Property Law Guidebook [2 ed.] 0195594037, 9780195594034

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PROPERTY LAW GUIDEBOOK

Second Edition

Chris Davies

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Contents Preface vii Guidelines for Answering Questions viii Acknowledgments xi Chapter 1: Introduction Australian property law The classification of property How does property law link into other areas of law? Chapter 2: What is Property? The definition and concept of property The human body as property Intellectual property

1 1 3 4 6 6 9 12

Chapter 3: What is Land? 16 16 The meaning of land Fixtures 17 Water rights 22 Mineral resources and mining law 24 Chapter 4: The Doctrines of Tenure and Estates The English feudal system The doctrine of tenure The doctrine of estates The doctrine of waste Determinable and conditional estates Future interests

28 28 29 30 32 33 36

Chapter 5: Native Title Common law native title Statutory native title: The Native Title Act 1993 (Cth) Extinguishment of native title

41 41 46 48

Chapter 6: Co-ownership of Property The history of co-ownership Joint tenancy Tenancy in common The rights of co-owners Termination of co-ownership Strata title and community title

51 52 52 54 56 59 62

Chapter 7: Creation and Enforcement of Property Interests The development of equity What are legal and equitable interests? The doctrine of part performance The doctrine of specific performance

66 66 68 69 71

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Contents

Priorities under the Torrens system Priorities under the common law

72 72

Chapter 8: The Torrens System Old system title The Torrens system The indefeasibility principle Limits to the indefeasibility principle How the caveat system protects equitable interests Volunteers and Torrens system transactions Torrens system remedies

82 82 83 84 86 93 100 101

Chapter 9: Mortgages The nature and creation of common law mortgages Torrens system mortgages Rights protecting a mortgagor

103 103 104 105

Chapter 10: Leases The definition of a lease Creation of leases Covenants in leases Options to renew a lease Determination of leases Privity of contract and privity of estate Residential tenancies Retail shop leases

116 117 122 123 130 131 134 135 136

Chapter 11: Proprietary Interests in Land Owned by Another 138 Easements 139 Extinguishment of easements 146 Covenants 148 Restrictive covenants 149 Profits 152 Glossary 153 Table of Cases 157 Table of Statutes 163 Index 167

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Preface One of the first things you might notice about property law is that many of the concepts are more difficult than those in other subjects you have already encountered. If you find yourself initially struggling with some of the concepts, do not panic – not yet, anyway – as it is standard for students to struggle when first confronted with concepts such as the perpetuity period and future interests. In fact, you will probably find these concepts as difficult as any you will encounter in your whole law degree. This brings us to the purpose of the Property Law Guidebook. It forms part of Oxford University Press’ Law Guidebook Series, which you may already be familiar with. As with the other books in the series, its aim is to provide concise and easy-to-understand material relating to the subject. The specific aims of the second edition of the Property Law Guidebook are to provide: • a concise summary of the general principles relating to property law • an understanding of the often complicated principles of property law • clear definitions of the important concepts in property law • examples to show how these concepts and principles work in a practical setting • an idea of how to approach property law problem questions. When using the book, you will find that at the beginning of each chapter, the cases to remember and the relevant statutes have been listed. While students will obviously need to know the relevant statutes from their own jurisdiction, it is also useful to have at least an awareness of similar statutes in other jurisdictions. Even as an undergraduate student, you will find the list useful to see how the statutes relevant to your state fit in with those in other states. This is because many of the cases that provide useful examples of the law may well originate from other jurisdictions, particularly since sheer population numbers means that there are more cases from a state like NSW. Lists of relevant statutes throughout the chapters give pinpoint references for particular areas of law. A comprehensive set of definitions is provided in a glossary at the end of the book. Also appearing throughout the book are some practical examples, which present the concepts in everyday situations. At the end of each chapter, some ‘Think about It’ questions and, when appropriate, assessment preparation questions have also been provided to help you think about and apply the material covered in that chapter. Suggested answers to these problem questions, together with comments on these suggested answers, are available online at www.oup.com.au/davies2e.

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Guidelines for Answering Questions As part of the property law course assessment, you may be required to write an essay of around 2000 words on a property law topic. It is also almost certain that you will be required to answer some problem-style questions in your end of semester exam. Below, therefore, are some ideas on how you may approach essays and problem-style questions.

Essay questions The reason you may be required to write a 2000-word assignment is that this type of assessment requires good research, writing, analysis and understanding of the material, all of which are useful and necessary skills. You should also find that going into one aspect of property law in more depth than can be covered in lectures will give you a better understanding for the subject as a whole. Everyone writes a little differently, so you are advised to feel comfortable with that and develop your own style within the restraints that law assessments places on writing, for example, not using too informal a style. Perhaps the one consistency in all good legal writing is that it flows. How this is achieved will vary. Some people will use relatively long sentences, while Lord Denning, recognised as one of the best legal writers, used very short sentences. Sometimes it is the combination of both short and long sentences that will create a good flow. Obviously, good content is also important in law as, even if the actual writing style is very good, it will still be lacking in quality if it has little substance. A good structure to an essay is always important. Keep in mind the basic structure of introduction, body and conclusion. The introduction does two things: it gives a very brief overview of the subject area and then informs the reader what the writer is going to be doing with the paper. An introduction could comprise of two relatively small paragraphs, one for each of these two aspects. The body is where the main material of the essay is found, and you will usually need to be fairly descriptive in the early part of this section as it is not possible to be analytical until you have described and summarised the relevant area of the law. Headings should be considered a vital part of legal writing. All judgments now use them. How many headings you will need will depend on the topic, and there is no hard and fast rule about how many you will need. You may need to use subheadings, though for a 2000-word paper you may not need them, and you certainly won’t need to further subdivide the subheadings. It is important, however, to physically differentiate the headings and the subheadings. For instance, the Australian Guide to Legal Citation uses upper case for headings and italics for subheadings. Different numbering or lettering systems will also help to differentiate the heading levels. If you have a subheading for each paragraph, or even every couple of paragraphs, then you have too many. Headings and subheadings will help the reader understand the

Guidelines for Answering Questions

material, but too many will make the essay disjointed. Starting each paragraph with a sentence containing the words you were thinking of including in the subheading can be just as effective in communicating that a new idea is being introduced, but does so in a way that keeps the flow of the essay going. As for the paragraphs themselves, there is no hard and fast rule about how big each paragraph should be, though three to four sentences is a good average, and each new idea should definitely go into a new paragraph. Legal argument requires good authority, which is why good referencing by means of footnotes is required to support your argument and also to prevent any problems with plagiarism. As a rough guide, a 2000-word assignment should probably have thirty to forty footnotes, though again there is no hard and fast rule on the actual number. Finally, it needs to be kept in mind that it is hard to write a good essay in one draft, and that there is really no such thing as good writing, just good rewriting. So start your assignments early and give yourself plenty of time to complete several drafts of the essay.

