessity are not implied on the basis of general public policy principles but, rather, are centred around giving effect to the actual or presumed intent of the parties.7 In some states, legislation allows the courts to impose easements over servient land where such easements are necessary for the use of dominant land: Property Law Act 1974 (Qld) s 180; Conveyancing Act 1919 (NSW) s 88K; Conveyancing and Law of Property Act 1884 (Tas) s 84J; the Law of Property Act (NT) ss 163 and 164. The Conveyancing Act  1919 (NSW) s  88K(1) gives the court the power to impose an easement over land where it is reasonably necessary for the effective use or development of other land that will have the benefit of the easement. Further, the Land and Environment Court also has power, in a case where it determines to grant development consent under s 97, to provide for an easement that is necessary to give effect to the development (Land and Environment Court Act s 40). In this context, reasonable necessity does not mean ‘absolutely necessary’. Hence, the requirement may be satisfied even where the plaintiff ’s land could be effectively used or developed without the easement.8 The use or development with the easement must be (at  least) substantially preferable to the use or development without the easement.9 Reasonable necessity also requires consideration of the effect of the grant of the easement on the servient tenement.10 Determining what amounts to reasonable necessity will always be a question of degree and must be objectively evaluated. It should, be more than mere desirability or preferability.11 In CG (Deceased) on behalf of the Badimia People v State of Western Australia [2015] FCA 204 the Federal Court was asked to consider whether an easement of necessity was deemed to accompany the rights held by holders of mining and resource titles. The claimants rejected the idea, arguing that an easement of necessity can only arise to give effect to an actual or presumed intention on the part of a grantor of land, and not purely on the basis of public policy. The claimants also argued that the rights of mining tenement holders are determined by statute rather than common law. Barker J  7. See also Mantec Thoroughbreds Pty Ltd v Batur [2009] VSC 351 at [114].  8. Tregoyd Gardens v Jervis (1997) 8 BPR 15,845; Re Seaforth Land Sales Pty Ltd’s Land (No 2) [1977] Qd R 317.  9. Moorebank Recyclers Pty Ltd v Liverpool City Council (No 2) (2012) 16 BPR 31,257 at [154]–[159]. 10. ING Bank Australia Ltd v O’Shea [2010] NSWCA 71. 11. See the discussion by Applegarth J in Lambert Property Group Pty Ltd v Body Corporate for Castlebar Cove [2015] QSC 179; Moorebank Recyclers Pty Ltd v Tanlane Pty Ltd [2012] NSWCA 445 at [154]– [155]; Rixon v Horseshoe Pastoral Co Pty Ltd [2017] NSWSC 1293, at [104]. 972

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agreed with the claimants and dismissed the easement. His Honour explained the situation as follows in Banjima People v State of Western Australia [2013] FCA 868 at [1781]: The notion of an ‘easement of necessity’ which may apply where an owner grants land to another is not apposite to the relationship between native title and Crown interests. Native title is not granted by the Crown out of the Crown’s estate. It is an allodial property interest which burdens the Crown’s sovereign radical title. Conversely, the statutory acquisition of minerals by the State did not comprise a grant of existing property interests by the native title holders to the Crown.

The position was further outlined by Brereton J in Khattar v Wiese (2005) 12 BPR 23,235 at  23,241–2: ‘The Conveyancing Act, s  88K(1) requires that the proposed easement be “reasonably necessary for the effective use or development” of the land to be benefited. It does not require that the easement be absolutely necessary for that use or development, nor that the proposed use or development be the only reasonable use of the land to be benefited; thus the requirement may possibly be satisfied even when the applicant’s land could be effectively used or developed without the easement.’ The greater the burden on the servient land, the harder it will be to establish that an easement is reasonably necessary: Lonergan v Lewis [2011] NSWSC 1133 at [22]. And where there is an alternative means, a court may be required to evaluate the costs and inconvenience of implementing this means: The Owners Strata Plan No 61233 v  Arcidiacono [2019] NSWSC 1307 at  [442]– [445]. The 10 key points relevant to the implementation of a s 88K ‘reasonable necessity’ easement were summarised by Preston CJ in Rainbowforce Pty Limited v Skyton Holdings Limited (2010) 171 LGERA 288 at [67]. They are as follows: First, the power to impose an easement is made conditional upon satisfaction of the requirement in  s 88K(1).  Subsection  (1) has been described as the ‘governing subsection’, although the criteria in subsection (2) must also be met if an order is to be made. It is ‘a precondition of the exercise of the jurisdiction’ that ‘there must be a finding that the easement sought is reasonably necessary for the effective use or development of the land which will have the benefit of it. A finding that the pre-condition in s 88K(1) is met is to be determined objectively. That finding ‘involves the making of a value judgment, but not the exercise of a discretion’. Secondly, the requirement in  s 88K(1)  is to be satisfied with respect to the particular easement that the Court is considering ordering to be imposed. The reference to the ‘easement’ in the beginning of the conditional phrase in s 88K(1) is a reference to the easement the Court orders to be imposed. Section 88K(3) requires the Court to specify in the order, the nature and terms of the easement. The applicant for an order imposing an easement will propose the nature and terms of the easement sought. The proposed easement will accord with the easement which the applicant has made all reasonable attempts to obtain, or have the same effect as that easement, so as to satisfy s 88K(2)(c). The Court’s power to impose an easement under s 88K(1) would extend to amending the proposed easement of the applicant, including so as to ensure the easement which the Court orders to be imposed satisfies the requirement in s 88K(1) of being reasonably necessary for the effective use or development of other land that will have the benefit of the easement. Thirdly, the inquiry directed by the requirement in s 88K(1) is whether the easement is reasonably necessary ‘for the effective use or development of other land that will have the benefit of the easement’. This other land will be the land of the applicant for the order. The easement may be reasonably necessary for either the effective use or the effective development or both of the applicant’s land. Most of the cases in which an easement has been sought have involved the carrying out of development on land and the subsequent use of the development, but some have involved only use of the land. The inclusion of ‘development’ as well as ‘use’ means that the Court’s power to impose an easement is enlivened not only if the easement is 973

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reasonably necessary for a particular development or use proposed by the applicant but also if the easement is reasonably necessary for any development or use of the applicant’s land, which is within the law. Fourthly, the easement is to be reasonably necessary for the ‘effective’ use or development of the land that will have the benefit of the easement. The adjective ‘effective’ bears its ordinary meaning of ‘serving to effect the purpose; producing the intended or expected result’. In context, therefore, the easement is to be reasonably necessary in order for the use or development of the land benefited by the easement to effect the purpose or produce the intended or expected result of the use or development. Thus, if use or development of land for some planning purpose, such as residential, commercial or industrial purposes, cannot be achieved without the creation and use of an easement for, say, access to the land or services to the land or for drainage of the land, the easement is reasonably necessary for such use or development to be effective. Fifthly, the easement is to be reasonably necessary for the effective use or development of the land itself, namely the land that will have the benefit of the easement; it is not sufficient for the easement to be reasonably necessary for the enjoyment of the land by any of the persons who, for the time being, are the proprietors. Accordingly, evidence as to the particular problems that one of the existing proprietors may have, or the hardship suffered as a result of those problems, would not be relevant. Sixthly, the requirement in s 88K(1) is that the easement be ‘reasonably necessary’. This has two components: first, ‘reasonably’ and second, ‘necessary’. The requirement that the easement be ‘reasonably’ necessary for the effective use or development of the applicant’s land does not mean that there must be an absolute necessity for the easement. This reduction in the quality of necessity to what is reasonable means that an easement may be able to be imposed although another means of right of way may exist or possibly even when the land could be effectively used or developed without the easement. The requirement that the easement be reasonably ‘necessary’ for the effective use or development of the applicant’s land means that there needs to be something more than mere desirability or preferability over the alternative means available. Reasonable necessity has to be assessed having regard to the burden which the easement would impose. Hence ‘[i]n general terms, the greater the burden the stronger the case needed to justify a finding of reasonable necessity.’ Seventhly, applying the test of reasonable necessity to the effective use or development of the land that will have the benefit of the easement has the consequence that: (1) the proposed easement must be reasonably necessary either for all reasonable uses or developments of the land, or else for some one or more proposed uses or developments which are (at least) reasonable as compared with the possible alternative uses and developments; and (2) in order that an easement be reasonably necessary for a use or development, that use or development with the easement must be (at least) substantially preferable to the use or development without the easement. Eighthly, the requirement of reasonable necessity does not demand that there be no alternative land over which an easement could be equally efficaciously imposed. Ninthly, the requirement of reasonable necessity is to be decided in light of the present circumstances at  the time of the hearing of the application for an order. Hence, it would not matter for the purposes of deciding whether the easement is reasonably necessary that the present circumstances were due to the applicant for the order taking a gamble. However, if such reasonable necessity for an easement as presently exists arose from previous unreasonable conduct from the applicant, that could be a discretionary factor counting against the granting of relief. Tenthly, the requirement of reasonable necessity can be satisfied notwithstanding that some future action may be required, in addition to obtaining the easement, for the effective use or development of land, such as obtaining some statutory consent. 974

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Common intention easements 14.24  Where the conferral of an easement is commonly intended by the parties when the dominant tenement is acquired, an easement may arise impliedly. Common intention easements may include easements that are necessary for the proper enjoyment of the dominant tenement but unlike easements of necessity, are not restricted to this category. It must be established that the easement is required in order to give effect to the common intention of the parties concerning the use of the dominant tenement. In Pwllbach Colliery Co Ltd v Woodman [1915] AC 624 at 646, Lord Parker of Waddington identified two classes of implied easements. The first class consisted of easements of necessity and: The second class of cases in which easements may impliedly be created depends not upon the terms of the grant itself, but upon the circumstances under which the grant was made. The law will readily imply the grant or reservation of such easements as may be necessary to give effect to the common intention of the parties to a grant of real property, with reference to the manner or purposes in and for which the land granted or some land retained by the grantor is to be used … But it is essential for this purpose that the parties should intend that the subject of the grant or the land retained should be intended to be used in a manner which may or may not involve this definite and particular use.

These conclusions were cited with approval by Martin J in Re State Electricity Commission of Victoria & Joshua’s Contract [1940] VLR 121. In Stafford v Lee (1992) 65 P & CR 172, Nourse LJ also approved of the conclusions of Lord Parker in Pwllbach Colliery noting at 175 that in proving the ‘common intention’: There are therefore two hurdles which the grantee must surmount. He must establish a common intention as to some definite and particular user. Then he must show that the easements he claims are necessary to give effect to it.

In Adam v Shewsbury [2005] EWCA Civ 1006, Neuberger LJ suggested that in analysing the common intention of the parties it was appropriate to take into account the terms of the conveyance, the communications between the parties prior to the execution of the conveyance and, in some instances, relevant communications between parties outside the conveyance. In proving the existence of an implied common intention easement, the burden of proof lies with the purchaser in the instance of a grant and a vendor in the instance of a reservation. Jenkins LJ in Re Webb’s Lease [1951] Ch 808 concluded at 828 that satisfying the requisite burden of proof for an implied common intention easement can be onerous.

Continuous and apparent easements 14.25  Easements may be implied where it can be established that the rights were continuous and apparent over the servient tenement prior to the grant of the dominant tenement. This has been set out by what has come to be known as the rule in Wheeldon v Burrows (1879) 12 Ch D 31. As Thesiger LJ stated at 49: On the grant by the owner of a tenement of part of that tenement as it is then used and enjoyed, there will pass to the grantee all those continuous and apparent easements (by which, of course, I mean quasi easements), or, in other words, all those easements which are necessary to the reasonable enjoyment of the property granted, and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted.

The rule in Wheeldon v Burrows has been held to have four primary aspects to it: 1. a grant of land; 2. at the time of the grant, continuous and apparent rights existed (quasi easements); 975

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3. the continuous and apparent rights were necessary for the reasonable enjoyment of the land; and 4. the continuous and apparent rights were used by the grantors for the benefit of the entire land. Implied ‘continuous and apparent’ easements are also founded on the maxim of non-derogation of grant: Wilcox v  Richardson (1997) 43 NSWLR 4 at  14. The maxim of non-derogation was expressed by McHugh JA in Keberwar Pty Ltd v  Harkin (1987) 9 NSWLR 738, 741 at 572 as follows: If the sale of land is made for a particular purpose, the vendor is under an obligation not to render the land sold unfit or materially less fit for that purpose: Browne v Flower [1911] 1 Ch 219 at 225–226 and Nelson v Walker (at 582). If a vendor sells part of his land, knowing that the purchaser intends to erect a building upon that land, the vendor impliedly undertakes not to use his adjoining land so as to injure or interfere with the building: Siddons v Short, Harley & Co (1877) 2 CPD 572 at  577. However, a right in the purchaser is only implied if, having regard to the circumstances, the parties must be taken to have contemplated that the land retained by the vendor would not be used by him in a manner inconsistent with that right.

In Wheeler v JJ Saunders Ltd [1995] 2 All ER 697, the English Court of Appeal considered the application of the rule in Wheeldon v Burrows. Two primary issues were examined: first, whether the rule sets out one or two tests; and second, the meaning of ‘necessary to the reasonable enjoyment’ of the land. Staughton LJ concluded that in order to satisfy the rule, use prior to severance was required. The rights must be proven to be continuous and apparent in the sense that they were rights naturally assumed when the tenements were together and, therefore, when a part of the tenement passed, were naturally expected to pass. The court further concluded that the ‘continuous and apparent’ test and the ‘necessary to reasonable enjoyment’ test should be treated independently.12 That is, each element of the test is separate. An implied easement that is continuous and apparent is to be differentiated from an implied easement necessary for the reasonable enjoyment of the land. The requirement that the easements be ‘necessary for the reasonable enjoyment of the land’ has been the subject of some discussion. Lord Cozens-Hardy MR in Schwann v Cotton [1916] 2 Ch 459 at 469 said: The word necessary must not be taken in a rigid sense. The better phrase is that which is used by Lord Campbell … ‘convenient and comfortable enjoyment of the property’.

In Wilcox v Richardson (1997) 43 NSWLR 4, Handley JA agreed, noting that the test was a liberal one and ‘necessary’ meant rights that were conducive to the reasonable enjoyment of the property. An implied easement based upon the maxim of non-derogation amounts to a legal interest under the general law: Parramore v Duggan (1995) 183 CLR 663 at 649. This is because such an easement is implied in the grant, it is not merely a covenant enforceable in equity.13 It has been argued by G Taylor, ‘Easements Implied in a Grant: Away with Continuous and Apparent’ (2012) 38(2) Monash University Law Review 128 at 137 that the

12. See also Goldberg v Edwards [1950] 1 Ch 247. 13. Cable v Bryant [1908] 1 Ch 259 at 264; Dabbs v Seaman (1925) 36 CLR 538 at 550–1; JLCS Pty Ltd v Loft City Steakhouse Pty Ltd [2008] FCA 867 at [329]–[331]; Kitching v Phillips [2011] WASCA 19 at [59]; Clarence City Council v Howlin [2016] TASSC 61 at [96]. 976

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reference to ‘continuous’ is a ‘red herring and a historical mistake’ because it is generally blended into the overall analysis of whether the easement is ‘apparent’. 14.26  The scope of continuous and apparent easement was discussed in McGrath v Campbell (2006) 68 NSWLR 229, where the New South Wales Court of Appeal considered the circumstances in which a continuous and apparent easement may be established.