Problem solving: the IRAC method Like for all substantive law subjects, there is a set way in which to answer problem questions relating to property law. This involves first of all identifying the issues in the problem, then stating the rules, principles or law that relate to those issues. This law then needs to be applied to the specific facts given in the problem before reaching a conclusion. Such a system is often referred to as the either the IRAC, IPAC or ILAC method: I – Issues R/P/L – Rules, principles or law A – Application or argument C – Conclusion It does not matter which term you use to refer to it as they are essentially the same system. While IRAC, IPAC or ILAC may appear to be a rigid system, it should be noted that a good answer will often need to merge some aspects of this system, particularly the rules and application stages. Thus, how IRAC, IPAC or ILAC is best applied will vary depending on the actual problem that is being answered. A number of problems relating to various areas of property law have therefore been presented at the end of some chapters. Suggested answers and some comments explaining the approaches to the questions have been made available online. Property law involves extensive legislation and therefore, when examining the rules or law for a particular problem, one of the first considerations is which statute applies. Due to the fact that there are different statutes in each state, the problems presented

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here have been deliberately written to reduce the need for reliance on statutes. Students should therefore be aware that for most of their exam questions, a greater use of the relevant statutes will almost certainly be required. It is also suggested that students should also consult with their lecturer or tutor in regard to how they expect an answer to be constructed, since each suggested answer is just one of a number of ways that a particular problem may be answered.

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Acknowledgments The author and the publisher wish to thank the following copyright holders for reproduction of their material. Cover image: Shutterstock/Ozarina anna Text: Federal Court of Australia for case extracts, AustLII; Incorporated Council of Law Reporting (ICLR) UK for case extracts; Incorporated Council of Law Reporting for the State of Queensland for extracts from the Queensland Reports (Qd R); LexisNexis Australia for extracts from the Australian Law Reports (ALR,) www. lexisnexis.com.au; LexisNexis UK for extracts from All England Reports (All ER), Law Reports Kings Bench Division (KB); Thomson Reuters (Professional) for case extracts from the Australian Law Journal Reports (ALJR), Commonwealth Law Reports (CLR), Federal Law Reports (FLR), New South Wales Law Reports (NSWLR) www.thomsonreuters.com.au; Victorian Council of Law Reporting for extracts from Victorian Reports (VR).

Every effort has been made to trace the original source of copyright material contained in this book. The publisher will be pleased to hear from copyright holders to rectify any errors or omissions.

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Chapter 1

Introduction Covered in this chapter • • •

Australian property law The classification of property How does property law link into other areas of law?

Australian property law Property law is an old area of law that developed under the English common law over many centuries. This common law was brought to Australia, but in the late nineteenth century property-related legislation was enacted in the then colonies of Australia. In general, these statutes placed the common law into a legislative framework, although some modifications to the common law were also made. The modern-day versions of these Acts govern the application of property and land law in Australia today. The concise nature and style of this book, however, does not allow for extensive references to these various statutes, and within the text an assumption has often been made that the law is essentially the same in each of the state-based statutes, which are referred to as the ‘relevant statutes’. A list of the relevant statutes has been given at the beginning of each chapter, and several of the more important sections of the relevant statutes are presented in boxes within the text, because property law is a subject where students must get used to applying the relevant statutory principles. While the more important statutes are mentioned, it should be noted that these lists are not exhaustive, because property law is an area where there are many relevant statutes at both Commonwealth and state level. Further, different states may have the same law, which will appear in different jurisdiction-specific statutes. For example, both Queensland and NSW have a presumption in favour of a tenancy in common, but the law is found in s 35 of the Property Law Act 1974 (Qld) and s 26 of the Conveyancing Act 1919 (NSW) respectively. In this book the relevant statutes are always listed in the alphabetical order of the states; that is, the order is NSW to Western Australia.

The Commonwealth The legislation covering property law is, for the most part, state based. However, some specific Commonwealth legislation is relevant to the area, most notably in

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Chapter 1: Introduction

the area of Indigenous rights to land. The Native Title Act 1993 (Cth) is the most significant Act, although the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) is also important in regard to rights in the Northern Territory. Recent problems with the Murray–Darling River System have meanwhile seen the enactment of the Water Act 2007 (Cth) in order to provide a solution to this problem at the Commonwealth level.

New South Wales The Real Property Act 1900 (NSW) is the most significant statute regarding real property in that state and, for instance, contains the law relating to the Torrens system. Other, more specific aspects of the law are covered by the Agricultural Tenancies Act 1990 (NSW), the Residential Tenancies Act 2010 (NSW) and the Perpetuities Act 1984 (NSW). The Conveyancing Act 1919 (NSW) covers the procedures required for the transfer of land; while the Mining Act 1992 (NSW), the Water Act 1912 (NSW) and Water Management Act 2000 (NSW) cover the law relating to mineral resources and water use.

Queensland The main statute in Queensland is the Property Law Act 1974 (Qld), which covers all the main areas of property law, including areas such as agricultural holdings and perpetuities, which are covered by specific Acts in NSW. The Land Title Act 1994 (Qld) covers the requirements for the Torrens system, while specific legislation, such as the Residential Tenancies and Rooming Accommodation Act 2008 (Qld), the Retail Shop Leases Act 1994 (Qld), the Mineral Resources Act 1989 (Qld) and the Water Act 2005 (Qld) cover their respective areas.

South Australia Like NSW, South Australia has a real property act, the Real Property Act 1886 (SA), with other areas of the law being covered by the Law of Property Act 1936 (SA). More specific areas of the law are covered by the Landlord and Tenant Act 1936 (SA), the Residential Tenancies Act 1995 (SA) and the Conveyancers Act 1994 (SA); while other areas are covered by the Mining Act 1971 (SA) and the Water Resources Act 1997 (SA).

Tasmania The relevant statutes in Tasmania include the Land Titles Act 1980 (Tas) and the Conveyancing and Law of Property Act 1884 (Tas); while more specific areas are covered by the Landlord and Tenant Act 1935 (Tas), the Perpetuities and Accumulations Act 1992 (Tas) and the Residential Tenancy Act 1997 (Tas). The Water Management Act 1999 (Tas) covers the law regarding the management of that resource.

Chapter 1: Introduction

Victoria The Property Law Act 1958 (Vic) is the main statute, with other areas being covered by the Land Act 1958 (Vic). The Torrens system is covered in the Transfer of Land Act 1958 (Vic). More specific areas are covered by the Residential Tenancies Act 1997 (Vic) and the Perpetuities and Accumulations Act 1968 (Vic); while natural resources are covered by the Mineral Resources (Sustainable Development) Act 1990 (Vic) and the Water Act 1989 (Vic).

Western Australia The main statute in Western Australia is the Property Law Act 1969 (WA); while other areas, including the Torrens system, are covered by the Transfer of Land Act 1893 (WA). The Residential Tenancies Act 1987 (WA) provides the legislative framework for that specific area; while mineral resources are covered by the Mining Act 1978 (WA).