— McGrath v Campbell — (2006) 68 NSWLR 229 Facts: Two adjoining lots were owned by a single registered proprietor, Mrs Chiplin. The northern lot (Lot 6) faced a main road, while the southern lot (Lot 12) was bounded by a street known as Brighton Avenue. A registered easement had been created over both lots in favour of a third adjoining property, which permitted access to the third lot from Brighton Avenue. The easement had also been used for some years as an access point for Lot 12, although this use had never been noted on the register. In 1980, Lot 6 was sold to the Campbells and Lot 12 was sold to the McGraths and the transfers of title were recorded in the register as having occurred on the same day. The Campbells continued to use the easement over Lot 12 to access Lot 6 until a dispute arose in 1995. The Campbells argued that the circumstances of the sale gave rise to an implied easement over Lot 12 for the benefit of Lot 6, and that the simultaneous transfers of the two lots gave rise to an equity or right in personam enforceable against the appellants. The McGraths argued that the indefeasibility provisions of the Real Property Act 1900, and the circumstances of the transfers in this case, prevented the recognition of any such equity. Tobias JA (with whom Giles and Hodgson JJA agreed): … This appeal concerns an implied or quasi easement over land under the Torrens system created by application of the rule in Wheeldon v Burrows [1879] 12 Ch D 31, as extended by the decision in Aldridge v Wright [1929] 2 KB 117. For the first time in a Torrens title jurisdiction, this appeal raises the question of whether such an easement also creates rights in personam or a personal equity enforceable by the registered proprietor of the putative dominant tenement against the registered proprietor of the putative servient tenement where each has acquired title by contemporaneous transfers from the common owner of both tenements. The primary judge, Barrett J, answered the issue so posed in the affirmative and the appeal is against that decision. It has generally been accepted that, as a consequence of the decision of this Court in Australian Hi-Fi Publications Pty Ltd v  Gehl [1979] 2 NSWLR 618, what is conveniently described as a Wheeldon v  Burrows easement, although not noted on the certificate of title of the servient tenement, may be enforced against the registered proprietor of that tenement who created that easement but not against that proprietor’s successors in title. In the present case, the common owner or registered proprietor of the dominant and servient tenements who created the Wheeldon v  Burrows easement contemporaneously transferred both tenements to different parties. The decision of the primary judge is the first occasion when it has been held that, in such circumstances, the effect of Aldridge v Wright is to subject the transferee of the servient tenement to the right of the transferee of the dominant tenement to enforce that easement by requiring the servient owner to execute an instrument in registrable form for the purpose of the Real Property Act 1900 (the RP Act) granting the easement. The legal basis underpinning this right is founded upon the in personam exception to the indefeasibility provisions of the RP Act. Those provisions would otherwise result in the registered proprietor of the putative servient tenement holding the same tenement, subject only to such estates or interests as may be recorded in the Register and absolutely free from all other estates or interests, including implied easements: RP Act s 42(1). … 977

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The jurisprudential basis of a Wheeldon v Burrows easement I have already drawn attention to the finding of his Honour that, in the circumstances, two inferences should be drawn: that it was Mrs Chiplin’s intention to burden Lot 12 with a right of way over the driveway for the benefit of Lot 6, and that it was also the McGraths’ intention to accept the transfer of Lot 12 subject to that burden. The difficulty with inferring these intentions, as distinct from presuming or imputing any such intention on the part of Mrs Chiplin on the one hand and any corresponding intention on the part of the McGraths on the other, is referred to in above. It is also difficult to reconcile such inferences with the primary judge’s finding (to which I have referred in above) that the McGraths were never informed, and nor was it ever explained to them, that there was an implied right of way over Lot 12 in favour of Lot 6 to which their purchase of Lot 12 was intended to be subject. In the foregoing context, there is authority for the proposition that a Wheeldon v  Burrows easement or, at the very least, the Aldridge v Wright extension of it, is based upon the common intention of the parties. But is that intention to be inferred as the actual common intention of the parties or as their presumed or imputed intention? In Aldridge v  Wright, Scrutton LJ (at 125) referred to the following passage from Lord Parker’s speech in Pwllbach Colliery Co v Woodman [1915] AC 624 at 646–647, where his Lordship said: The second class of cases in which easements may impliedly be created depends not upon the terms of the grant itself, but upon the circumstances under which the grant was made. The law will readily imply the grant of a reservation of such easements as may be necessary to give effect to the common intention of the parties to a grant of real property, with reference to the manner or purposes in and for which the land granted or some land retained by the grantor is to be used. … But it is essential for this purpose that the parties should intend that the subject of the grant or the land retained by the grantor should be used in some definite and particular manner. After referring to the findings of fact of the trial judge, Scrutton LJ concluded in these terms (at 127): I think the grantee of No 30, when his grantor claims to have impliedly reserved such a right from his grant, although it is not mentioned in his grant, is entitled to require the clearest evidence of an ‘intention of the parties’ that there should be reserved for the benefit of No 28 an easement or quasi-easement to be used and enjoyed as of right. In my opinion the defendant has failed to show such a common intention or implied reservation in this case. In Sovmots Investments Ltd v  Secretary of State for the Environment [1979] AC 144, the House of Lords held that the first rule in Wheeldon v Burrows related to voluntary conveyances and to contracts for the sale of land founded on the principle that a grantor could not derogate from his own grant and, therefore, had no application to a compulsory purchase. In the course of his speech, Lord Edmund-Davies noted (at 175) that: The line of cases to which Wheeldon v Burrows belongs are all illustrations of rights resulting from the rule against derogation from grant, which Younger LJ once described as ‘a principle which merely embodies in a legal maxim a rule of common honesty’. After quoting the classic passage from the judgment of Thesiger LJ, his Lordship observed that the basis of the proposition so stated was, as Lord Parker stressed in Pwllbach Colliery Co at 646, that: ‘The law will readily imply the grant or reservation of such easements as may be necessary to give effect to the common intention of the parties to a grant of real property’. However, there could be no common intention between an acquiring authority and the party whose property is compulsorily taken. Accordingly, the very basis of implied grant of easements was absent in Sovmots. 978

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It is difficult to determine from some of the foregoing passages whether their Lordships were referring to an actual or only a presumed common intention. The key, in my opinion, is that the relevant principle seems to be based on an implied term in the grant from which the grantor is not permitted to derogate. That the rule in Wheeldon v  Burrows is based on the presumed common intention of the parties was thus emphasised by Handley JA in Wilcox v Richardson (1997) 43 NSWLR 4 at 14 where his Honour observed: The rule in Wheeldon v  Burrows illustrates the relevance of surrounding circumstances to the implication of terms and reflects the working out of the general principle ‘that a grantor shall not derogate from this grant’ (at 49). As Lord Wilberforce said  in Sovmots Ltd v  Environment Secretary [1979] AC 144 at  168: ‘The rule is a rule of intention, based on the proposition that a man may not derogate from his grant’. Ad hoc implied terms, as explained in Codelfa (at 353), give effect to the presumed intention of the parties, but the leading cases referred to in Codelfa, and Codelfa itself, concerned contracts where the principle of non-derogation was not relevant. Horsfall v Braye [1908] HCA 85; (1908) 7 CLR 629 at 668, 645–648, cited in Codelfa, involved a grant of land, and the two lines of authority were there brought together. … the rule in Wheeldon v Burrows is not a special rule of the law of conveyancing, but is only an illustration, in particular circumstances, of the operation of the ordinary rules governing implications in contracts: see Nelson v Walker [1910] HCA 27; (1910) 10 CLR 560 at 586–587; Sovmots Ltd v Environment Secretary … [1979] AC 144 at 175. In the passage from Nelson v Walker referred to by Handley JA in Wilcox (at 14), Isaacs J observed (at 586): ‘To imply a grant the same degree of certainty must exist as would justify the implication of a term in a contract.’ His Honour then cited the opinion of Lord Atkinson, speaking for the Judicial Committee in Douglas v Baynes (1908) AC 477, where his Lordship said (at 482): The principle on which terms are to be implied in a contract is stated by Kay LJ in Hamlyn v Wood [[1891] 2 QB 488 at 494] in the following words: ‘The Court ought not to apply a term in a contract unless there arises from the language of the contract itself, in the circumstances under which it is entered into, such an inference that the parties must have intended the stipulation in question that the Court is necessarily driven to the conclusion that it must be implied.’ Isaacs J then continued in these terms: As to what amounts to necessary implication, we have the authority of Lord Eldon in Wilkinson v  Adam [1812] EngR 144; [1 V&B 422], and James LJ in Crook v  Hill [(1871) LR 6 Ch App 311 at  315] for saying it means ‘not natural necessity, but so strong a probability of intention that a contrary intention cannot be supposed,’ or as Lord Chelmsford phrased it in the House of Lords: … not ‘necessarily susceptible of only one interpretation, but that it is sufficient if it is indicated in a way that excludes the probability of an opposite intention’. In Canon Kabushiki Kaisha v Green Cartridge Co (Hong Kong) Ltd [1997] AC 728 at 736–737, Lord Hoffmann, delivering the opinion of the Judicial Committee, referred to the speech of Lord Templeman in British Leyland Motor Corporation Ltd v Armstrong Patents Co Ltd [1986] AC 577 and observed that his Lordship ‘found an analogy in the principle that a grantor may not derogate from his grant. … The principle of non-derogation is however based upon the presumed intention of the parties. The rights derived from the principle must … have a consensual origin. It is the conveyancing equivalent of an implied term derived, in a broad sense, from the construction of the transaction into which the parties have entered.’ (Emphasis added.) 979

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This difference between a presumed intention and an inferred actual intention was explained with particular clarity by Mason J in Codelfa Construction Pty Ltd v  State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 346 when dealing with the difference between the implication of a term in a contract on the one hand and the rectification of a contract on the other. His Honour said: The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract. In each case the problem is caused by a deficiency in the expression of the consensual agreement. A term which should have been included has been omitted. The difference is that with rectification the term which has been omitted and should have been included was actually agreed upon; with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it — it is not a term that they have actually agreed upon. Thus, in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it. Rectification ensures that the contract gives effect to the parties’ actual intention; the implication of a term is designed to give effect to the parties’ presumed intention. The point I therefore seek to make is that the rule in Wheeldon v Burrows by which a grantor is bound, when he retains the putative servient tenement, to recognise an implied easement over that retained land in favour of the grantee of the land benefited, is based upon the presumed intention of the grantor to transfer to the grantee ‘all those continuous and apparent easements’ which the grantor has himself created when the putative dominant and servient tenements were in the one ownership. The grantor is thus not permitted to derogate from his own grant and, accordingly, the provision of the easement is an implied term of the grant. But in a case such as the present, to which Aldridge v Wright is said to apply, the purchaser of the putative servient tenement is a grantee and not a grantor. As a consequence, the principle of a grantor not being permitted to derogate from his grant has no direct application. Nevertheless, it seems to me that for that purchaser to take the servient tenement burdened by the implied easement which is the subject of the grant by the common grantor to the purchaser of the putative dominant tenement, it is still necessary for there to be imputed to the former purchaser an intention to take title subject to the burden of that easement. Or, to consider the matter in the context of implied terms, the party asserting that the purchaser of the putative servient tenement from the common vendor takes title subject to a Wheeldon v  Burrows easement must establish that, in accordance with the ordinary rules governing the implication of terms in a contract as established by cases such as Codelfa, there should be implied into the contract of sale from the common vendor to the purchaser of the putative servient tenement a term that the land being sold is subject to an implied easement in favour of the putative dominant tenement. The circumstances must be such that the probability that the implication of such a term was intended must be so strong that a contrary intention cannot be supposed. In my opinion, there is no evidence from which such an intention could be imputed to the McGraths in the present case. There is certainly no evidence from which any such actual intention could be inferred. The McGraths’ knowledge was no greater than that, over the years, Mr McGrath had from time to time, as a consequence of his general knowledge of the locality, observed the driveway being used over Lot 12 to gain access to the commercial building on Lot 6 while Mrs Chiplin owned Lots 6 and 12. One might accept, for present purposes, that had Lots 6 and 12 been under old system title, the authority of Aldridge v Wright may have carried the day in favour of the Campbells. According to Professor Butt in Land Law (2006, 5th ed) at  446, such an easement would

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be a legal and not merely an equitable interest. Professor Butt refers to the statement of Priestley JA in Dobbie v Davidson (1991) 23 NSWLR 625 at 646 to the effect that easements such as those arising under the doctrine of Wheeldon v Burrows are equitable, and suggests that this approach may be explained upon the basis that the easement in that case arose over Torrens title land and was, at the time of the litigation, unregistered. As an unregistered interest it could only be an ‘equitable’ and not a ‘legal’ interest. The finding by the primary judge in [71] that the Wheeldon v  Burrows implied easement in the present case brought about ‘in equity, the result that lot 6 had the benefit of, and lot 12 was burdened by’ may be explained in a similar way. Although the implication of a Wheeldon v Burrows easement is based on the principle that the grantor may not derogate from his grant, it has nevertheless been accepted that, in determining whether Thesiger LJ’s first rule applies, one is required to look carefully at the circumstances in order to ascertain, for instance, whether the relevant easement was ‘used by the owners of the entirety for the benefit of the part granted’. I have already referred to the statement of Isaacs J in Nelson v Walker at 586, which supports the proposition that in order to imply in the relevant grant that the grantee was to have the benefit of the easement used by the grantor over the part granted, the same degree of certainty must exist as would justify the implication of a term in a contract. The McGraths submitted that, consistent with the foregoing observations, a finding that a Wheeldon v Burrows easement existed in the present case was dependent upon whether, in the circumstances, it was possible to imply into the contracts for sale that the Campbells’ Lot 6 would have the benefit of a right of way over the driveway upon Lot 12 and that Lot 12 would be burdened accordingly. It was submitted that the McGraths’ knowledge that the registered 1926 ROW already existed over Lot 12 in favour of Lot 20 was relevant to the presumption of a common intention to that effect. The inference to be drawn from that knowledge, so it was submitted, was that the McGraths actually intended to acquire Lot 12 subject only to the 1926 ROW, of which they were aware, and not subject to a right of way in favour of Lot 6 of which they were unaware. Looking at  all the circumstances, the question is whether the McGraths’ (or at  least Mr McGrath’s) prior knowledge of the use of the driveway on Lot 12 to gain access to Lot 6 was of itself sufficient to imply a term in their contract with Mrs Chiplin that they were acquiring Lot 12 subject to a right of way over that driveway benefiting Lot 6. Although the Campbells submitted that such knowledge of itself might not be sufficient, the fact that the McGraths were aware of the simultaneous transfers by Mrs Chiplin of Lot 6 to the Campbells and Lot 12 to themselves, when added to their prior knowledge of the use of the driveway, gave rise to so strong a probability of a presumed intention on the part of the McGraths to acquire Lot 12 subject to a right of way benefiting Lot 6 ‘that a contrary intention cannot be supposed’. Does a Wheeldon v  Burrows easement as extended by Aldridge v  Wright trump the indefeasibility provisions of the RP Act? The answers to the questions posed in the previous paragraphs are relevant to the critical question of whether a Wheeldon v  Burrows implied easement over Lot 12 for the benefit of Lot 6, which as a result of the simultaneous transfers of Lot 6 to the Campbells and Lot 12 to the McGraths, gave rise to an equity or right in personam enforceable against the McGraths as registered proprietors of Lot 12 on the basis that they were personally bound to recognise that equity and give effect to it as an exception to the indefeasibility provisions of the RP Act. The governing provision of the RP Act establishing the indefeasibility of the estate of the registered proprietor of land under Torrens title is s  42(1) which is, relevantly, in the following terms: 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 981

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for the time being of any estate or interest in the land recorded in the 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 their folio, but absolutely free from all other estates and interests that are not so recorded except: (a1) in the case of the omission … of an easement subsisting immediately before the land was brought under the provisions of this Act or validly created at or after that time under this or any other Act or a Commonwealth Act. It was common ground that the exception referred to in sub-paragraph (a1) above had no application to the present case. It was further common ground that if the McGraths were to take title to Lot 12 subject to the right of way claimed by the Campbells, it could only be upon the basis that the principle of indefeasibility encapsulated by s 42(1), in the words of Mason CJ and Dawson J in Bahr v Nicolay (No 2) at 613 (omitting citations), did not preclude: a claim to an estate or interest in land against a registered proprietor arising out of the acts of the registered proprietor himself … Thus, an equity against a registered proprietor arising out of a transaction taking place after he became registered as proprietor may be in force against him … So also with an equity arising from conduct of the registered proprietor before registration … so long as the recognition and enforcement of that equity involves no conflict with ss 68 and 104 [of the Transfer of Land Act 1893 (WA), equivalent to ss 42 and 43 of the RP Act]. 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. In the joint judgment of Wilson and Toohey JJ in the same case (at 637), their Honours referred to the fact that in accepting the general principle of indefeasibility of title, the Privy Council in Frazer v Walker (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’. Their Honours then referred to the following statement of the Privy Council in the same case with respect to claims in personam: ‘The principle must always remain paramount that those actions which fall within the prohibition of ss 62 and 63 may not be maintained.’ The reference to ss  62 and 63 is a reference to the Land Transfer Act  1952 (NZ), which roughly corresponds to s 42 of the RP Act. Their Honours then said (at 638, omitting citations): ‘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 when those actions give rise to a personal equity in another. Such an equity may arise in conduct of the registered proprietor after registration. And we agree with Mahoney JA in Logue v Shoalhaven Shire Council that it may arise from conduct of the registered proprietor before registration.’ (Emphasis added.) In Mercantile Mutual Life Insurance Co Ltd v Gosper (1991) 25 NSWLR 32, Kirby P (at 36), after referring to the statement in Frazer v Walker at 580 that a registered proprietor is ‘exposed to claims in personam’, referred to the statement of Street J in Mayer v Coe [1968] 2 NSWR 747 at 754 (approved in Breskvar v Wall [1971] HCA 70; (1971) 126 CLR 376) that a registered proprietor is ‘subject to a personal obligation by which he may be bound in personam to deal with his registered title in some particular manner.’ As an equity may arise from events which occurred before registration, the Court is required to examine the pre-registration positions of the parties in equity in order to determine whether such an equity exists.

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Mahoney JA in Gosper also considered this issue and, after quoting extensively from the judgment of Barwick CJ in Breskvar v Wall, observed (at 41): What was said in Frazer v  Walker and Breskvar v  Wall in relation to equities enforceable against the registered proprietor was further considered by the High Court in Bahr v Nicolay (No 2). In that case, all members of the court accepted that, where a registered proprietor was bound in equity by matters affecting him personally, those equities could be enforced against him notwithstanding that he was registered as a proprietor of the land and the enforcement of those equities would, subject to what I shall say, be inconsistent with the nature of the title which prima facie registration had conferred upon him. (Emphasis added.) After referring to the passages from the joint judgment of Mason CJ and Dawson J on the one hand and Wilson and Toohey JJ on the other in Bahr v Nicolay (No 2), which I have quoted above, Mahoney JA made a number of observations arising out of those passages including the following (at 43): But, thirdly, not every right which, under the general law would be enforceable against the holder of the interest which the registered proprietors hold is enforceable against it under the Act. The cases which are so enforceable have been described as ‘personal equities’ and it will be convenient to use that term, though possibly inaccurately, to describe the rights which can in this way be enforced against a registered proprietor. His Honour then continued (at 45) in these terms: There has, I think, been no comprehensive definition of ‘personal’ equity for this purpose: the occasion for it has not previously arisen. The matter is, I think, to be decided upon considerations of substance rather than form or terminology. ‘Equity’ and ‘equitable interest’ refer, in Maitland’s sense, simply to the fact that the person involved may invoke the assistance of the equity court or equity principles to achieve the relevant relief. And every equity or equitable interest is, in a sense, personal … But this does not mean that all equities or all equitable interests are ‘personal’ in the sense here relevant. If, then, there is to be a distinction between different kinds of equities or equitable interests, it is relevant to look to the reasons of substance behind the distinction. Two suggestions at least emerge from the argument and the cases to which reference has been made: first, that the interests must not be inconsistent with the terms of policy of the Act; and, secondly, the ‘personal’ equities arise only from the acts of the new owner: see Breskvar v Wall (at 384–385). As to the last-mentioned matter, Mahoney JA observed (at 46) as follows: If it was the view of Barwick CJ [in Breskvar v Wall] that a ‘personal’ equity may arise only from the acts of the owner himself, that view has, in my respectful opinion, not received general acceptance. The judgment of their Lordships in Frazer v  Walker was delivered by Lord Wilberforce. His Lordship did not limit the ‘acts of a personal nature’ which could be relied upon to personal acts of the registered proprietor himself. He referred merely to ‘a claim in personam, founded in law or in equity for such relief as the court acting in personam may grant’ (at 585). And, I think, that the judges in Breskvar v Wall and Bahr v Nicolay (No 2) did not limit the matter in that way. Such a limitation would, in my opinion, be unsatisfactory but would result in the new owner retaining the registered estate in circumstances in which he should not. The fiduciary duty cases would, I think, provide an illustration of this. If the retention of the land by the new owner would constitute a breach of his fiduciary obligations, the registration would, I think, be set aside even if the new owner had not himself induced and procured the registration. 983

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In Gosper, Mahoney JA noted that the mere fact that relevant instrument was void for forgery did not of itself give rise to a personal equity. He thus said (at 47): 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. It is therefore necessary to determine whether there is anything in the facts, other than the fact of the forgery of the document, which gives rise to such an equity against the company. The company in question (Mercantile Mutual Insurance Ltd) was the mortgagee of the land of which Mrs Gosper was the registered proprietor. A forged variation of the mortgage was executed and registered. Because it was the mortgagee, Mercantile Mutual held the certificate of title, subject to the ordinary obligations affecting a mortgagee that has such possession or custody. It then produced the certificate of title to the Registrar General for the purpose  of procuring the requisition of the forged variation of mortgage. His Honour found that the company had no authority to produce or otherwise use the certificate of title for the purpose of enabling the variation to be registered. It had no implied authority as mortgagee under the valid existing mortgage standing in its name, and Mrs  Gosper gave no authority for that purpose. Whether or not its production of the certificate was negligent was beside the point: the fact was that Mercantile Mutual produced the certificate of title to facilitate the registration of the forged variation of mortgage without authority to do so. His Honour held that the company used the certificate of title in breach of its obligations to Mrs Gosper and that such use of the certificate was a necessary step in securing the registration of the forged variation. Accordingly, Mahoney JA concluded (at 49) that the registration of the forged instrument that has been produced by such a breach was sufficient to create in the relevant sense a ‘personal equity’ against the company in favour of Mrs Gosper. The obligations of a mortgagee, whether strictly fiduciary or not, were in his Honour’s opinion such that the mortgagee should not be allowed to retain a benefit (the forged variation) procured by an act which constituted a breach of such obligations. The forged variation of mortgage was therefore set aside. The purpose of referring so extensively to what Mahoney JA said in Gosper is to illustrate the point that in order for a ‘personal equity’ to be created in favour of the Campbells enforceable against the McGraths, it was necessary that some conduct on the part of the McGraths (or those for whom they were responsible) constituted a breach of an obligation owed to the party seeking the benefit of the equity or was otherwise unconscionable. Story v Advance Bank Australia Ltd (1993) 31 NSWLR 722 also involved a forged instrument. Gleeson CJ, with whom Cripps JA agreed, cited (at 736–737) the following passage from the judgment of Hayne J in Vassos v State Bank of South Australia [1992] V Conv R 54-443, where (at 65-180 to 65-181) his Honour said: 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 … In the present case … 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 is 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. In Story, Mahoney JA reiterated (at 739) the opinion he had expressed in Gosper that: ‘“personal equity” arose because the mortgagee had without proper authority made the title deed available for registration of the mortgage and that wrong enabled registration of the forged 984

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mortgage and was essential to the registration of it. In the relevant sense, the wrong allowed the registration to be effected.’ His Honour then observed that conduct on the part of the registered proprietor that would constitute unconscientious behaviour would be sufficient to give rise to a ‘personal equity’ in the relevant sense. Finally, in Grgic v  Australia & New  Zealand Banking Group Ltd (1994) 33 NSWLR 202, Powell JA, with whom Meagher and Handley JJA agreed, expressed (at 222–223) the following with respect to what constituted ‘a personal equity’ sufficient to be enforceable against a registered proprietor. His Honour said: ‘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 whose conduct he is responsible for, which conduct might antedate or postdate the registration of the dealing which it has sought to have removed from the Register.’ Under the former s 42(1)(b) of the RP Act, it was apparent from the decision of this Court in Australian Hi-Fi Publications (at 627) that an easement by implication has limited enforceability under the rights in personam exception to indefeasibility of title. Such an easement was enforceable only as between the proprietors of the dominant and servient lands which were involved in the transaction which gave rise to the easement. Further, so long as the registered proprietor of the servient land at the time the easement arose remained registered as proprietor, the registered proprietor of the dominant land could seek a court order directing the servient proprietor to take all steps necessary (including executing the appropriate documents and lodging them for registration) to secure the benefit of the easement by having it registered. However, unless the easement was registered in this way, once the servient land was transferred to a new registered proprietor taking without fraud, the easement could no longer be enforced. According to Woodman and Nettle, The Torrens System in New South Wales at 10,245, the position under s 42(1)(a1) is the same. Sections 46 and 47 of the RP Act describe formalities for creating valid easements, the assumption behind these formalities being that easements will be reduced to writing and registered, but that until that happens an easement cannot be said to be ‘validly created’. Accordingly, by limiting omitted easements to those that are ‘validly created’ under the RP Act or some other Act, s  42(1)(a1) precludes implied easements from being enforced against a registered transferee of that land or interest. However, according to the learned authors, it does not preclude the dominant owner from enforcing the implied easement against the servient land or interest where the ownership of the servient land or interest has not changed since the circumstances that gave rise to the implication of the easement. In the 5th edition of Land Law, Professor Butt expresses a similar view (at 779). Although s 42(1)(a1) precludes implied easements from being enforced against a later registered proprietor of the servient land, it should not negate the dominant owner’s right to enforce the implied easement against the servient land if its ownership has not changed since the circumstances that gave rise to its implication. The authority for this proposition cited in footnote 515 is the decision of the primary judge in the present case. Yet the legal basis as to why a Wheeldon v Burrows easement binds in equity the registered proprietor of the retained land notwithstanding the indefeasibility of provisions of the RP Act has not always been made clear. It was not in issue in Australian Hi-Fi Publications for, as Mahoney  JA noted at  the commencement of his judgment (at 620), only one question was argued on the appeal in that case. That was, whether a Wheeldon v Burrows easement not noted on the relevant certificate of title can be enforced against a person who, after the creation of that easement by his predecessor in title, became the registered proprietor of the servient tenement under the RP Act. I have already referred in [75] above to what, to me, is the true jurisprudential basis of a Wheeldon v Burrows easement at common law. Subject to the ultimate effect of this Court’s 985

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recent decision in Williams (see [61] above), it would seem that a common owner (registered proprietor) is bound by a personal equity to recognise that he or she has burdened the land retained by him or her (the servient tenement) by transferring to another that part of the land having the benefit of an implied easement which he or she has created (the dominant tenement) while both tenements were in common ownership and which it was his or her presumed intention to transfer with that benefit attached. Having impliedly granted to the transferee of the dominant tenement the benefit of that easement, it would be unconscionable for him or her to derogate from that grant. The Campbells thus submit that the implied Wheeldon v Burrows easement in favour of Lot 6 arose upon the transfer by Mrs Chiplin of that lot to the Campbells. Had Mrs Chiplin retained ownership of Lot 12, the Campbells would have been entitled to enforce that interest against her. Furthermore, it was recognised as a consequence of the decision in Australian Hi-Fi Publications that if Mrs Chiplin had retained ownership of Lot 12 and subsequently sold it to the McGraths, they would have taken the land free of the implied right of way upon the registration of the transfer. But, it was submitted, the simultaneous transfers of Lot 6 to the Campbells and Lot 12 to the McGraths gave rise both to an implied right of way in favour of Lot 6 and an implied reservation of the right of way out of Lot 12. As I have already acknowledged, the foregoing proposition may well be the case with respect to land under old system title. But in my opinion, the simultaneous transfers alone could not give rise to a ‘personal equity’ binding upon the McGraths as the registered proprietors of Lot 12 in circumstances where they have not in any way contributed to the creation of the implied easement or conducted themselves in any way which could be regarded as unconscionable. In particular, their reliance upon their strict legal rights – that is, the indefeasibility of their title to Lot 12 effected by s 42(1) of the RP Act – was in no way unconscionable. On the contrary, the position in the present case is, if anything, analogous to the forgery cases where the registered proprietor of the relevant interest in respect of which equitable relief is sought, has done nothing to contribute either to the forgery or to the registration of the forged instrument. There must, in my opinion, have been some conduct on the part of the McGraths or those for whom they were responsible which would make it unconscionable for them to retain the benefit of the servient land free from the burden of the claimed right of way. In my view, there was no such conduct. Thus the mere simultaneous transfer of the two lots by Mrs Chiplin to the Campbells and McGraths respectively, and to the knowledge of each, was, in my opinion, insufficient to give rise to an equity binding upon the McGraths. This is so notwithstanding that Mr McGrath was generally aware that the driveway over Lot 12 had been used in the past to gain access to the rear of Lot 6, due to his familiarity with the locality. I would add this. The Aldridge v  Wright extension to a Wheeldon v  Burrows easement is, as I have already noted, dependent upon the presumed intention of all three parties that the easement is to benefit the dominant tenement and to burden the servient tenement. This presumed intention is the basis for an implied term in the grant by the common vendor to the transferee/purchaser of each tenement. It arises by operation of law. But mere knowledge on the part of the transferee of the putative servient tenement that both tenements are to be transferred by the common vendor simultaneously does not involve any relevant conduct on the part of that transferee. He or she has not created the easement and he or she is not a party to the transfer to the purchaser of the putative dominant tenement. Although aware that such a transfer is to occur, the purchaser of the putative servient tenement is not only unaware of the terms of the contract between the common vendor and the purchaser of the putative dominant tenement but also has no control over those terms or, for that matter, when the transfer is to take place. There was no suggestion in the present case that the simultaneous transfers were due to any request or conduct on the part of the McGraths. As far as one can tell, it came about solely for the benefit and at the insistence of Mrs Chiplin. 986