The classification of property In order to understand property law, one of the first things that needs to be examined is the classification of property. The law has developed two main categories of property: real property and personal property. The terms ‘real property’ and ‘land’ are effectively interchangeable, with the latter more frequently used today. Historically, this division developed because only land was specifically recoverable under the early common law. It followed that the category of real property was limited to land as the defendant recovered the thing, the ‘res’, the very subject in dispute. Objects not so recoverable were regarded as personal property, and people dispossessed of such objects had a ‘personal’ action for damages against the wrongdoer, but not an order for delivery. Today, this distinction between real and personal property broadly corresponds to the factual distinction between land (that is, real property), and moveable objects and intangibles such as copyright, which are considered to be personal property. Real property is then divided into corporeal hereditaments, or the tangible real property capable of being alienated or passed onto heirs, and incorporeal hereditaments, the intangible real property rights, such as an easement, which can be a right to walk across another’s land. Personal property, meanwhile, can be divided into chattels real and chattels personal, also known as pure personalty. Chattels real are leasehold interests, with their classification as personal property reflecting the historical emphasis on the personal, contractual nature of a lease. Today, however, a lease is considered to be an interest in the land. Chattels personal include movable objects, such as books and furniture, and also intangibles, such as patents, copyrights and shares.

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Chapter 1: Introduction

Figure 1.1 The classification of property Real property

Corporeal (land)

Incorporeal (easements)

Personal property

Chattels real (leases)

Chattels personal (furniture, copyright)

Figure 1.1 indicates that ‘property law’ is a broader term than ‘land law’, because it incorporates both real property; that is, land and personal property. Both terms are used as titles by the various textbooks in this subject, as is the title ‘real property’. However, even in texts entitled ‘property law’, the material covered is predominantly the law concerning land. This is also reflected in many undergraduate courses that use the term ‘property law’, even though much of the content is actually ‘land law’, with personal property being left to be covered in greater detail in subjects such commercial law and intellectual property law.

How does property law link into other areas of law? While it is a both a characteristic, and a need, of an undergraduate degree to isolate and then emphasise the specific nature of a particular subject, it should also be remembered that in reality, each area of law does not work in total isolation. It is important, therefore, to appreciate how this subject fits in, and links, with other areas of law. At a basic level, the definitions and concepts of property law may be required to understand other areas of law. The classification of property into its two main divisions is required for subjects such as commercial law when covering, for example, the sale of goods. A definition of what constitutes property is also required for the compulsory acquisition of property in constitutional law; while a trespass to land claim in torts requires a definition of what constitutes ‘land’. The law relating to energy, resources and the environment all have connections to property law; for instance, an Act relating to mineral resources usually sets out the requirements for prospecting licences and mining leases. Water rights is presently a very topical area in relation to property, but it is also an area that raises a major constitutional issue in relation to whether the Commonwealth has the power to legislate in this area. Since

Chapter 1: Introduction

property is often placed into a trust, the law of trusts is another area that needs to be kept in mind when examining land law. Material covered in property law also forms a basis for what is covered in practice-related subjects, such as succession, conveyancing and town planning. Conveyancing, for instance, involves a study of what is actually required in practical terms when transferring land, and the study of land law provides an understanding of why these procedures need to be carried out.

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Chapter 2

What is property? Covered in this chapter • • •

The definition and concept of property The human body as property Intellectual property

Cases to remember Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 Moore v Regents of the University of California (1990) 793 P 2d 479 Doodeward v Spence (1908) 6 CLR 406 Singtel Optus v National Rugby League Investments Pty Ltd (No 2) [2012] FCA 34

Relevant statutes Copyright Act 1968 (Cth) Designs Act 2003 (Cth) Patents Act 1990 (Cth) Trade Marks Act 1995 (Cth)

The definition and concept of property The definition of property is a broad one, because property can be considered to be anything that has value and is capable of being owned. It therefore obviously includes land and goods, but also includes more intangible intellectual property rights, such as copyright. An intangible is something that cannot be physically touched. Copyright, for instance, is an intangible property right giving the person who owns the copyright exclusive rights in relation to that property. A copyright owner can therefore allow or prohibit certain things to be done with that property, and in Australia, the scope of these rights is covered by the Copyright Act 1968 (Cth). Property law, particularly land law, is a very old area of law, and an examination of its history is essential in order to have an understanding of today’s concept of property and how the law relates to land. This examination also shows that the concept of property can involve legal philosophy and presiding social attitudes as much as legal definitions. Australian property law originated in an environment that was very different from present-day Australia. It is derived from English common law, which itself evolved

Chapter 2: What is property?

under the medieval feudal system, in which society was stratified into various classes, with the king at the apex. In such a system land meant wealth, and in turn, this ­ land-based wealth brought immense power to relatively few landowners. This included the church, which owned large tracts of land, and therefore exerted political, as well as spiritual, influence over the people. The English medieval attitude towards property can be seen from the fact that even at the end of the eighteenth century there were over 200 hanging offences, the vast majority of which related to property. A hundred years later, however, there were just four: murder, manslaughter, rape and treason. The catalyst for this change in attitude towards property during Victorian times was the Industrial Revolution, which changed the power axis. Wealth began to drift away from the landed gentry into the hands of those who owned the means of production, namely the industrial capitalists. The large estates began to disintegrate, and with this came a conversion of land into a commodity. A middle class also began to emerge, mainly to provide the managerial skills required by industrial capitalists. Thus, by the time the Australian colonies were being formed, the English class system and its associated attitude to property were being broken down. The concept of property therefore reflects political, social and economic conditions, and cannot be explained purely in doctrinal terms. Different societies may have differing attitudes towards property; for instance, some societies allow the ownership of humans as slaves, while in other societies such ownership is prohibited by the state. The twentieth century also saw a difference in the attitude to property between capitalist society, in which the ability to own property privately is an essential component, and socialist society, in which private property is seen as the source of oppression and inequality. Hence, in a capitalist society the quality, size and location of the house an individual owns will reflect the individual’s wealth, which in turn can be a reflection of the individual’s importance in that society. In a socialist society, however, doctors and street cleaners are often paid similar wages, which theoretically prevents inequality when it comes to what type of house they live in. In economic terms the differences in capitalist and socialist attitudes are most apparent, with non-government-owned companies being the norm in capitalist societies and government-owned companies being standard in socialist societies. Like in most countries, Australia contains a mixture of private and public property, with our numerous beaches, parks and public buildings being examples of property held for the benefit of all. While for the vast majority of Australians the ability to use such public spaces is paramount to the enjoyment of living in Australia, the opportunity to own property, particularly their home, is equally as important.

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Chapter 2: What is property?