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In these circumstances there was no conduct on the part of the McGraths to which any equity could attach to bind them personally. One further aspect of the personal equity issue should be mentioned. The relief granted by the primary judge to the Campbells was analogous to rectification of the Register. The equitable basis of the remedy of rectification of a contract is that in its executed form the contract does not represent or embody the actual common intention of the parties: Maralinga Pty Ltd v Major Enterprises Pty Ltd [1973] HCA 23; (1973) 128 CLR 336 at 350; Codelfa at 346; see [74] above. The requirement of an actual, as distinct from a presumed, common intention in the context of the equitable remedy of rectification, it seems to me, may be applied by analogy to the present case. In other words, no relevant equity arises to bind the McGraths unless it is established that it was the actual common intention of all three parties that Lot 6 should have the benefit of, and that Lot 12 should be subject to the burden of, a right of way over the driveway. In my view, even if that was the intention of Mrs Chiplin and the Campbells, it was not that of the McGraths. Finally, I come to the recent decision of this Court in Williams v  State Transit Authority of New South Wales. It is true, as the primary judge observed, that this case involved an easement by prescription. Mason P, with whom Sheller JA and myself agreed, noted (at 297 [111]) that text writers (including Professor Butt) had expressed the view that prescriptive easements based upon the doctrine of lost modern grant did not trump the registered proprietor’s indefeasible title by means of the statutory exception in s 42(1)(a1) of the RP Act. At 300 [129] the President observed that it was ‘to pile fiction upon fiction to extend the doctrine of lost modern grant into the Torrens system, because (assuming no relevant exception to s 42 or its equivalents) that system contemplates title at law as arising only upon registration.’ Special leave to appeal to the High Court from this Court’s decision in Williams was refused on 29 April 2005. In the 5th Edition of Land Law at 779, Professor Butt refers to Williams as requiring reconsideration of the in personam enforcement of (unregistered) implied easements. The learned author observed that this Court in Williams refused to recognise the in personam enforcement of prescriptive easements. He continued: ‘Since prescriptive easements and implied easements share a common feature arising by operation of law and without any registrable dealing, refusal to recognise the in personam enforceability of prescriptive easements must logically cast doubt on the in personam enforceability of implied easements.’ In footnote 518 to the above passage, Professor Butt noted that the primary judge in the present case declined to apply this logic. However, the learned author observed that ‘Given the relevant similarities between prescriptive and implied easements, it is difficult why it [the logic] should not apply.’ In my opinion, there is much force in Professor Butt’s observations about the effect of Williams upon implied easements of the Wheeldon v  Burrows type. As he observes, and as I have endeavoured to demonstrate, such an implied easement arises out of the common intention of the relevant parties, which is presumed by operation of law. Prescriptive easements arise in a similar way. If prescriptive easements are trumped by the indefeasibility provisions of the RP Act, logic requires that those provisions should apply to implied easements in the same way. However, it is unnecessary for me to express a concluded view on this issue. Turning to the Aldridge v  Wright exception to the second rule articulated by Thesiger LJ in Wheeldon v Burrows, which presumes an implied reservation by the grantor over the servient tenement where there is a simultaneous transfer of both the putative dominant and servient tenements by the grantor to two separate ownerships, I do not consider that it is sufficient to give rise to a ‘personal equity’ which bound the McGraths and which the Campbells were entitled to enforce against them. This is so notwithstanding the knowledge of the McGraths of the past use of the driveway over Lot 12 to gain access to the businesses conducted in the building upon Lot 6 and of their knowledge of the simultaneous transfer of Lot 6 to the Campbells.

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Accordingly, for the aforementioned reasons, in my view the primary judge erred in his finding that the present case came within the in personam exception to statutory indefeasibility so that the RP Act did not prevent the enforcement by the Campbells against the McGraths of an implied right of way over the driveway on Lot 12.

Conclusion It follows from the foregoing that, in my opinion, the following orders should be made: a) Appeal allowed.

Commentary 14.27  The plaintiffs, Mr and Mrs Campbell, claimed an implied right of way arguing that

when they bought the land, along with the defendants, from a single vendor, Mrs Chiplin, a right of way existed. The plaintiffs argued, inter alia, that a continuous and apparent right over their land existed which was reasonably necessary to the enjoyment of the land. The defendants argued, inter alia, that the plaintiffs lost any implied grant that they might have had when they entered into an oral licence with the defendants to use the right of way. Tobias JA in the New South Wales Court of Appeal concluded that the rule in Wheeldon v Burrows is based upon the presumed intention of the grantor to transfer to the grantee ‘all those continuous and apparent easements’ that the grantor had himself created when the putative dominant and servient tenements were in the one ownership. In light of this his Honour concluded that on the facts, the Campbells’ prior knowledge of the use of the driveway on Lot 12 to gain access to Lot 6 was sufficient to imply a term in their contract with Mrs Chiplin that they were acquiring Lot 12 subject to a right of way over that driveway benefiting Lot 6. This knowledge, combined with the knowledge of the simultaneous transfers by Mrs Chiplin of Lot 6 to the Campbells and Lot 12 to the McGraths, gave rise, according to his Honour, to a strong probability of a presumed intention on the part of the McGraths to acquire Lot 12 subject to a right of way over that driveway benefiting Lot 6. To reach this conclusion, the probability must be so strong that a contrary intention may not be supposed. Where it is established, a term will be implied into the contract of sale to the effect that the land is sold subject to an implied easement in favour of the dominant tenement. To reach such a conclusion, the probability that such an implication was intended must be so strong that a contrary intention cannot be supposed. His Honour concluded at [78] that there was no evidence from which such an intention could be imputed to the McGraths. Mere knowledge of the use of the driveway on Lot 12 to gain access to Lot 6 was insufficient. Tobias JA further concluded that where such an easement can be established, it will bind a registered proprietor because having impliedly granted to the transferee of the dominant tenement the benefit of that easement, it would be unconscionable for him or her to derogate from that grant. While it was clear that the simultaneous transfer alone could not generate the personal equity, Tobias JA held that the transfers in combination with other positive acts may generate the equity. On the facts, no such additional acts existed and this meant that there was, in the words of Tobias JA at [113], ‘no conduct on the part of the McGraths to which any equity could attach to bind them personally’.14 The Torrens framework has inevitably altered the circumstances in which the Wheeldon rule was first 14. See  also McKeand v  Thomas [2006] 12 BPR 98,201 where Campbell J at  [65] approved of the conclusions of Tobias JA (with whom Giles and Hodgson JJA agreed) in McGrath v Campbell on the issue of implied easements of necessity. 988

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recognised. It has been suggested that as a consequence, unregistered implied easements may only be enforced against a registered proprietor where their existence is protected by legislation. As outlined by G Taylor, ‘Easements Implied in a Grant: Away with Continuous and Apparent’ (2012) 38(2) Monash University Law Review 128 at 139: In the context of near-universal registration, which did not exist in the time and place where the Wheeldon rule was first enunciated, that rule should deal only with how easements arise as a result of transactions, not how their existence is recorded. The decision of the legislature of each State on the question of the relationship between unregistered implied easements and the register must take precedence over that of the Court of Appeal a century and a third ago. The Torrens system exists for the purpose of providing notice of interests, including to later purchasers from the original grantor, who are the most obvious parties who will need it — not the rule in Wheeldon.

This makes sense, given focus of the indefeasibility provisions upon a secure title unencumbered by the existence of prior equitable interests. It has received recent approval by Duffy J in the New Zealand High Court in Kinara Trustee Ltd v Infinity Enterprises NZ Ltd [2019] NZHC 1526, who stated at [69]: … the better legal view is that once there has been a purchase with indefeasible title this will extinguish any equitable easement that might otherwise have survived. This is because an indefeasible title is one that is free from all interests and encumbrances other than those registered against the title. Once a purchaser acquires such title it would necessarily follow that any prior existing equitable easements that cannot qualify for recognition under one of the exceptions must necessarily be extinguished or permanently severed from the title. Such an outcome seems to me to be a logical consequence of the indefeasibility principle.

Easements arising from construction 14.28  An easement may be implied from a construction of the express terms of a particular transfer, conveyance or lease. This stems from the general process of constructing the reasonable intentions of specific words within conveyancing documents. Where land is described as adjoining or abutting a road or land owned by a vendor, there is an implied assumption that the description indicates an intention to confer a right of way over that lane or road. Where such a description exists, the vendor is estopped from denying the existence of an implied right of way in favour of the purchaser. Such an estoppel would only be precluded where there is a clear term within the transfer that no easement can arise: Nickerson v Barraclough [1981] Ch 426. 14.29  The scope of this principle was discussed in Dabbs v Seaman (1925) 36 CLR 538, which is extracted below.

— Dabbs v Seaman — (1925) 36 CLR 538 Facts: Seaman bought land which fronted, to the south, onto Shirley Road and to the north on to Bayswater Road. Access to these roads was, however, prevented by a small strip of land which was owned by another person. When Seaman acquired the land, he subdivided it into two one-acre lots. He sold one lot to Smith, reserving a 20-foot strip along the eastern boundary so that he would be able to access Shirley Road from the land that he had retained. Without this reservation, the land retained would have been landlocked. This reserved strip was described as a ‘lane’ on the plan of subdivision. Seaman then purchased other land which provided access to the road so that the reserved land was no longer vital. The laneway was too narrow to sell so Seaman purchased land to the west with the aim of joining both blocks and 989

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creating a bigger block. Dabbs inherited land which adjoined the reserved lane. The certificate of title to the land that Dabbs inherited was described as abutting the 20-foot lane. There was no express reference to any easement. Dabbs tried unsuccessfully to purchase the lane and the adjoining land from Seaman. Seaman then applied to the Registrar for a consolidation of the two titles and the removal of a reference to an abutting lane on the title held by Dabbs. Dabbs objected to this. The Supreme Court of NSW concluded that no easement existed. Dabbs appealed to the High Court which concluded that an implied right of way arose on the basis of a natural construction of the description in the certificate of title as the land ‘abutting a laneway’. Isaacs J: … Construction — What, then, is the ‘land therein described’? It was argued that that could only mean the physical substance contained within the metes and bounds marked red without reference to anything beyond those limits. I do not agree with that argument. The ‘land therein described’ means the parcel delimited with all the inherent characteristics with which the terms of delimitation invest it. I say ‘inherent’ in order to distinguish them from characteristics that are mere additions distinct in themselves but attached by some act quite independent of the original quality of the subject land. For instance, an easement to pass through a neighbour’s garden is a superadded right of way and not an inherent characteristic of the subject land. Such an easement would properly fall within the terms of sec 47 of the Real Property Act. But a right of access to the sea or a navigable river is an inherent quality of a riparian tenement. In the present case the ‘land therein described’ is the parcel edged red bounded on the south by Shirley Road — a public road — and bounded on the east by a ‘twenty feet lane.’ Its contiguity to a lane 20 ft wide is an inherent characteristic of the land described. The parcel, if Shirley Road or the lane were eliminated, would possess a quite different character. It would cease to be a parcel of which the owner is a frontager to a public road or a private lane (see Stirling LJ in Mellor v Walmesley). The accessorial right is included in the grant itself, and is evidenced by the certificate without a special memorial or specification (James v Stevenson). The principle recognising the right in such circumstances has been settled in many cases, of which Roberts v  Karr is the root and Furness Railway Co v  Cumberland Co-operative Building Society is the most authoritative. In Roberts v Karr Lawrence J says: ‘If a man buys a piece of ground described as abutting upon a road, does he not contemplate the right of coming out into the road through any part of the premises?’ Mansfield CJ says:— ‘If then he afterwards prohibits the defendant from coming there, is it not a sufficient answer to say, you have told me in your lease, this land abuts on the road: you cannot now be allowed to say that the land on which it abuts is not the road.’ Those passages were quoted with approval by Kelly CB for himself and Cleasby B in Espley v Wilkes. There a lease described the land as ‘bounded on the east and north by newly-made streets’ &c, and added ‘a plan whereof is endorsed on these presents.’ The Chief Baron thought the plan so important as to incorporate it pictorially in his judgment. There, as here, the ‘street’ on the east was a piece of rough waste ground, and it so remained for the most part impassable as a road down to the time of the trial, that is, about twenty years. The Chief Baron said that the lessor was estopped from denying that there were streets which were in fact ways along the north and east fronts, and adds: ‘We should have thought this point clear upon the obvious and necessary construction of the lease and plan’; and then adds that Roberts v Karr was a direct authority to that effect. It is important to observe that the ‘estoppel’ arises on the ‘construction’ of the deed. It is not unimportant to observe that Kelly CB says: ‘Here the land is described as abutting upon newly-made streets.’ Unless land shown on a certificate by a plan only is thereby ‘described,’ it is not described at all, and sec 40 would have no operation upon it. And if it is thereby described, as it must necessarily be, the plan showing the contiguity of the lane to the subject land brings the case precisely within the authorities cited. Lord Selborne in Furness Railway Co v Cumberland Co-operative Building Society so considered the effect of a plan. In the Furness Railway Co’s Case Lord Selborne C and Lord Blackburn affirmed both the cases mentioned. Lord Fitzgerald also rested on some general words: ‘Together with all buildings, ways, advantages’ &c. But the opinion of the other learned 990

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Lords was quite independent of those words, as was the judgment of Kelly CB and Cleasby B independent of similar words in Espley v Wilkes. Those general words are additional to, and not explanatory of, the description of the subject land. Lord Selborne says: ‘How is it possible to regard the description of this land as bounded by streets as otherwise than most material to the subject of the contract and to the bargain between the vendor and purchaser?’ In International Tea Stores Co v  Hobbs, Farwell  J reaffirmed the doctrine of Roberts v  Karr by saying ‘the fact that the conveyance states that the property is bounded by a roadway constructed and leading to the yard estops the defendant from saying there is not in fact a roadway which necessarily passes the door in the plaintiffs’ wall opening on to the yard.’ Mellor v Walmesley is an important and instructive case. The whole Court agreed that by describing the land conveyed as ‘situate on the seashore’ the grantor was estopped from saying that some land belonging to him intervening between the actual seashore and the land conveyed was not itself seashore. Vaughan Williams LJ says: ‘The description itself is a description of a piece of land situate on the seashore of certain dimensions which are set forth.’ He did not, nor did Stirling LJ, carry the estoppel so far as to include the intervening strip as part of the land conveyed, though Romer LJ did go so far. The principle has been acted upon in New South Wales in Little v Dardier and Bradley v McBride, and, doubtless, property rights in many cases rest upon those decisions. Estoppel — In view of the argument as to the estoppel established by the doctrine of Roberts v Karr, it is necessary to say a few words respecting its nature. Estoppel in that case simply means that the conveyance or lease or other instrument is based upon a conventional state of facts, and therefore to dispute that conventional state of facts in order to set up another state of facts is an attempt to destroy the very basis of the transaction. In Ashpitel v  Bryan in the Exchequer Chamber Pollock CB says:— ‘Estoppel may arise without any mistake or misleading, as by matter of recital in a deed executed by two parties. So here, for the purposes of the transaction in question, the parties agreed that certain facts should be admitted to be facts as the basis on which they would contract, and they cannot recede from that.’ The governing principle is stated in Blackburn’s Contract of Sale, 3rd ed, p 204, that ‘when parties have agreed to act upon an assumed state of facts, their rights between themselves are justly made to depend on the conventional state of facts, and not on the truth.’ This was adopted and applied in the Exchequer Chamber in McCance v London and North-Western Railway Co. In Horton v Westminster Improvement Commissioners Martin B states it thus: ‘The meaning of estoppel is this — that the parties agree, for the purpose of a particular transaction, to state certain facts as true; and that, so far as regards that transaction, there shall be no question about them.’ Lord Blackburn himself so held in Burkinshaw v Nicolls. Lord Mansfield in Goodtitled Edwards v Bailey said: ‘No man shall be allowed to dispute his own solemn deed.’ But a question may always arise whether there has been adopted, for the purposes of an instrument and as its conventional basis, any given state of facts. That must be determined upon its construction. Brett LJ expresses this truth in Simm v Anglo-American Telegraph Co, where, after speaking of other kinds of estoppels in business and daily life, he says:— ‘I speak not of that estoppel, which is said to arise upon a deed of conveyance or other deed of a similar nature. I incline to think that when the word estoppel is used with reference to deeds of that kind, it is merely a phrase indicating that they must be truly interpreted.’ If on the true construction of a conveyance it is found that a recorded state of facts is part of the very thing effected by the instrument, then the party so effecting it cannot dispute the state of facts without disrupting the transaction itself. If he succeeded, he would be leaving something other than was originally done. In the process of construction a Court may be required to examine the document to determine whether that state of facts is clearly enough adopted. Onward Building Society v  Smithson shows that it must be definitely stated. But that must not be misunderstood. Bowen LJ in Low v Bouverie said:— ‘An estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be 991

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such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed.’ A recital may satisfy the claim to an estoppel (Bowman v Taylor), or it may not (South-Eastern Railway Co v Warton). I apprehend it is to the former class of cases that Lord Phillimore (then Phillimore LJ) adverted in Poulton v Moore. The Lord Justice said: ‘With regard to the question of estoppel by recital in a deed, it is truly said that the law of estoppel in the case of real property is different from the law of estoppel as between persons.’ The expression ‘as between persons’ I understand to mean ‘in pais.’ The doctrine of Roberts v Karr and the line of cases supporting it, does not refer to recitals: it refers to the very essence of the transaction, the description of the thing granted. That must, ex vi termini, be the basis — perhaps a true basis, perhaps a conventional basis — but at  all events the indisputable basis, of the transaction. It cannot be disputed. No inquiry is permissible once that stage is reached. To permit such an inquiry would be to permit a man to derogate from his grant (per Vaughan Williams LJ in Mellor v Walmesley). The rule that a man may not derogate from his grant is a rule of law and not a rule of equity. It is quite different from the obligation of a grantor arising from his covenant which might give rise to equitable considerations (Cable v Bryant). The obligation of a grantor not to derogate from his grant, as explained by Lord Parker (when Parker J) in Browne v Flower, is altogether independent of those obligations which arise from the express or implied creation of easements. Lord Loreburn for the Privy Council in Lyttleton Times Co v Warners Ltd said: ‘The maxim that a grantor cannot derogate from his grant expresses the duty ordinarily laid on a man who sells or leases land.’ That duty here arises upon the terms of the grant operated upon by the statute. The result, so far, is that the estoppel relevant to this case is the estoppel which as a rule of law arises, not, it is true, upon the operative words of the transfer or certificate, but upon the true construction as to the land transferred of the appellant’s certificate founded on the transfer by Jenkins by direction of the respondent. The construction being established that, as an essential part of the transaction and the certificate, the land is described as fronting a 20 ft lane on land belonging then to Jenkins or Seaman and now to Seaman, it is not permissible to Seaman to contradict or impugn that conventional state of facts. In order to test the position of the present appellant, suppose immediately after Smith became the registered proprietor Seaman had set up his present claim, basing it as here on the alleged fact that the lane had been intended solely for the residual part of lot 1, is it not plain he would have failed? Even if he had proved Smith’s knowledge of that fact, he would have failed. The answer would have been that he had nevertheless accepted for the purpose of that transaction the conventional fact that the land transferred was to have the 20 ft lane abutting upon it. The words of Mansfield CJ in Roberts v Karr would have applied, namely: ‘But supposing that Pratt, which I do not believe, had in his mind the intent to reserve this land, he could not consistently with what appears upon the face of these deeds, prevent the defendant from opening his door into the street; because he has described the defendant’s land in his lease as thirty-six feet nine inches in breadth, and abutting on the street.’ Unless by reason of some recognised head of equity jurisprudence, such, for instance, as mutual mistake, the instruments were rectified, the claim must have been disallowed (Creelman’s Case). The appellant stands in the same position now as Smith did then (Little v  Dardier; Phillips v  McLachlan; Assets Co v  Mere Roihi). Assuming, what is not proved, that the lane was intended solely for the residual land, and assuming the appellant was told so, how could that affect her rights in respect of Smith’s land according to the certificate? Those rights were rights of grant depending solely on the subject described, and not dependent on covenant or any other purely personal obligation of Seaman. Cable v  Bryant applies. But still more authoritatively is the point decided in Sarat Chunder Dey v Gopal Chunder Laha. Lord Shand for the Judicial Committee stated the law very distinctly; which is correctly abstracted thus in the last paragraph of the head-note: ‘Where a mortgagee has a good title by estoppel, he can give a good title to a purchaser under 992

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a mortgage sale, even though the purchase is made with knowledge of the circumstances to which the estoppel applies.’ It needs hardly be said that that is not based on any special position of a mortgagee as distinguished from an absolute transferee, but upon the general law of estoppel as applied to grants. So far it is clear that Seaman is estopped by his transfer and by Dabbs’ certificate from diminishing even by a wall the space of 20 ft described as a lane. Dabbs’ land is entitled to that clear space to the east … I am clearly of opinion the appeal should be allowed. Starke J: … Under the general law, the cases decide that if land — particularly building land — is conveyed described as abutting on streets or ways and the land granted is separated from the streets or ways by a strip of land belonging to the grantor, the effect is that the grantee has a right of way over the strip to the road (see Theobald, Law of Land, p 102). Lord Selborne says he is ‘bound to this effect, that the purchaser, his heirs and assigns,’ shall have the ‘use of those streets’ or ways. ‘How is it possible to regard the description’ of the land ‘as bounded by streets as otherwise than most material to the subject of the contract and to the bargain between the vendor and purchaser? Building land abutting upon a street means having access to and fro by that street’ (Furness Railway Co v Cumberland Co-operative Building Society; Roberts v Karr; Espley v Wilkes; Mellor v Walmesley; Donnelly v Adams). It makes no difference that the land in the conveyance is described by reference to a plan attached to it (Furness Railway Co v  Cumberland Co-operative Building Society; Rudd v  Bowles). Nor does it make any difference that the abutting land is described as a street or way or as a lane — which is only a narrow passage or way — or even as a narrow strip coloured on an attached plan, running along a boundary of the land (Rudd v Bowles). Sometimes these decisions have been referred to the principle that a man must not ‘derogate from his own grant’ and at other times to the principle that a man is ‘estopped from denying that there are streets which are in fact ways.’ (See the cases cited supra, and Gale on Easements, 9th ed, p 110; Goddard on Easements, 8th ed, p 132.) These two principles are not quite the same, for in the case of the former a grant is implied from the description contained in the conveyance, whilst ‘estoppel arises’ according to Lord Halsbury LC ‘where you are precluded from denying the truth of anything which you have represented as a fact although it is not a fact’ (Farquharson Brothers  &  Co v  King &  Co), or, more accurately, where, in the words of Lord Blackburn, the rights of the parties are regulated, ‘not by the real state of the facts, but by that conventional state of facts which the … parties agree to make the basis of their action’ (Burkinshaw v Nicolls; cf Gale on Easements, 9th ed, pp 152, 153). But the distinction in theory is unimportant, if the benefit of the estoppel enures, as clearly it does, for the benefit of the grantee and his transferees or assigns (Taylor v Needham — a case of estoppel by deed; Wood v Seely — a case of estoppel in pais; Furness Railway Co v Cumberland Co-operative Building Society — the case of an assignee; Mellor v Walmesley — the case of an assignee; Rudd v Bowles — the case of a mortgagee; Sarat  Chunder Dey v  Gopal Chunder Laha (to  which my brother Isaacs has referred me): see also Spencer Bower, Estoppel by Representation, sec 173, p 149). Consequently, if this were a case of a conveyance under the general law, Smith would have been entitled to a right of way along the 20 ft lane abutting on the land transferred to him by Jenkins at the direction of Seaman. And in Little v Dardier, decided in the year 1891, these principles were applied to land under the Real Property Act. That decision was, in my opinion, right, either because the grant of a right of way was implied from the words and description used in the transfer, or because an equitable claim or right to the way arose by reason of estoppel (Barry v Heider). And in any case it would be difficult to depart from a decision which has been acted on for so long a time and upon which possibly many titles depend. The remaining question is whether Smith’s rights over the lane in question were transferred to the appellant Emily Dabbs. Smith died, and the Public Trustee became his legal personal representative. By transfer in the month of April 1922 the Public Trustee transferred all his 993

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estate and interest in all the land mentioned in Smith’s certificate of title to Emily Dabbs, and she was, by endorsement on that certificate, registered as proprietor of the land. But the lane was not expressly mentioned in the transfer, nor was any right of way over it expressly given. What is the effect of that transfer? It purports to transfer a parcel of land described in a certificate of title, which discloses, upon examination, that the land abuts on one of its sides on the lane. Under the general law a grant of land passed all that was ‘legally appendant or appurtenant thereto’ without the words ‘with the appurtenances’ (see Norton on Deeds, p 249). In practice ‘general words’ were usually added so as to pass all appurtenances enjoyed with the land. But in New  South  Wales, as in England, legislation has rendered this addition unnecessary (Conveyancing Act 1919, sec 67). It may be that the same result has been achieved under the Real Property Act by the definition of land in sec 3: ‘In the construction and for the purposes of this Act,’ the section  provides ‘and in all instruments purporting to be made or executed thereunder (if not inconsistent with the context and subject matter) … the following terms shall bear the respective meanings set against them:— … Land — Land, messuages, tenements, and hereditaments corporeal and incorporeal of every kind and description or any estate or interest therein, together with all paths, passages, ways, watercourses, liberties, privileges, easements, plantations, gardens, mines, minerals, quarries, and all trees and timber thereon or thereunder lying or being unless any such are specially excepted’ (cf Ex parte Cuningham; In re M’Carthy). And the title of the servient tenement is subject to any easement existing over the land although the same has not been registered (Real Property Act, secs 42, 47). But it is unnecessary to decide the point because Smith’s representative has transferred to Emily Dabbs a piece of land described in his certificate of title by means of a plan, as abutting on the lane. Now, if Smith’s representative had owned the lane he could not, as we have seen, have denied the right of Emily Dabbs to use it. On similar principles, if Smith’s representative has a right of way over the lane, incident to the land which he sold to Emily Dabbs, then, if he has not expressly or impliedly granted that right to her, he is estopped from denying, and must be taken to have granted to her the right of way he had in or over the land (cf Cooke v Ingram). Emily Dabbs thus succeeds in establishing her right by the application of legal principles to the forms of transfers executed in this case, but somewhat, I am afraid, at the expense of justice. She never bargained for a right of way over the lane at the time of the purchase, and the learned Judge who tried the action was satisfied that she had been informed that she was buying the one acre of land and not any right to or over the lane. But a right of way over the lane was in point of law, in my opinion, granted or transferred to her, or must be assumed to have been so granted or transferred, and consequently her appeal must be allowed. Appeal allowed with cost.

Commentary 14.30  The conclusions of the High  Court in Dabbs v  Seaman make it clear that an equitable easement, as opposed to an implied easement arising under general law, may arise under estoppel grounds in circumstances where land is, on a true construction, described as ‘abutting’ a laneway. In such a situation, the grantor cannot contradict or impugn the state of affairs by denying the validity of the easement. As outlined by Starke J at 559 the grant in such circumstances is valid: … either because the grant of a right of way was implied from the words and description used in the transfer, or because an equitable claim or right to the way arose by reason of estoppel (Barry v Heider). And in any case it would be difficult to depart from a decision which has been acted on for so long a time and upon which possibly many titles depend.

The application of Dabbs v Seaman in Victoria is subject to s 96(2) of the Transfer of Land Act 1958 (Vic), which states the following: 994

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Mention of an abuttal in any folio of the Registrar shall not give title to the abuttal or be evidence of the title of any person who is referred to in the description as owner or occupier of the land upon which any abuttal stands or of any land constituting an abuttal.

In other states, courts have interpreted this decision narrowly, concluding that it cannot apply in circumstances where the servient tenement to which the easement applies does not come within the Torrens system.15 In Bellevue Crescent Pty Ltd v Marland Holdings Pty Ltd (1998) 43 NSWLR 364, Young J stated at 372: Anyone who relies on Dabbs v Seaman in the light of its subsequent history is a bold person. From Jobson v Nankervis (1943) 44 SR (NSW) 277; 61 WN (NSW) 76 onwards it has been considered that Dabbs v Seaman is a very special case and must be closely confined because it is outside all general principles.

By contrast, Handley JA at  [15] in Lake Macquarie City Council v  Luka, described the decision in Dabbs v  Seaman as ‘settled law’. Subsequently, in Weber v  Ankin [2008] NSWSC 106, White J applied Dabbs v Seaman on the facts, finding in favour of a right of way where land was described as abutting a lane. See also: The Owners Strata Plan No 61233 v Arcidiacono [2019] NSWSC 1307 at [238].

Easements arising under the non-derogation principle 14.31  All of the categories of implied easements discussed above will apply in the context of an easement grant. However, in the context of an easement reservation, the categories are not as extensive. In accordance with the basic principle of non-derogation of grant, the only form of easement that can be impliedly reserved is the easement of necessity. Thus, a grantor is not entitled to infer rights that diminish the scope of a grant of land beyond those that are expressly reserved or those that are absolutely necessary. 14.32  This rule was outlined in Wheeldon v  Burrows (1879) 12 Ch  D 31, which is extracted below.

— Wheeldon v Burrows — (1879) 12 Ch D 31 Facts: Samuel Tetley owned property in Derby which included vacant land with a street frontage and a silk factory with workshops at the rear which abutted onto the vacant land. The windows of the factory opened onto that land. Tetley subsequently sold the vacant land ‘together with all walls, fences, sewers, gutters, drains, ways, passages, lights, watercourses’ and ‘easements, and appurtenances whatsoever to the said piece of land and hereditaments belonging or in anywise appertaining’ to the plaintiff’s husband. When Tetley sold the land he did not expressly reserve any right over the land. Subsequently, Tetley contracted to sell the silk factory and workshop to the defendant. The defendant subsequently argued that he had the right to light from the windows so that he could, in effect, prevent the plaintiff from obstructing the windows by building on the vacant land. The court at first instance found that because Tetley had not expressly reserved such a right when selling the vacant land to the plaintiff, the right could not subsequently be impliedly granted to the defendant when he purchased the silk manufactory and attached workshops.