The most salient aspect of private property is the right of the owner to exclude others, with legal writer Felix Cohen suggesting, in ‘Dialogue on Private Property’ (1954) 9 Rutgers LR 357, that such property can have the following label attached: To the world: Keep off unless you have my permission which I may grant or withhold. Signed: Private Citizen Endorsed: The State

The right to private ownership is enforceable against everyone and includes the right to decide who can and who cannot enter onto that land. It also requires the endorsement of the state, and in Australia, this is achieved through the relevant law that enables an individual to purchase, and therefore own, what was originally a grant of land from the state. As previously mentioned, the concept of property involves the application of legal philosophy, and various theories have been attached to property. One is labour theory, attributed to seventeenth-century legal philosopher John Locke. The essence of this theory is that the infinite mind, ‘God’, created all things and is therefore the owner of all that is in the universe; by analogy, what a person acquires from their labour belongs to them. The economic theory, which is a reaction to the labour theory, claims that private property is an essential stimulus to production, and that work performance proceeds from the satisfaction of owning something. Underpinning this theory, therefore, is that humans rationally seek maximum satisfaction from life. Any definition of property therefore must include concepts of economics and wealth, the right to enjoy it and the ability of the law to protect the interest. The legal concept of property is that it constitutes a bundle of rights, namely: • the right to possess one’s property • the right to use property • the right to exclude others • the right to transfer ownership by gift or by sale • the right to dispose of one’s property after death • the right to compensation from governments if they acquire the property. Attitudes to property, however, do change between cultures and societies. Australian colonial powers often relied on Western ideas about the nature of property rights in order to deny Indigenous people property in land with which they had had a close relationship to for untold generations. This was illustrated in an early native title case, Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141. This decision clearly relied on a Western concept of property, and reflects the fact that prevailing social views, legal philosophy and other factors may influence the concept of property.

Chapter 2: What is property?

A case to remember Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141 Facts: The plaintiffs were Aboriginal people who claimed that their land on the Gove Peninsula (Northern Territory) had been unlawfully invaded by Nabalco, which mined bauxite under an agreement with the Australian government. The plaintiffs needed to establish a proprietary interest in the land in order to maintain the action. Decision (Blackburn J): I think that property in its many forms generally implies the right to use or enjoy, the right to exclude others, or to alienate. I do not say that all these rights must coexist before there can be a proprietary interest, or deny that each of them may be subject to qualifications. But by this standard I do not think that I can characterise the relationship of the clan to the land as proprietary … The evidence shows a recognisable system of law which did not provide for any proprietary interest in the plaintiffs in any part of the subject land.

In Yanner v Eaton (1999) 201 CLR 351, the High Court had to decide whether an Aboriginal had breached the Fauna Conservation Act 1974 (Qld) in catching two juvenile crocodiles using traditional methods. It was held that, as a native title holder, he was entitled to hunt for non-commercial communal needs. In reaching its decision, the High Court also stated that property under the Fauna Conservation Act 1974 (Qld) was a ‘description of a legal relationship with a thing’. It was further stated that the term ‘property’ can be used ‘to describe all or any of very many different kinds of relationship between a person and a subject matter’. The case dealt with the question of what fauna could actually be owned by the Crown, with the High Court asking whether it was just fauna located within the state of Queensland, or whether, for example, migratory birds could also be owned. It was noted by the High Court that at common law, wild animals could be the subject of only the most limited property rights. Ownership denotes a legal right to have, and to dispose of, possession and enjoyment of the subject matter, and the High Court considered that under the Act fauna was always meant to be outside the possession of humans.

The human body as property If you ever feel totally broke, without even a dollar to your name, you could take some comfort from the fact that you are carrying around property worth an estimated $200 000: your body. Sometimes the human body is characterised as property, sometimes as quasi-property and sometimes not as property, but as the subject of privacy rights. Whether it is achieved through property rights or privacy rights, the objective is the right to possess one’s own body and the right to exclude others from it. John Locke’s view was that ‘though the Earth and all

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inferior Creatures be common to all Men, yet every Man has a property in his own person. This nobody has any right to but himself’. According to this view, individual ownership of the physical body entailed ownership of those external things that are the product of the body’s labour. Locke therefore viewed individuals as stewards over their own bodies, possessing ‘themselves’ in trust, rather than being outright owners. The most obvious exception to this was slavery, now illegal in Western society. However, questions have arisen as to whether there can still be ownership of live parts of a body or dead bodies. In Green v Commissioner of Internal Revenue 74 TC 1229 (1980), Margaret Green had a rare type of blood, AB negative. She therefore was able to make a living from repeatedly selling her blood to a blood bank because in the United States, blood donors are paid. The Commissioner then claimed that she should have to pay tax on her ‘earnings’. It was then held by the court that blood was a tangible product, akin to eggs, milk and honey. The money she earned from selling her blood was therefore taxable income, although on a more positive note, she was able to claim related business expenses, such as travel. This case highlights, therefore, the relationship between property law and other areas of law, such as tax. While in Australia blood is donated, rather than sold, there seems to be no reason why other body products, such as hair, could not be sold. Another United States case that examines the issue of property rights in live parts of the body is Moore v Regents of the University of California (1990) 793 P 2d 479.

A case to remember Moore v Regents of the University of California (1990) 793 P 2d 479 Facts: John Moore had leukaemia and was treated over a period of years by Dr Golde at the University of California’s Medical Centre. Samples of blood, bone marrow and skin were taken during his treatment, and on the advice of Dr Golde, his spleen was removed. Dr Golde was aware that the samples and spleen would be valuable for research purposes. Moore had given permission for his spleen to be removed, but had not been informed that the Centre had a financial interest in the removal. Dr Golde then developed a cell line from Moore’s samples which was patented, with Dr Golde and the Regents subsequently receiving considerable payments relating to the commercial development of the cell line. Moore then sued for conversion. Decision: Moore did not have a proprietary interest in the spleen cells for conversion, but he did have a claim in tort for breach of a fiduciary duty and lack of informed consent for the removal of the spleen. The spleen cells, however, were the property of the scientists who had harvested them due to the skill needed to obtain them.

Chapter 2: What is property?

Actual organs cannot be sold, although they can be donated at death or during life, particularly by a relative. In Colavito v New York Organ Donor Network Inc (2006) 8 NY3d 43 the court had to decide whether a kidney of the deceased, which had been promised to Colavito by the deceased’s widow, was capable of being the subject of a claim for conversion when the donor network had given it to another patient. It was held by the court that there was no property in a corpse, but left unanswered the question as to whether there should be a public policy against finding property rights in donated organs, because Colavito had no enforceable right to the kidney since it was incompatible with his antibodies. This concept, that there is no property in a corpse, is a law that is nearly 400 years old, having been established in Haynes Case (1614) Co Rep 113, which involved a grave robber. It was also a concept that was examined by the High Court in the case of Doodeward v Spence (1908) 6 CLR 406.