15. See Cowlishaw v Ponsford (1928) 28 SR (NSW) 331; Bellevue Crescent Pty Ltd v Marland Holdings Pty Ltd (1998) 43 NSWLR 364; Lake Macquarie City Council v Luka (1999) 9 BPR 17,481; Weber v Ankin [2008] NSWSC 106. 995

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Thesiger LJ: … We have had a considerable number of cases cited to us, and out of them I think that two propositions may be stated as what I may call the general rules governing cases of this kind. The first of these rules is, that on the grant by the owner of a tenement of part of that tenement as it is then used and enjoyed, there will pass to the grantee all those continuous and apparent easements (by which, of course, I mean quasi easements), or, in order words, all those easements which are necessary to the reasonable enjoyment of the property granted, and which have been and are at the time of the grant used by the owners of the entirety for the benefit of the part granted. The second proposition is that, if the grantor intends to reserve any right over the tenement granted, it is his duty to reserve it expressly in the grant. Those are the general rules governing cases of this kind, but the second of those rules is subject to certain exceptions. One of those exceptions is the well-known exception which attaches to cases of what are called ways of necessity; and I do not dispute for a moment that there may be, and probably are, certain other exceptions, to which I shall refer before I close my observations upon this case. Both of the general rules which I have mentioned are founded upon a maxim which is as well established by authority as it is consonant to reason and common sense, viz, that a grantor shall not derogate from his grant. It has been argued before us that there is no distinction between what has been called an implied grant and what is attempted to be established under the name of an implied reservation; and that such a distinction between the implied grant and the implied reservation is a mere modern invention, and one which runs contrary, not only to the general practice upon which land has been bought and sold for a considerable time, but also to authorities which are said to be clear and distinct upon the matter. So far, however, from that distinction being one which was laid down for the first time by and which is to be attributed to Lord Westbury in Suffield v Brown (1864) 4 De GJ & Sm 185, it appears to me that it has existed almost as far back as we can trace the law upon the subject; and I think it right, as the case is one of considerable importance, not merely as regards the parties, but as regards vendors and purchasers of land generally, that I should go with some little particularity into what I may term the leading cases upon the subject … … As I have already said, there is an undoubted exception in cases where the easement is what is called a way of necessity. Thus in Pinnington v Galland (1853) 9 Exch 1 at 12 which was a case for disturbance of a right of way, there were five closes, two of them called the Holme Closes, which were separated by the others from the only available highway, and which were conveyed subsequently in point of time to the conveyance of the remaining closes through which this way de facto ran. In deciding that the way still existed, Baron Martin appears to me to have put the case entirely upon the exception to which I am referring. He says this: ‘Secondly, assume that the conveyance to Mr Dearle was executed the first. In this case the Rye Holme Closes were for a short period of time the property of Mr Dickinson after the property in the land conveyed to Mr Dearle had passed out of him. There is no doubt apparently a greater difficulty in holding the right of way to exist in this case than in the other; but according to the same very great authority the law is the same … It no doubt seems extraordinary that a man should have a right which certainly derogates from his own grant; but the law is distinctly laid down to be so, and probably for the reason given in Dutton v Taylor Lutw 1487, that it was for the public good, as otherwise the close surrounded would not be capable of cultivation.’ Now those last words clearly shew that the whole foundation of the judgment in the case of Pinnington v  Galland (1853) 9 Exch 1 at 12 was that the way claimed in the case was a way of necessity, and it is equally clear, as it seems to me, that Baron Martin and the Court whose judgment he delivered in no way disputed the general maxims to which I have referred. The case of Davies v Sear (1869) LR 7 Eq 427 at 431 also appears to me to have been decided on the same basis. There a man, a builder, had got a lease of land for the purpose of building upon that land, and he proposed to build upon it in such a way as that through an archway, which was, at all events, standing to such an extent as to shew that it was intended to be used for a passage — that through that archway should be the only means of communications with certain stables which were to be 996

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erected. That being the position of things, a portion of the land was sold to a third person, and the question arose whether it was open to that person to build upon his land in such a way as to obstruct this one only way into the stable. The Master of the Rolls (Lord Romilly) held that it was not. And why? He founded his opinion upon the basis of this exception to which I am referring. He says ‘The question is, whether the Defendant has a right to shut up the archway, and to intercept all access to Erskin Mews through this passage. This depends upon whether this easement is reserved by implication on the assignment of the house to the Defendant; and this depends upon whether the easement is apparent, and also is a way of necessity.’ These cases in no way support the proposition for which the Appellant in this case contends; but, on the contrary, support the propositions that in the case of a grant you may imply a grant of such continuous and apparent easements or such easements as are necessary to the reasonable enjoyment of the property conveyed, and have in fact been enjoyed during the unity of ownership, but that, with the exception which I have referred to of easements of necessity, you cannot imply a similar reservation in favour of the grantor of land. Upon the question whether there is any other exception, I must refer both to Pyer v Carter (1857) 1 H & N 916 and to Richards v  Rose (1853) 9 Exch 218; and, although it is quite unnecessary for us to decide the point, it seems to me that there is a possible way in which these cases can be supported without in any way departing from the general maxims upon which we base our judgment in this case. I have already pointed to the special circumstances in Pyer v Carter, and I cannot see that there is anything unreasonable in supposing that in such a case, where the Defendant under his grant is to take this easement, which had been enjoyed during the unity of ownership, of pouring his water upon the grantor’s land, he should also be held to take it subject to the reciprocal and mutual easement by which that very same water was carried into the drain on that land and then back through the land of the person from whose land the water came. It seems to me to be consistent with reason and common sense that these reciprocal easements should be implied; and, although it is not necessary to decide the point, it seems to me worthy of consideration in any after case, if the question whether Pyer v Carter is right or wrong comes for discussion, to consider that point …

Commentary 14.33  The non-derogation principle ensures that the grantee of land cannot use land that is retained in a manner that impedes the purpose for which the land disposed of was made. This principle has two consequences. In the first place, it means that easements arising against the land granted (easements by reservation) will only arise impliedly where they are necessary to give effect to the common intention of both parties. Such rights will not arise easily because of the unfairness that can ensue from the imposition of a burden over land already transferred. However, reserved rights of necessity may arise in circumstances where it can be shown that a grant and a reservation were intended to be conferred as reciprocal rights: Pyer v Carter (1857) 1 H & N 916; 156 ER 1472. In the second place, it means that easements arising in favour of the land granted (easements by grant) will arise impliedly where they support the purpose for which the grant was made. It has been suggested that the non-derogation principle should only be raised where the circumstances make it clear that the way in which retained land is used interferes with the purpose of the grant. In Nelson v Walker (1910) 10 CLR 560 at 593, Higgins J noted: The principle of ‘derogation from grant’ is clear enough. As expressed by Bowen LJ in Birmingham, Dudley and District Banking Co v Ross, the principle is that a ‘grantor having given a thing with 997

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one hand is not to take away the means of enjoying it with the other’. But he must first give it; and this must be done by the appropriate instrument. As Wood VC puts it in North-Eastern Railway Co v Elliot ‘If the conveyance is made for the express purpose of having buildings erected upon the land so granted, a contract is implied on the part of the grantor to do nothing to prevent the land from being used for the purpose for which to the knowledge of the grantor the conveyance is made’; and see Lyttleton Times Co Ltd v Warners Ltd. Counsel have not been able to refer us to any case in which the doctrine of ‘derogation from grant’ has been applied where the purpose for which the land was to be used was not in some way mentioned in the conveyance. If a ‘stable’ is leased, the lessor must not do anything to prevent the lessee from using it as a stable; if a ‘house’ is leased, the vendor cannot undermine it so as to bring it down. But if A sell to B land described merely by metes and bounds, C and other subsequent purchasers of the land are not bound to investigate all the relations between A and B at the time of the sale by A. They need not inquire into matters which do not appear on the face of the title or on the face of the land.

Thus, in order to ensure that an implied easement does not derogate from a grant, the  purpose for which the grant is issued should either be apparent from the terms of the grant or the subject of a clear communication between the grantor and the grantee. In Kitching v Phillips [2009] WASC 396, Jenkins J at [61], in holding that the Wheeldon v Burrows principle did not apply to the facts, made the following comments about the requirements of the rule: First, the land being sold must have a ‘current use and enjoyment’. Secondly, the rule operates to imply the grant only of continuing and apparent easements which are necessary to the reasonable enjoyment of the use of the land and thirdly, the easement granted must be one which is used at the time of purchase for the benefit of that part of the land which is purchased. The rule is not met where, as in this case, the intended use of the land is quite different to its then use and where the alleged easement is not used at the time of purchase.

Similarly, in Cuzeno Pty Limited v  The Owners — Strata Plan 65870 [2013] NSWSC 1385, Darke J at [88] noted that the Wheeldon v Burrows doctrine is grounded in implied intention and any such intention must not be inconsistent with the actual circumstances. His Honour stated: The foundation of the doctrine of implied contract or grant is that the stipulation set up must necessarily have been intended by the parties, so that without the implication the manifest intention would be defeated. If, then, it appears from admitted or proved facts that the implication set up is inconsistent with the actual circumstances attendant on the making of the contract the implication is excluded.

The principle of non-derogation is also applicable to a leasehold estate. An implied reservation by a landlord cannot derogate against the grant of a lease. On the other hand, if an easement exists, and is not excluded from a tenancy the tenant may enforce an implied grant. The rights of the tenant flow from the fact that he or she is in possession of the land. There is no need for any additional consent from the landlord: Hampshire Automotive Centre Pty Ltd v Centre Com (Sunshine) Pty Ltd [2019] VSCA 77 at [117] per Tate, Niall and Emerton JJA.

14.34  Revision Questions 1. How do the courts treat implied reservations differently from implied grants? 2. What is the difference between an implied easement arising because it was ‘continuous and apparent’ and an implied easement arising on the basis of ‘common intention’? 998

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3. What relevance does common intention have to the non-derogation principle? 4. The High Court in Dabbs v Seaman (1925) 36 CLR 538 at 454 stated: ‘The estoppel which as a rule of law arises, not, it is true, upon the operative words of the transfer or certificate, but upon the true construction as to the land transferred …’. Is it accurate to say that all easements arising impliedly from a construction of the transfer documents are validated under estoppel principles? 5. What is the difference between the concept of ‘necessary’ within continuous and apparent quasi-easements and the concept of ‘necessary’ within easements ‘of necessity’? Is the same ‘rigid’ approach taken to the interpretation of both terms? 6. An easement of necessity will arise where the actual or presumed intention of the parties was to grant or reserve the right. What does this mean in a situation where the ‘need’ for the right has arisen after the grant or sale?

Easements by Prescription 14.35  Easements by prescription may arise in circumstances where the right has been the subject of continuous usage for a period of 20  years. The history of this principle evolved from the well-established rule that the use of a right for a long period of time is, in the absence of interruption, evidence of the existence of that right. There is, however, a clear difference between Roman and English approaches to prescription. This was well summarised by Lord Hoffmann in R v Oxfordshire County Council; Ex parte Sunningwell Parish Council [2000] 1 AC 335 at 348: Any legal system must have rules of prescription which prevent the disturbance of longestablished de facto enjoyment. But the principles upon which they achieve this result may be very different. In systems based on Roman law, prescription is regarded as one of the methods by which ownership can be acquired. The ancient Twelve Tables called it usucapio, meaning literally a taking by use. A logical consequence was that, in laying down the conditions for a valid usucapio, the law concerned itself with the nature of the property and the method by which the acquirer had obtained possession. Thus usucapio of a res sacra or res furtiva was not allowed and the acquirer had to have taken possession in good faith. The law was not concerned with the acts or state of mind of the previous owner, who was assumed to have played no part in the transaction. The periods of prescription were originally one year for movables and two years for immovables, but even when the periods were substantially lengthened by Justinian and some of the conditions changed, it remained in principle a method of acquiring ownership. This remains the position in civilian systems today. English law, on the other hand, has never had a consistent theory of prescription. It did not treat long enjoyment as being a method of acquiring title. Instead, it approached the question from the other end by treating the lapse of time as either barring the remedy of the former owner or giving rise to a presumption that he had done some act which conferred a lawful title upon the person in de facto possession or enjoyment. Thus the medieval real actions for  the recovery of seisin were subject to limitation by reference to various past events. In the time of Bracton the writ of right was limited from the accession of Henry I (1100). The Statute of Merton (1235) brought this date up to the accession of Henry II (1154) 999

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and the Statute of Westminster 1275 extended it to the accession of Richard I in 1189. The judges used this date by analogy to fix the period of prescription for immemorial custom and the enjoyment of incorporeal hereditaments such as rights of way and other easements. In such cases, however, the period was being used for a different purpose. It was not to bar the remedy but to presume that enjoyment was pursuant to a right having a lawful origin. In the case of easements, this meant a presumption that there had been a grant before 1189 by the freehold owner.

Eventually, given the evidential difficulties in proving a right dating back to 1189, the English courts developed the fictional principle known as the doctrine of ‘lost modern grant’. The evolution of this process was outlined by Cockburn CJ in Bryant v Foot (1867) LR 2 QB 161 at 181: Juries were first told that from user, during living memory, or even during 20  years, they might presume a lost grant or deed; next they were recommended to make such presumption; and lastly, as the final consummation of judicial legislation, it was held that a jury should be told, not only that they might, but also that they were bound to presume the existence of such a lost grant, although neither judge nor jury, nor any one else, had the shadow of a belief that any such instrument had ever really existed. According to this rule, it was necessary to prove that use of an easement had occurred for at least 20 years and that, in effect, the grant of that deed had, fictionally, been lost.

Following the adoption of the doctrine of lost modern grant, a period of 20 years’ use was regarded as practically sufficient to establish a prescriptive right. As Cockburn CJ noted in Bryant v  Foot, in the absence of inconsistent evidence with immemorial user or lost modern grant, if a period of 20 years of use can be established, prescriptive rights will be established. This meant, as Lord Hoffmann in R v Oxfordshire County Council; Ex parte Sunningwell Parish Council [2000] 1 AC 335 at 349 further concluded, that the emphasis is ‘shifted from the brute fact of the right or custom having existed in 1189 or there having been a lost grant (both of which were acknowledged to be fictions) to the quality of the 20  year user which would justify recognition of a prescriptive or customary right’. This scope of the doctrine was further explained by Crawford CJ, Porter, and Wood JJ in the Full Court of the Supreme Court of Tasmania in Chick v Dockray [2011] TASFC 1 at [63], where their Honours noted that ‘The doctrine operates by presuming from the fact of long user at a point in time that an easement was actually granted at some time in the past prior to the user supporting the claim, and that the grant has been lost. If, prior to the action, the use has been interrupted after the necessary period of long use has been satisfied, the grant implied by the law is still assumed to exist’. See also Mills v Silver [1991] 2 WLR 324 at 328; Oakley v Boston [1976] QB 270 at 275. Apart from the requirement of 20 years’ continuous use, it was also necessary to prove that the use was ‘not by force, nor stealth, nor the licence of the owner’: Mills v Colchester Corporation (1867) LR 2 CP 476 at  486. Where the use is acquired forcefully, secretly, or with the permission of the owner, it is reasonable to expect the owner to do nothing. However, where the use is acquired openly and without force or consent for such a long period of time, the long-term ‘de facto’ enjoyment should not be disturbed because the true owner is taken to have acquiesced to this right. Hence, the requirement of acquiescence may be satisfied where toleration of use as a matter of ‘neighbourly indulgence’ can be established; however, a line must be drawn between conduct ‘as of right’ and conduct ‘by permission’, and this can often be nebulous.16 If, however, permission is given at any point 16. Dobbie v Davidson (1991) 23 NSWLR 625 at 627G-629A. 1000

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during the 20-year period, that permission will necessarily cancel ‘the benefit of all use to date’ under the doctrine.17 This rationalisation was formally laid down by the House of Lords in Dalton v Angus (1881) 6 App Cas 740 at 773, where Fry J (advising the House of Lords) noted: … the whole law of prescription and the whole law which governs the presumption or inference of a grant or covenant rests upon acquiescence. The Courts and the Judges have had recourse to various expedients for quieting the possession of persons in the exercise of rights which have not been resisted by the persons against whom they are exercised, but in all cases it appears to me that acquiescence and nothing else is the principle upon which these expedients rest … In the case of that acquiescence which creates a right of way, there are five elements involved: (i) the doing of some act by one man upon the land of another; (ii) the absence of right to do that act in the person doing it; (iii) the knowledge of the person affected by it that the act is done; (iv) the power of the person affected by the act to prevent it, either by an act of his part or by action; (v) the abstinence by that person from interference for such a length of time as renders it reasonable for the courts to say that it shall not afterwards interfere to stop the act being done.

In England, the requirement of 20 years’ continuous usage has also been set out in the Prescription Act 1832 (UK) s 2 where the claim must have been ‘actually enjoyed by any person claiming right thereto without interruption for the full 20 years …’. In Bright v Walker (1834) 1 Cr M & R 211 at 219, Parke B noted that this provision effectively meant that the right must have been enjoyed ‘openly and in the manner that a person rightfully entitled would have used it … and not by stealth or by licence’. The subsequent Rights of Way Act 1932 (UK) was similar in content but contained two significant variations: (1) the presumption of dedication could be rebutted by ‘sufficient evidence that there was no intention during that period to dedicate such way’ (no such proviso existed in the 1832 Act); (2) the 20-year retrospective period did not, as in the 1832 Act, run from the commencement of the proceedings but, rather, it ran from when the right to the way was ‘brought into question’: Godmanchester Town Council, R (on the application of) v Secretary of State for the Environment, Food and Rural Affairs [2007] UKHL 28. The Rights of Way Act 1932 (UK) now effectively provides a separate cause of action to that of the common law doctrine of lost modern grant. The law in Australia concerning prescriptive easements did not evolve in the same way. In the first place, there is no Australian legislation governing prescription. The common law position has, however, been endorsed in some states. For a discussion of the positions of the various jurisdictions, see: New South Wales: Rodwell GR Evans & Co Pty Ltd [1978] 1 NSWLR 448 at 451 (discussed in P Butt, Land Law, 5th ed, 2005, para 1666); South Australia: Golding v Tanner (1991) 56 SASR 482; and Western Australia: Piromalli v Di Masi [1980] WAR 173 at 176. In Delohery v Permanent Trustee Co of NSW (1904) 1 CLR 283, Griffith CJ specifically endorsed the application of the doctrine of lost modern grant, concluding that it was a part of the law of property at the point of colonisation and was therefore a component of an inherited common law. The court concluded at 299 that the need to determine the suitability of an inherited law was a legislative rather than a judicial function: 17. See  Ross Bilton v  Georgia Ligdas [2016] NSWSC 1262 per Rein J at  [26]; Austin v  Wright  [1926] WALawRp 23; (1926) 29 WALR 55; and Earl de la Warr v Miles (1881) 17 Ch D 535 at 596. 1001

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… we think that the law of prescription, which is, in various forms, part of the law of most civilised countries, cannot be regarded as a law of local policy adapted solely to the locality in which it was made, but must be regarded as a general regulation of property. In this regard we are unable to draw any distinction in principle between prescription at common law and prescription by Statute. It has never been doubted that the Statute of Limitations of 1623 (21 Jac I, c 16) applied to New South Wales (Devine v Holloway, 14 Moo PC, 290), and it was expressly decided in Attorney-General v Love ((1898) AC, 679), that the Nullum Tempus Act (9 Geo III, c 16) is in force there. The learned Chief Judge appears to have thought that, in determining whether any particular part of the law of England was introduced into New South Wales by the Statute of 1828, the test to be applied is to consider whether the law is beneficial, by which we understand him to mean suitable to the existing conditions of Australia. But whether a law is suitable or beneficial to a country or not is a question for the legislature, and not for a Court of law. Moreover, the test prescribed by the Statute is not whether the law is suitable or beneficial, but whether it can be applied. It is plain that a law may be applicable in the sense that it can be administered, although it may, as a matter of opinion, be considered not ‘applicable,’ in the sense of being suitable or beneficial. The Statute does not, indeed, itself use the term ‘applicable,’ from the use of which in a double sense confusion has arisen … For the reasons already stated we are of opinion that it was part of the common law of England in 1828. (Note that the decision in Delohery v Permanent Trustee Co of NSW concluded that easements of light could be acquired by prescription. However, legislation was subsequently introduced to preclude this: Conveyancing Act 1919, s 179.)

Second, it is clear that the land must be ‘used’ as of right in a manner that is not by force or violence, that is open and that is without permission. The use must be consistent with the conferral of an easement right and not merely rights naturally associated with ownership of the dominant tenement: Gardner v Hodgson’s Kingston Brewery [1903] AC 229 at 239; Palmer v Bowman [2000] 1 All ER 22. Third, the usage must be without the permission or knowledge of the owner of the servient tenement. In this context, knowledge includes actual or constructive knowledge. As outlined by Lord Walker in R (Beresford) v Sunderland City Council [2004] 1 AC 889 at 913: … The law sometimes treats acquiescence as equivalent in its effect to actual consent … In this area of law it would be quite wrong, in my opinion, to treat a landowner’s silent acquiescence in persons using his land as having the same effect as permission communicated … To do so would be to reward inactivity, despite his failing to act and indeed simply by his failure to act the landowner would change the quality of the use being made of his land from use as of right to use which is (in the sense of the Latin maxim) precarious.

In this respect, a casual, trivial, or fleeting use of the property may be treated as tacit neighbourly consent or permission: Neville v  Dale (1990) V Conv R 54-382 at  64,728; Wayella Nominees Pty Ltd as Trustee for the DJ Gordon Family Trust v Cowden Ltd [2003] WASC 210. In Laming v Jennings [2018] VSCA 335 at [41], the Victorian Court of Appeal restated the requirements for establishing an easement by prescription, quoting from the summary outlined by Hedigan J in Sunshine Retail Investments Pty Ltd v Wulff [1999] VSC 415 at [76]: (a) the doing of an act by a person or persons upon the land of another; (b) the absence of right to do that act in the person doing it; (c) the knowledge of the person affected by it that the act is done; 1002

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(d) the power of the person affected by the act to prevent it, either by an act on his or her own part or by action in the courts; (e) the abstinence by that person from interference for such a length of time as renders it reasonable for the court to say that the court shall not afterwards interfere to stop the act being done.

On the facts of Laming, the court rejected a prescriptive easement on the grounds, inter alia, that a right to use and enjoy private land was not capable of forming the subject matter of a grant. See the discussion above at  14.12. Prescriptive easements may be enforceable against Crown land unless specifically prohibited by legislation. In Pekel v Humich (1999) 21 WAR 24 at 35, Templeman J concluded: The proposition that ‘time does not run against the Crown’ is true in relation to land, as defined in s 3 of the Limitation Act 1935: see s 36. However, the definition of ‘land’ for the purposes of that Act: ‘… includes messages and all corporeal hereditaments whatsoever …’. This definition does not include easements, which, being a species of intangible property, are incorporeal hereditaments: see Halsbury’s Laws of England, 4th ed, Vol 14 par 14. [Note that in NSW, s 178 of the Conveyancing Act 1919 specifically sets out that no grant of way can be presumed against the Crown.]

Further, in some states a prescriptive easement will continue to bind a registered proprietor. Where that is not the case, it has been argued that a prescriptive easement may still be enforceable against a registered proprietor in circumstances where the registered proprietor has acquiesced in the ‘continuous usage’ of the land for the entire duration of the period. It has been suggested that such acquiescence generates generates a personal equity that is enforceable against the registered proprietor. This was discussed by the South Australian Supreme Court in Golding v Tanner (1991) 56 SASR 482. This decision was not accepted in Williams v  State Transit Authority of NSW (2004) 60 NSWLR 286, because, as Mason P noted at [129]: … it is to pile fiction upon fiction to extend the doctrine of lost modern grant into the Torrens system, because (assuming no relevant exception to s  42 or its equivalents) that system contemplates title at law as arising only upon registration.

In McGrath v  Campbell (2006) 68 NSWLR 229, Tobias JA at  [118] agreed with the conclusions of Mason P in Williams v State Transit Authority of NSW noting that the ‘same logic’ could be applied to other forms of implied easement. Prescriptive easements arising under the doctrine of lost modern grant have been expressly abolished in Tasmania pursuant to s  138I(2) of the Land Titles Act  1980 (Tas). However, easements acquired under the doctrine prior to the introduction of this provision remain enforceable. This is discussed by the Tasmanian decision of Chick v Dockray [2011] TASFC 1 at [65], where Crawford CJ, Porter and Wood JJ held that: Although the doctrine was abolished on 12 April 2001, there was no suggestion in the Act that abolished it (the Land Titles Amendment (Law Reform) Act) that easements that had been acquired by reason of the doctrine prior to that date were extinguished. That may be regarded as significant having regard to the fact that the Land Titles Act, s 105(7), was left untouched. It provides that ‘on application in writing for that purpose, the Recorder may record in the Register any easement over or appurtenant to registered land which the Recorder is satisfied has been recognized by an order of the Supreme Court’. Clearly, the presumption against the retrospective operation of statutes should apply.

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14.36  See  also the comprehensive outline by F Burns, ‘The Future of Prescriptive Easements in Australia and England’ (2007) 31(1) Melbourne University Law Review 3. The prescriptive easement has been held to apply not only to freehold land but also to a leasehold estate. This was discussed by the Victorian Supreme Court of Appeal in Hampshire Automotive Centre Pty Ltd v Centre Com (Sunshine) Pty Ltd [2019] VSCA 77, which is extracted below:

—  Hampshire Automotive Centre Pty Ltd v Centre Com (Sunshine) Pty Ltd  — [2019] VSCA 77 Facts: Hampshire Automotive Centre Pty Ltd and Centre Com (Sunshine) Pty Ltd were both tenants of neighbouring commercial properties in Sunshine, Victoria. Between 1995 and 2014, the boundary of the two properties was separated by a fence. Hampshire breached the fence and used Centre Com’s leased property for access and ingress from its own property and for storing motor vehicles that it used in its business. In 2015, Centre Com sued Hampshire in trespass. Hampshire counterclaimed asserting that its use of the land had been pursuant to an easement created by prescription based on long user between 1975 and 1995. Centre Com based its claim in trespass on two acts. First, on 16 October 2014, the applicant removed a section of the fence separating the two properties and installed a padlocked gate. The applicant then used the gate for access and egress for its employees, customers and invitees and to receive the delivery of motor vehicles for its business between 16 October 2014 and 19 August 2016. Second, on 30 October 2015, the applicant removed a further 16 metre section of the dividing fence and built a fence across the northern part of the land, excising a parcel of land of approximately 66 square metres. On this excised land, the applicant removed vegetation, installed crushed rock, and placed vehicles for sale. The land in issue was owned by Victorian Rail Track Corporation. Hampshire Automotive Centre Pty Ltd was a lessee. One of the issues for the court was whether an easement by prescription could arise in favour of both the owners of the dominant tenement as well as their lessees. The trial judge held that Hampshire, as tenants, were unable to seek a declaration for an easement by prescription. The Court of Appeal disagreed with this. Tate, Niall and Emerton JJA: It is convenient to commence by setting out some general principles in relation to easements by prescription. An easement is a proprietary right in relation to land. In order for there to be a valid easement, there must be a dominant and servient tenement; the easement must accommodate the dominant tenement; the owners of the dominant and servient tenements must be different from each other; and the right or claim must be capable of being the subject matter of a grant. In Victoria, it has been established that an easement by prescription can arise where there has been an open and uninterrupted enjoyment of land for at least 20 years that is not explained by an express grant of an easement or permission to use the land. In Sunshine Retail, Hedigan J identified the elements necessary to give rise to an easement by prescription as follows: (a) the doing of an act by a person or persons upon the land of another; (b) the absence of right to do that act in the person doing it; (c) the knowledge of the person affected by it that the act is done; (d) the power of the person affected by the act to prevent it, either by an act on his or her own part or by action in the courts; (e) the abstinence by that person from interference for such a length of time which renders it reasonable for the court to say that it shall not afterwards interfere to stop the act being done.

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The underlying premise is that, where there has been a long period of uninterrupted user amounting to an assertion of right and a corresponding acquiescence by the owner of the servient tenement in a position to prevent that user, there is a presumption that the use was pursuant to the conferral of a lawful title, thus the fiction of lost modern grant. The legal fiction is that the paper owner of the servient tenement has conferred a right by grant but the grant has been lost. In the United Kingdom, an easement by prescription may arise in three contexts, being, common law prescription, the doctrine of lost modern grant and under the Prescription Act 1832 (UK). At common law, acquisition of a prescriptive right depends upon the claimant establishing the requisite period of user leading to a presumed grant. The grant would be presumed only if the appropriate user had continued from time immemorial, fixed as the year 1189. From that developed the doctrine of lost modern grant, in which a grant will be presumed after the effluxion of 20 years uninterrupted use. It is that doctrine that forms part of the law in Victoria and which forms the basis of the easement in the proceeding. A number of points about the doctrine of lost modern grant are relevant. First, although it is based on a fictional grant, the making of the grant, and its corollary that the user has a legal authority, cannot be rebutted by evidence that in fact there had not been a grant. As explained in  Gale on Easements,  the presumption cannot be displaced by merely showing that no grant was in fact made. The long enjoyment either estops the servient owner from relying on such evidence or overrides it when given, and the court will make any possible presumption necessary to give that long enjoyment a legal origin. The second point to note is that the user is not pursuant to legal authority. In the case of an easement for a right of way, before the presumption applies at  the expiration of 20 years of uninterrupted use, entry onto the servient tenement would constitute a trespass. It is the assertion of title by the dominant owner (which the user necessarily lacks) and the acquiescence by the servient owner that gives rise to the presumption. The third general point is that it is not necessary that the 20-year period of uninterrupted use continue up to the point of claim. This may be contrasted with the position under the Prescription Act 1832 (UK), which requires that the period run continuously up to the point of action. It follows that there may be a gap between the creation of the easement and any action to enforce it or prevent an infringement. It follows from these matters, as was explained in Laming v Jennings, that whether an easement by prescription has been created depends on an examination of the issue from the perspective of both landowners. From the perspective of the claimant, its acts and conduct must manifest an assertion of right to do the thing claimed. In relation to prescription by long user, the long enjoyment must have been ‘neither by violence, nor by stealth, nor by leave asked from time to time’.  From the other perspective, the servient owner must have knowledge of the acts that constitute the claimed assertion of title and the power to stop them. Once created, the owner of the dominant tenement enjoys an enforceable proprietary right to the benefit of the easement and the title of the servient land is correspondingly burdened. Such an easement may be unregistered. Section 42(2)(d) of the Transfer of Land Act 1958 provides a relevant exception to the indefeasibility of title. It provides that registered land is subject to any easements howsoever acquired subsisting over or upon or affecting the land. It is not presently necessary to consider the question left unresolved in Laming v Jennings as to whether a period of user relied on to establish an easement by prescription is affected by a change in ownership of the servient tenement. Because an easement by prescription relies on use in the form of an assertion of title and acquiescence by the servient owner, questions may arise where either, or both, the dominant and servient tenements are subject to lease and occupied by a tenant during the putative period of long user. Those questions include: whether an easement can be created where the servient tenement is held by a tenant; the extent to which use by a tenant can give rise to an easement; and whether the easement, once created, forms part of the rights conferred by a lease and is thus capable of being enjoyed by the tenant in possession. The preliminary question considered by the judge did not grapple with all of those questions, but asked whether the applicant had a right to ‘seek a declaration that it has acquired an easement 1005