A case to remember Doodeward v Spence (1908) 6 CLR 406 Facts: In 1868 a stillborn baby was birthed in New Zealand with the distinctive feature of having two heads. It was preserved in a jar by Dr Donahoe who was the doctor at hand at the time of the birth. On his death in 1870 it was sold at auction with his other personal effects, and later came into the possession of Doodeward, whose father who had bought it at the auction for £36. It was then confiscated by a police officer who felt the body should be given a Christian burial. Decision: There is no law forbidding the mere possession of a human body, whether it had been born alive or dead, for purposes other than immediate burial. When a person has by lawful work and skill dealt with a human body so that it has some attributes differentiating it from a corpse that is awaiting burial, then there is a right to possession. One such example given was that of a mummy, because the skill of the embalmer has turned it into something else. Such possession is not unlawful if the body possesses attributes of such a nature that its preservation may afford valuable or interesting information or instruction.

The common law, therefore, is that there is no property in a corpse, with exceptions such as the work and skill exception and the museum specimen exception. The basis of these exceptions is that some skill was required and applied to obtain the human material, or that the possession has a training or instruction purpose to it. That is why ownership of the spleen cells in Moore was with the doctors, and the law would be the same in Australia. Another issue in regard to the human body as property is the right to possession of the body for the purpose of burial. This was examined in Smith v Tamworth

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City Council (1997) 41 NSWLR 680, where a child who had been adopted later died. His biological parents wanted the title to the cemetery plot in which he had been buried transferred to them, and with it, an exclusive right to control the plot. Alternatively, they wanted to be able to erect their own headstone on the plot in addition to the one that had already been erected by the adoptive parents. It was held that ownership of a cemetery plot involved a licence granted by the cemetery authority, not actual title to that plot. The right to erect a headstone belonged to the person who owned the licence to the burial plot, and there was no right to have an additional headstone erected. However, while the adoptive parents were the legal parents, they could not deny other relatives access to the grave, and could not unreasonably remove any flowers that had been left on the grave. There can sometimes be conflict between various family members as to where the body should be buried, and this can be decided by the court on the grounds of practicalities. In Calma v Sesar (1992) 106 FLR 446, for instance, it was held that as the body was already in Darwin and funeral arrangements had already been made, the funeral should go ahead there, despite the father’s wish he be buried in Port Hedland. It can also be determined by what was indicated in the will, and in Manktelow v Public Trustees [2001] WASC 290, it was held that the funeral and burial should be held in Perth, as indicated by the deceased’s will, and not in the Barossa Valley where her surviving children wanted her to be buried. Cultural issues may also need to be considered, and in Jones v Dodd [1999] SASC 125 the father, Paddy Jones, wished to have his son buried at Oodnadatta, while the deceased’s former de facto, Laurie Dodd, wanted him buried at Port Augusta. The court took into account the relevant cultural issues, noting that according to Aboriginal law and custom it was important that the deceased be buried in the area in which he lived, so that his spirit could come back to that area. The court referred to the International Covenant on Civil and Political Rights and the Draft Declaration on the Rights of Indigenous Peoples, and while it acknowledged these international instruments were primarily drafted for living persons, it also stated that the ‘common considerations of decency and respect for human dignity should lead those responsible for the burial of a corpse to recognise, and where possible to give effect to, the cultural, spiritual and religious beliefs and practices of the deceased’.

Intellectual property Intellectual property involves the rights that provide protection to creative and intellectual works. It includes laws relating to copyright, designs, patents and trademarks, each of which now has its own Commonwealth Act, namely the Copyright Act 1968 (Cth), Designs Act 2003 (Cth), Patents Act 1990 (Cth) and the Trade Marks Act 1995 (Cth). Thus, a feature of intellectual property is that the

Chapter 2: What is property?

relevant legislation has been enacted at the Commonwealth level, unlike most areas of property law, where the relevant statutes are in the state jurisdictions. The fact that each of these areas is covered by its own statute illustrates that the law relating to these various areas evolved independently and for different reasons. This means that the term ‘intellectual property’ covers a wide and diverse collection of laws, rather than being one distinct area of law. The common distinctive feature of these various areas is that it governs work derived from either a creative or an intellectual effort. This is illustrated in the case of CBS Records Australia Ltd v Gross (1989) 15 IPR 385 where copyright was claimed on a demo tape of a song entitled Ring My Bell, which became a hit in the 1970s. It was held that the song constituted sufficient original skill and creative labour to be covered by copyright. Copyright is probably the most significant area of intellectual property and is an example of an intangible property right that gives the person who owns the right exclusive rights in relation to that property. A copyright owner can therefore allow certain things to be done with that property, or prohibit things to be done with that property. For example, a copyright owner of a song could allow the song to be used in an advertisement, or alternatively could prevent someone from using it in an advertisement. It should be noted that copyright law did not develop under common law and was established by statute—in Australia originally by the Copyright Act 1905 (Cth). This is now reflected in s 8 of the present statute, Copyright Act 1968 (Cth), which states that copyright only exists by virtue of this Act. The 1968 Act covers areas such as original literary, dramatic, musical and artistic works, as well as sound recordings, cinematograph films and television programs. It is considered to be a code for copyright, although the comment has been made that it is always out of date, because new technology is continually providing new areas that need protection under the Act. Advances in technology are such that once the necessary amendments have passed through parliament, another area created by new technology means further amendments to the Act are needed. Even the advent of television required such an amendment, because the legislation of the time only referred to, and covered, cinematographic films. Copyright law, therefore, gives a graphic indication that the concept of property is always evolving and changing. Another feature of copyright is that it may exist separately from ownership of the physical property. In Dickens v Hawksley [1935] 1 Ch 267, for instance, the trustees of a beneficial trust set up by author Charles Dickens argued that they owned the copyright of an unpublished manuscript entitled ‘The Life of Christ’. This claim was based on it forming part of the residual estate, rather than the copyright being with Dickens’s sister-in-law, who had been left the manuscript along with all his papers. It was held that the copyright formed part of the residual estate because the copyright was separate and distinct from the manuscript itself. Thus, the case

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illustrates that ownership of the intangible copyright can be separate and distinct from the ownership of the actual chattel, in this case the manuscript. Similarly, in Boyapati v Rockefeller Management Corporation (2008) 77 IPR 251 it was stated that if copyright in questions for practice exams had been held by Rockefeller through its director, Dallas Gibson, then it would have become vested with the trustees who were dealing with Gibson’s bankruptcy. This again illustrates that copyright is a property right that can be transferred. In this case, however, the copyright was held by the plaintiff due to the fact that the independent skill, judgment and labour involved in producing them satisfied copyright’s originality requirement.

Practical example If you go out shopping and buy a book, a CD and DVD you will then have ownership of those physical items. However, that does not mean that you now own the copyright of the creative work they contain, because this is a separate, intangible property right that will usually remain with the person who was responsible for the creation of that work. This means that while you have every right to use the items as often as you wish, any reproduction of them will be in breach of the copyright.

Due to its intangible nature, there is a danger that copyright can extend too far and therefore restrict the creation of new pieces of work. In Baigent v Random House Group Ltd (2007) 72 IPR 195, for instance, the authors and publisher of a book entitled The Holy Blood and the Holy Grail claimed that Dan Brown had infringed their copyright in his bestselling novel, The Da Vinci Code. Brown admitted that he had looked at the book as part of his research for The Da Vinci Code, and it was held that what he had taken were general propositions, too abstract to qualify for copyright protection, because they were merely historical facts, ideas and theories. A distinction was made between the legitimate use of ideas expressed and the unlawful copying of the expression of those ideas, which meant no copyright had been breached in this case.

A case to remember Singtel Optus v National Rugby League Investments Pty Ltd (No2) [2012] FCA 34. Facts: In July 2011 Singtel Optus, and its subsidiary, Optus Mobile Pty Ltd, began a new service called TV Now, which enabled customers to record free-to-air television programs on personal computers, iPhone or iPod, Android mobile devices, or 3G mobile phones. The central issue in the case was whether Optus had infringed the copyright of the National Rugby League (NRL), Australian Football League (AFL) and Telstra in regard to several matches played in September 2011. The alleged copyright breaches centred on whether the ability of people using TV Now to record programs, and then watch them time

Chapter 2: What is property?

delayed, was in breach of the Copyright Act. The issue at trial was whether there had been a breach of the amended s 111, which allows people to record films, or sound recordings, to watch at a more convenient time provided it is solely for private and domestic use. Decision: The original trial judge, Justice Rares, held that the users had made their films and viewed them near live, solely for private and domestic purposes, and to watch them at a more convenient time than the live broadcast. His Honour also held that it was the user who was responsible for any communication, because it was the user who initially chose to record the program—even though it was Optus who provided the services—and hence there was no breach of copyright. However, on appeal to the Full Court of the Federal Court it was noted that Optus had retained possession, ownership and control of the physical copies made on the hard disk until deleted by Optus. Thus, the court held that Optus’ role in capturing the broadcast, and then embodying its images and sounds meant that what Optus did was ‘sufficiently close and causal to the illegal copying’ by the machine owner who had breached the ‘exclusive domain of the copyright owner’. It was also held that while without the subscriber’s involvement, nothing would be created, and without Optus’ involvement, nothing would be copied. Both parties were therefore involved with the act of making the copies. While the individuals were covered by the s 111 domestic purposes exemption, Optus was not protected, due to its commercial activities. It was then held that only Optus could be sued for breach of copyright, because the subscriber could rely on s 111. Thus, the appeal by the NRL was successful.

Think About It 1 Do you agree that the concept of property is culturally dependent? How has the concept changed in the 200 years or so of European settlement in Australia? Does the Western concept of property differ from the Indigenous concept? 2 The idea of the human body as property raises moral and ethical questions, as well as legal ones. Some questions you may wish to consider are: • Do you think that people should be paid to give blood in Australia, as they are in the United States? • Do you believe that someone should be able to ‘sell’ their kidneys or other organs after they have died in order to provide a greater ‘inheritance’ for their children? • Do you believe that a family member should be forced to give up a kidney or bone marrow to save the life of another family member? 3 Do you agree that intellectual property rights, such as copyright, need to be ­covered by Commonwealth legislation? Do you think that all property should be covered by C ­ ommonwealth Acts, rather than state ones? If so, why? If not, why?

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Chapter 3

What is land? Covered in this chapter • • • •

The meaning of land Fixtures Water rights Mineral resources and mining law

Cases to remember Bernstein v Skyways General Ltd [1978] QB 479 Farley v Hawkins (1997) 2 Qd R 361 Brand v Chris Building Co Pty Ltd [1957] VR 626 Beaudesert Shire Council v Smith (1966) 160 CLR 145 Attorney-General (Southern Nigeria) v John Holt Co Ltd [1915] AC 599

Relevant statutes Water Act 2007 (Cth) Mining Act 1992 (NSW) Water Act 1912 (NSW) Water Management Act 2000 (NSW) Mineral Resources Act 1989 (Qld) Water Act 2005 (Qld) Mining Act 1971 (SA) Water Resources Act 1997 (SA) Water Management Act 1999 (Tas) Mineral Resources (Sustainable Development) Act 1990 (Vic) Water Act 1989 (Vic) Mining Act 1978 (WA)

The meaning of land The common law notion of land is that it extends up to the heavens and down to the centre of the earth. This is stated by the Latin maxim cuius est solum eius est usque ad coelum et ad inferos, which means ‘to whom belongs the land, to whom belong the soil, to them also the space above and the space below’. Restrictions, however, have been placed in regard to how high above the land ownership goes, and also in regard to ownership of what is in the soil.

Chapter 3: What is land?

A case to remember Bernstein v Skyways General Ltd [1978] QB 479 Facts: A professional photographer took aerial photographs over a large country estate owned by Bernstein, who claimed this amounted to trespass. Decision: It was held by the court that an owner’s right in the airspace above their land was restricted to such height as was necessary for the ordinary use and everyday enjoyment of the land. Above that height, the owner had no greater rights than any other member of the public, which meant that the photographer was not trespassing on Bernstein’s land.

The Australian case of Graham v KD Morris & Sons Pty Ltd [1974] Qd R 1, like Bernstein, involved the question of a potential trespass by an object travelling above the land. KD Morris was constructing a substantial building on a piece of land adjoining land owned by Graham, and had erected a crane almost on the centre of the building being constructed. When the crane was not in use it was left free to rotate and would frequently encroach 62 feet (20 metres) over the plaintiff’s land, the crane on these occasions being suspended above Graham’s roof. Graham then sought an injunction with the court holding that KD Morris could not continue to commit this trespass, and argued that if an injunction was not granted, the court would be condoning a clear breach of Graham’s proprietary rights. While this case was decided before Bernstein, it was decided on the same principle that the crane jib was in effect interfering with the ordinary use and everyday enjoyment of the land. In Uniting Church v Immer (1991) 24 NSWLR 510 it was held that use of the airspace was a transferrable and transmissible right, although not an actual interest in land. Limitations have been placed on what constitutes the air above land, and a further modification of the maxim occurs in regard to who owns what is in the soil. In Commonwealth v NSW (1923) 33 CLR 1 it was held that land owned by the state covers the whole of the soil from the surface to the centre of the Earth and everything that is physically incorporated in it, including the royal minerals; that is, gold and silver. All states now have mineral resources legislation that expressly states that all minerals are owned by the Crown.