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by prescription over land’.  In her ruling, the judge framed the issue as being whether the applicant as a tenant could ‘claim’ an easement that had been acquired by prescription. There were a number of problems with the course that was adopted by the judge, with the consent of the parties. First, it may be said that the framing of the question, and the argument that proceeded on it, tended to elide two distinct issues. The first relates to the circumstances in which an easement by prescription can arise where the dominant tenement is subject to a lease and occupied by a tenant. The second is whether, if an easement by prescription exists, a tenant requires the consent or permission of the landlord in order to commence a proceeding alleging interference with the easement. The question as formulated, and the reasons given by the judge, were directed to the second of those two issues. The judge held that the tenant could not ‘claim’ the easement or seek a declaration as to its existence in the absence of the consent of the landlord. Initially, in its written case, the applicant sought to establish, as the starting point for resolving the question determined by the judge, that the landlord of the dominant tenement does not need to consent or authorise the particular use that is said to give rise to the easement by prescription. However, in oral argument, the applicant retreated from that position and said it was not necessary for this court to resolve that anterior question. The respondents in oral argument also submitted that it was not necessary for this court to resolve the anterior question. Upon proper analysis, it seems impossible to avoid a consideration of the anterior question of whether the dominant owner must consent to, or have knowledge of, the use by a tenant in order for an easement to arise. That is because both parties sought to answer the preliminary question, at least in part, by reference to the principles that attend the creation of the easement. Second, there were no findings of fact, either found or assumed, as to use of the land during the 20-year period 1975 to 1995. There were no findings of fact, either found or assumed, as to the knowledge of the person affected by that use, the power of that person to prevent it, or any attempts by that person to interfere with that use — elements (c), (d) and (e) identified by Hedigan J in Sunshine Retail as required for the creation of an easement by prescription. There were no findings of fact as to whether, during that 20-year period, the leave of the owner of the servient tenement was asked for, and given, from time to time. Given that it is necessary to consider the circumstances in which an easement by prescription might be created by the use of the servient land by a tenant of the dominant land, it would have been preferable for those questions to be examined not as steps along the way to the preliminary question but on a clear factual basis, either assumed or found. question. In order to analyse the first three proposed grounds of appeal, it is convenient to commence with the cause of action pleaded by the applicant in its defence and counterclaim. It is then necessary to consider whether that cause of action, when brought by a tenant and in relation to an easement created by prescription, requires the consent of the owner in fee simple. The critical elements of the counterclaim are set out above. To reiterate, the applicant sought to establish, and claim infringement of, an easement created by prescription in or around 1995. It was said that Rayking, or its predecessors, had interfered with the enjoyment of that easement by the erection of a fence that prevented access from the VicTrack land over the Rayking land. The applicant sought declaratory relief, an injunction or alternatively damages. Although not expressly stated, the cause of action pleaded in the counterclaim was one of private nuisance. Nuisance is a tort directed against the plaintiff’s enjoyment of rights over land and extends to conduct that interferes with rights over land of another by way of easement or profit. In an article setting out the history of the law of nuisance, Professor Newark observed that ‘[i]nterference with a private right of way over another’s tenement was undoubtedly nuisance.’ In  Victoria Park Racing and Recreation Grounds Co Ltd v Taylor, Dixon J described the essence of a wrong that is amenable to an action in private nuisance as being ‘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’. His Honour went on to say that ‘the law fixes those rights’. In order to bring an action for private nuisance, it is necessary for the plaintiff to establish possession of the land 1006

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because the tort is concerned with interference with land rather than interference with personal rights. Accordingly, the House of Lords in Hunter v Canary Wharf Ltd refused to uphold a claim in nuisance brought by persons who were affected by the use of land, but who themselves did not possess an interest in land. Subject to one exception, Lord Goff concluded that it had been settled that a person who has no right in the land cannot sue in private nuisance. The exception, founded in the judgment of the English Court of Appeal in Foster v Warblington Urban District Council, extended to a person who was in de facto possession even though they did not hold lawful title.  Importantly for present purposes, Lord Goff observed that an action of private nuisance will usually be brought by the person in actual possession of the land affected, either as the freeholder or tenant of the land in question, or even as a licensee  with exclusive possession of the land. In the same case, Lord Hoffmann noted that nuisance is a tort against land, including interests in land such as easements and profits, and that a plaintiff must therefore have an interest in the land affected by the nuisance. It is clear from his Lordship’s speech that possession based upon, or derived through, title would provide a sufficient foundation to bring an action in nuisance. Lord Hoffmann also noted that even possession which is wrongful against the true owner can found an action for trespass or nuisance against someone else. The limiting principle is that the plaintiff must be enjoying or asserting exclusive possession of the land. As a matter of general principle, the applicant, as tenant of the VicTrack land, was in possession and was entitled to the benefit of any easement that attached to the land and included, expressly or impliedly, in the lease. In this context it is useful to consider s 62 of the Property Law Act, which provides that a conveyance of land, including a lease, ‘shall be deemed to include and shall by virtue of [the  Property Law Act], operate to convey … all … privileges, easements, rights and advantages whatsoever, appertaining or reputed to appertain to the land’ at the time of conveyance. There is no rule or principle that a person in possession of land, and entitled to the benefit of an easement appurtenant to the land, requires the consent of its landlord to bring an action to prevent interference with the enjoyment of possession. The respondent did not embrace such a rule, no authority can be found in support of such a general proposition and it would be entirely inconsistent with exclusive possession, which is the legal right to control the land. Indeed, the authorities to which we have referred confirm the contrary proposition and identify the tenant as a person who may sue for an infringement of an easement appurtenant to land in its possession. Indeed, the landlord may be in an inferior position, in that it may not maintain an action for an interference with the enjoyment of an easement unless the nuisance will, or might, continue to a time when the reversioner falls into possession. The respondents contended for a special rule in relation to unregistered easements arising by prescription. In support of this contention, the respondents made the following points: the ‘fee simple rule’ means that an easement is created for the benefit of the owner of the dominant tenement and that any rights of a tenant are derivative; an easement does not exist until it is recognised by the owner of the fee simple of the dominant tenement, in part because it reflects an implied agreement between the owners of the dominant and servient tenements; an easement carries with it obligations that ought not be imposed without the agreement or consent of the owner; and an easement cannot be transmitted under a lease if the owner is unaware of its existence. We turn to consider whether those propositions reflect the law and, if so, whether they alone, or in combination, support the special rule contended for.

The fee simple rule The basal principle relied on by the respondents as underpinning the fee simple rule, is that user must be by, or on behalf of, a fee simple owner against a fee simple owner. It follows, so it was submitted, that a tenant of the dominant tenement, through its own use of the servient tenement, does not obtain any proprietary rights over the servient land. Put another way, the use of the tenant goes to enlarging the proprietary interest of its landlord, not that of the tenant. As a necessary corollary, any right claimed by prescription must not be claimed as annexed to 1007

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the land for a term of years, but runs with the land in perpetuity. Pugh v Savage concerned an easement for a right of way arising by prescription over two contiguous blocks of farmland. In that case, the primary judge rejected the easement because the period of long user on the servient tenement included a period in which the servient land was in the possession of a tenant under a lease. The English Court of Appeal overturned the decision of the primary judge, holding that that the occupation of the servient land by a tenant did not interrupt the period of use, at least where the land was in the possession of the owner at the time the relevant use commenced. Although Pugh v Savage was concerned with the circumstances in which the servient tenement is under lease, Cross LJ also referred to user by tenants of the dominant tenement. His Lordship did not regard that as disqualifying, explaining that ‘a tenant cannot by use gain a prescriptive right of way for himself as tenant; but by user over land of a stranger he can gain a prescriptive right of way in fee for his landlord which he can use while he is tenant and which his landlord can grant to a subsequent tenant’. In Austin v Amhurst, the plaintiffs were occupiers of land who claimed an interest in funds that had arisen from the sale of part of the land to a railway company. Justice Fry held that the plaintiffs, as occupiers, had insufficient interest to claim rights by prescription. The only estate in the land that gave rise to the funds was that of the landlord. The occupiers could not claim an interest on their own behalf because they held no estate, nor could they do so on behalf of the owner because, in effect, that would entail the landlord making a claim against itself. It has also been established that the dominant and servient owners must be different persons. That is, an owner or occupier of land cannot subject it to an easement in favour of other land also owned and occupied by himself. Similarly, a tenant cannot obtain an easement over other land of his landlord. This is because a tenant can only prescribe in right of his landlord. Thus, where there is unity of ownership in the dominant and servient tenement, there can be no claim by prescription over the servient land based on user by the owner or tenant of the dominant land. This approach has been criticised in Hong Kong, where land is invariably held under long leases rather than in fee simple. In China Field Lord Millet NPJ concluded that this doctrine should not be applied in Hong Kong and that a tenant can acquire an interest in land by its own use, which it holds during the term of the tenancy. Lord Millet NPJ said: It is true that the tenant is only able to exercise rights over the servient tenement because he is in possession of the dominant tenement, and that his possession of the dominant tenement is with the consent of his landlord. But he does not derive the rights over the servient tenement from his landlord under his lease as part of the demised premises, nor does he acquire it with the landlord’s consent, but by separate (albeit fictitious) grant presumed from long user against land not comprised in his lease and without his landlord’s consent. The analysis adopted there was that the law should recognise a fictional grant of title to the tenant by reason of its long use. That approach entailed a rejection of long-standing English authority, which also underpins acceptance of the doctrine in Australia, that there is a fictional grant to the owner in fee simple. As Morgan J persuasively demonstrated in  Metropolitan Housing Trust Ltd v RMC FH Co Ltd (‘Metropolitan Housing’), that approach does not accord with the common law of England and amounts to a rejection of the fundamental principle that an easement accrues for the benefit of the owner in fee simple. In Metropolitan Housing, Morgan J held that where a dominant tenement is subject to a lease, then the acts of user by the lessee, which are relied upon to support a claim to an easement acquired by prescription, are treated as acts of user by the freehold reversioner and will lead to the acquisition of an easement appurtenant to the freehold. Pugh v  Savage  supports the view that a tenant can enjoy the benefit of a prescriptive right of way during the lease and that the landlord may grant rights in respect of the easement to a subsequent tenant. In Hamilton v Joyce, Powell J reached a similar conclusion. In Metropolitan Housing, Morgan J also accepted that where the prescription arises during a lease, the easement, when acquired, is treated as being demised to the head lessee. The fact that user by a tenant can give rise to an easement, that the easement, once 1008

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created, forms part of the leasehold and that the tenant in possession may benefit from any easement appurtenant to the land, all support the conclusion that the fee simple rule does not preclude the creation of an easement, even though the dominant land owner is ignorant of the user and does not consent to the creation of the easement. Further, once the easement has been created, fidelity to the fee simple rule does not require the landlord’s consent in order to sue for a declaration that an easement has been created or for an infringement of the easement. It is to be recalled that the incursion onto the servient tenement that gives rise to the easement is not pursuant to a legal authority held by the dominant owner. The application of the doctrine of lost modern grant is concerned with the creation of proprietary rights and not with their exercise. Although the user by a tenant gives rise to a proprietary interest in favour of its landlord, the user is not derivative in the sense of relying on a lawful entitlement of the landlord. For that reason, it would be anomalous to prevent the creation of an easement because the landlord has not given consent to the use, in circumstances where the landlord has no legal entitlement to authorise that use. Different considerations may apply where the interference with the servient tenement is inconsistent with a lease or where the easement, once created, is not demised to a future tenant. Further, the requirement to prove knowledge and consent of the dominant owner is also inconsistent with the legal presumption based on user. Once evidence of user has been adduced, and the necessary elements for the creation of an easement by prescription have been satisfied, evidence is not admissible to rebut the presumption underpinning the fictional grant that the user has occurred with the lawful authority of the servient owner. The fictional grant cannot be rebutted by showing that in fact the grant was not made. If rebuttal evidence was admissible, it would undermine the presumption by requiring an examination of the knowledge and state of mind of the servient owner. Against that background, it would be anomalous if evidence of the knowledge and state of mind of the dominant owner was admissible. The relevant inquiry is whether the user (which may be by the dominant owner or its tenant) is objectively an assertion of title to use the land. Although the language with which the fee simple rule is expressed talks of the easement being for the benefit of the landlord and not the tenant, that goes no further than emphasising that the easement enlarges the freehold title and does not create any independent rights in the tenant. The analysis of Lord Millet in China Field posits a grant of title to the tenant for the currency of the lease. That does not represent the law in Australia. In Australia the user of the tenant ultimately crystallises into a proprietary interest of the owner. However, the user is not undertaken as the owner’s agent. Agency has no role to play. The fee simple rule does not require a special principle that the consent of the owner in fee simple is obligatory for either the creation or enforcement of an easement by prescription. It is not necessary for creation because it is the act of user not its authority that is important. Indeed, one of the defining elements of the creation of an easement by prescription is the absence of any right to engage in the act of user by the person doing it, as Hedigan J acknowledged in Sunshine Retail. None of the cases that admit that user by a tenant is sufficient to create an easement suggest a further qualification that it must be user with the knowledge or consent of the owner. There is no reason in principle to require it. Once the easement is created it gives an interest in land that is enforceable by the party in possession. The fee simple rule is not relevant to the enforceability of the easement once created. As the case of Foster v Warblington Urban District Council in the English Court of Appeal established, as an exception to the normal rule that a person who has no right in the land cannot sue in private nuisance, an action in nuisance can be brought by a person in occupation if they are in de facto possession of the land, even though they have no right to possession as against the owner. The right of the party in possession of land to bring an action to vindicate its enjoyment of that land is not derivative in the sense that it depends on the consent or approval of the owner in fee simple, but is an incident of the legal rights that it enjoys under the lease. As Dixon J observed in Victoria Park Racing and Recreation Grounds Co Ltd v Taylor, the law fixes those rights. 1009

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Recognition by the dominant landowner The respondents also submitted that an easement by prescription does not exist until it is recognised by the dominant landowner. Again, this is not supported by any authority. The passage from Gale on Easements 19th edition relied on by the respondents does not go as far as the respondents would have it. To recap, the relevant passage says that, in the case of an easement which has been proven to exist, the party in possession has a sufficient right to sue for infringement. That passage cross-references later analysis dealing with the need to prove title in the easement. In that further passage, the authors refer to the requirement in earlier authorities that the person seeking to enforce the easement allege title with sufficient detail. The authors go on to note that, by subsequent decisions, it appears to have been held that in all actions for disturbance of an easement, whether the action be brought against the servient owner or a stranger, a general allegation of right is sufficient. However, the pa