Fixtures A fixture is a chattel that has been annexed to land or a building so as to become part of it in accordance with the maxim quicquid plantatur solo, solo cedit, which means ‘whatever is affixed to the soil becomes a part of the soil’. Fixtures are therefore chattels, or goods, which were intended to become attached to land and

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are now considered by the law to be a part of that land. It is an area of property law that illustrates the practical significance of the common law difference between real and personal property, because fixtures can be described as objects that were once chattels, but are now part of the land, because the law sees them as being attached. The question as to whether a chattel is affixed or not is relevant in the following situations: • selling land, because fixtures will pass to the buyer • mortgaging land, because the security will include the fixtures • leasing land, because fixtures will become part of the landlord’s realty • death of the landowner, because fixtures will pass on to the beneficiaries who are entitled to the landowner’s realty, and what are not fixtures will pass onto those entitled to the deceased’s personal property. In Holland v Hodgson (1872) LR 7, a two-step test was developed to determine whether something is a fixture or not. 1 Look at the degree of fixation. The more secure the object is, the more likely it is to be seen as a fixture, but if it is only attached by its own weight, then it is generally considered to be a mere chattel. 2 Look of the intention of the annexation. An article may be very firmly attached, yet the circumstances may show that it was never intended to be part of the land. The courts look at the objective intention of the person who has affixed the object, although the degree of fixation may help to indicate what that intention was. Thus, since the law of fixtures involves examining the intention of one of the parties, you will find that the cases are, to some degree, determined according to their own characteristics and facts, as was pointed out in Australian Provincial Assurance v Coroneo (1938) 38 (SR) NSW 700. This examination assesses the degree of fixation, whether the object can be removed without causing damage, what is being done with the object and its function. The objective intention can also be determined by asking whether the fixation was done for the better use and enjoyment of just the item itself. If so, then it is more likely to be a chattel. However, if the object has been fixed in place for the better use and enjoyment of the actual land or building, then it is more likely to be a fixture. One of the surrounding circumstances that may be looked at is whether the object fits into an overall architectural design of a house. If it does, the object is more likely to be a fixture. In Re Whaley [1908] 1 Ch 615, for instance, a portrait and a tapestry were held to be fixtures because of the way they were intended to be part of how the room was presented. Presumptions apply to this area of land law. If the item is affixed to the land to a great extent beyond its own weight, it is presumed to be a fixture, with the burden of proof then being on those who assert that it is not a fixture. If it is not affixed, and merely rests on its own weight, it is presumed not to be a fixture, with the burden of proof resting on those who assert that it is a fixture.

Chapter 3: What is land?

Houses and other buildings are usually intended to be permanent. In Greita Sebea v Territory of Papua (1941) 67 CLR 544 Sebea had leased 50 acres from the Crown in 1937 for a period of ten years at a yearly rental of £15. An aerodrome and associated buildings were then constructed on the land and when the land was compulsorily acquired in 1939 the issue was whether compensation should be for the land, or the land plus the buildings. It was held that anything annexed becomes part of the realty and that the person who was the owner of it when it was a chattel loses their property in it, which immediately vests in the owner of the soil. The land was therefore valued to include all the structures and the buildings that were permanently attached or affixed to it. However, even when dealing with a home, there may be no intention for buildings to become permanent, and in both Yallingup Beach Caravan Park v Valuer-General (1994) 11 SR (WA) 355 and Ceedive Pty Ltd v May [2005] NSWSC 222 they were held to be chattels. Everyday items, such as carpets, venetian blinds, airconditioners, dishwashers and garden sheds have also all been the subject of litigation to determine whether they were mere objects or fixtures. Depending on the particular circumstances, these are all capable of being either fixtures or chattels. In Palumberi v Palumberi (1986) NSW ConR 55–287, for instance, carpets were considered to be fixtures while venetian blinds were held to be chattels. In Belgrave Nominees v BarlinScott Air-conditioning (1984) VR 947, Belgrave Nominees, who were the owners, entered into a contract with a builder who then subcontracted with Barlin-Scott Air-conditioning for the supply and installation of airconditioners. A platform was constructed on each roof to hold a chiller that stood on its own weight. BarlinScott later removed the airconditioners when the builder went into liquidation, and Belgrave Nominees sought an injunction seeking their return. It was held that the airconditioners were connected to water pipes by means of bolts and nuts, so there was some connection with the building. The airconditioners were thus intended to be fitted permanently to each building, and therefore were fixtures at the time of their removal. Farley v Hawkins (1997) 2 Qd R 361 involved two other common household objects: dishwashers and sheds.

A case to remember Farley v Hawkins (1997) 2 Qd R 361 Facts: Elizabeth Farley died on 16 July 1992. Under her will her children became entitled to her house and her second husband became entitled to her residuary estate. In 1994 her husband removed a dishwasher from the house and attempted to remove a galvanised iron shed from the property, claiming he was entitled to them because they were not fixtures. The dishwasher was connected by inlets and outlets for water and its removal

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left an unsightly gap in the kitchen. The shed, meanwhile, was used to store earth-moving equipment and was bolted into large concrete blocks in the ground. Decision: If a chattel is securely attached to a house there is a strong presumption it is a fixture, although all the circumstances of the case have to be considered. The dishwasher’s status as a fixture was established because not only was it lightly connected with other fixtures, it was also set into fixtures. Although it could be easily removed after the disconnection of the plumbing, the fixture into which it was built was intended as an integrated whole. It did not merely occupy an empty space. The shed was so substantial as to amount to a fixture. By its size and relative permanence the shed was intended to be a fixture and being bolted to the base did not detract from this. The ease by which it could be disconnected from the concrete slab to which it was bolted is irrelevant, and normally a shed would be a fixture, unless the structure was light and easily portable.

Practical example The owners of a house buy a bed linen set consisting of sheets, pillow covers and a quilt cover for the main bedroom. It also includes a matching curtain for the large window in the room. After agreeing to sell the house, the owners remove the bedroom set, including the curtains, but the purchasers demand the curtains be returned, because they consider it to be part of the house. In such a scenario the curtains probably have to be returned, because the usual intention is for curtains to become a fixture, despite the relatively low degree of annexation, because they are usually installed for the better use and enjoyment of the house itself rather than the objects. Usually, therefore, the curtains will be considered to be fixtures, and the sellers would have to return them, unless provision had been made in the contract for sale that indicated that the curtains did not form part of what was being sold with the house. The maxim relating to fixtures, namely ‘what becomes attached to the soil becomes part of the soil’, can be modified by the terms of the contract of sale. It can also be modified by the operation of estoppel. Estoppel is the doctrine that protects a party from detriment that would flow from that party’s change of position if the assumption or expectation that led to the change was rendered groundless by the other party; that is, you cannot go back on a promise if it leads to detriment. It is therefore the concept of unconscionability that underlies estoppel. Brand v Chris Building Co Pty Ltd [1957] VR 626 illustrates how the maxim of fixtures can be modified by estoppel.

A case to remember Brand v Chris Building Co Pty Ltd [1957] VR 626 Facts: Chris Building Co entered into a contract to build a house for Joe and Mary Pulis on their land. Joe and Mary Pulis showed representatives of Chris Building Co the land on which the house was to be built, but in error the adjoining block of land was indicated, and the house was subsequently erected on the wrong block. Brand, the owner of the block

Chapter 3: What is land?

of land, sought to restrain Chris Building Co from entering his land and demolishing the house. Decision: Brand, as the owner, is entitled to possession. Chris Building Co, under an honest mistake that was not contributed to by Brand, entered upon the land without any authority from Brand, became a trespasser and proceeded to build a house on it. When Brand found out, he took immediate steps to prevent the continuance of the trespass. Chris Building Co cannot claim the house because when A stands by while A’s right is being infringed by B, the following must, as a general rule, be present in order for estoppel to be raised against A: 1 B must be mistaken as to B’s own legal rights. 2 B must spend money on the faith of B’s mistaken belief. 3 Acquiescence, the doctrine of which is founded upon conduct with a knowledge of your legal rights. 4 A knows of B’s mistake and remains quiet. 5 A encourages B by abstaining from asserting A’s legal rights.

The third way the maxim can be modified is by statute, and it is common, for instance, to have statute-based modifications for agricultural holdings. The tenant of an agricultural holding, for instance, may be able to take away items belonging to them, such as engines, generators, pumps, machinery, fencing and any buildings or structures that are not affixed. These can be removed during or after the occupation, provided all the rates are paid, and the tenant gives two months’ notice to the landlord. A tenant who makes improvements, which covers things like drainage, dams and buildings that cannot be removed, will be entitled under the relevant Act to compensation from the landlord.

Relevant statutes Agricultural Tenancies Act 1990 (NSW) ss 6–10. Property Law Act 1974 (Qld) ss 155–167. Landlord and Tenant Act 1935 (Tas) s 26. Property Law Act 1958 (Vic) s 159A

When a building encroaches onto land that is owned by another, under the doctrine of fixtures, it will belong to whomever owns that other land. Statutes, however, allow a court to consider the nature of the encroaching object, the resulting loss and the damage that is caused. The court may then demand compensation, make an order that the portion of land be transferred, or order the removal of the

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encroaching object. In Ex parte Van Achterberg [1984] 1 Qd R 160, a brick building was built in 1960 at the rear of a house, for the use of the business belonging to one of the owners. In 1978 it was agreed to build a welded mesh fence to replace an old wooden paling fence that was thought to define the boundary between the two properties. Surveys, however, disclosed that the southern end of the building and the fence encroached by 0.315 to 0.35 of a metre. The court then ordered an easement right in respect of the area of land occupied by the encroachment. This was because the substantial and lasting character of the building meant that the legal rights of those affected were best adjusted by permitting it to remain in place, rather than ordering its removal merely because it was a trespassing encroachment on another person’s land. In Queensland and Western Australia relief can also be sought when there has been a genuine mistake that results in making a lasting improvement on another’s land.

Relevant statutes Encroachment of Buildings Act 1922 (NSW) s 3 Property Law Act 1974 (Qld) ss 185, 196 Encroachment Act 1944 (SA) s 4 Property Law Act 1969 (WA) ss 122–123

Water rights Water rights are also connected with the land, and in some cases water forms the boundaries of a property, or properties. Under common law a riparian owner (that is, one who who owns land adjacent to a river) may take and use water for ordinary purposes connected with their riparian tenement, as was held in Rugby Joint Water Board v Walters [1967] Ch 397. By the late nineteenth century, however, it had become obvious that the common law principles derived from England were not suited to the very different water situation that existed in Australia. Legislation was therefore passed, with the then colony of Victoria leading the way with the Water and Conservation Act 1880 (Vic) and the Irrigation Act 1886 (Vic). These two Acts provided regulation in regard to water and irrigation, and were the beginning of a reduction of common law riparian rights by statutory reform. At the time of Federation, however, water was not seen as a major concern, which is why the Commonwealth Constitution is largely silent on the issue,

Chapter 3: What is land?

leaving the control of water largely in the hands of the states. After Federation Victoria continued to lead statutory reform with the Water Act 1905 (Vic), providing that the right to the flow and control of the water in that state now lay with the Crown. An outcome of this legislation was that rights in connection with water were no longer directly connected to ownership of the land. Instead, water was in effect a separate property right to land, with a licence often needed to use it. Other states followed with similar legislation that vested the right to the use and control of the waters, rivers and lakes with the Crown, and the impact of these water Acts is illustrated in the case of Beaudesert Shire Council v Smith (1966) 160 CLR 145.

A case to remember Beaudesert Shire Council v Smith (1966) 160 CLR 145 Facts: Beaudesert Shire Council removed a large quantity of gravel from a bed of the Albert River in south-east Queensland, destroying a natural waterhole from which Smith was licensed to pump water. Smith then sought damages. Decision: The Water Act 1926 (Qld) vests the bed, the banks and the right to the flow of a watercourse with the Commissioner of Irrigation and Water Supply. Neither as a riparian owner, nor as a licensee, did Smith have a right to the preservation of the pool from which he pumped, or to a flow of water to the pump. The Water Act denies the common law right to the flow of water. Smith was entitled to receive damages for an intentional positive act that inevitably caused damage to his right as a licensee, because the council failed to obtain a certificate of authority from the Commissioner of Main Roads.

Today each state has some form of water or water management Act that determines how water is to be controlled and managed in that state. However, the recent crisis involving the Murray–Darling River system that runs through four states, illustrated the limitations of state-based water regulation. A federal response to water regulation was required, and despite potential constitutional problems, the Water Act 2007 (Cth) was enacted. This Act regulates the water resources in Australia as a whole, unlike the state-based legislation, which can only regulate water within the relevant state. A feature of water is that, by its very nature, it comes and goes. The law, therefore, has to cover situations where property boundaries defined by water have changed. This involves the doctrine of accretion, which was discussed in Attorney-General (Southern Nigeria) v John Holt Co Ltd [1915] AC 599.

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A case to remember Attorney-General (Southern Nigeria) v John Holt Co Ltd [1915] AC 599 Facts: The respondents had used a strip of land, together with other grants of land, piers and wharves, for the purpose of their business. The land included a strip of shore that had been below the high water mark in 1861, but had become dry land owing either to natural accretion or artificial reclamation. The respondents alleged the former; the Crown the latter. Decision: Accretion should be slow and gradual, so slow and gradual in a practical sense to be imperceptible in its course and progress as it occurs. The evidence appeared to point to the foundations of the wall having been sunk to the extent of a few feet in the soil between the ordinary high and low water mark; that is, the foreshore itself. The legal consequence follows that the doctrine of natural accretion could not be held to apply.

In Southern Centre of Theosophy Inc v South Australia [1982] AC 706 a lease of land contained 500 acres on the shore of an inland lake in 1911. Between 1911 and 1975 the lake receded and left exposed an area of 20 acres previously covered by water. It was held that accretion under common law is derived from sources of nature not aided by artificial structures. It was therefore held that natural accretion had taken place. It should be noted that some aspects of common law accretion can be altered by statute. Section 10 of the Land Act 1962 (Qld), for instance, states that land raised above the high water mark as the result of carrying out works belongs to the state, although in Beames v Leader [2001] 1 Qd R 347 it was stated that the common law still applied in determining what accretion actually is.

Mineral resources and mining law Mining law is the branch of law that is concerned with the access to and removal of minerals from the land. It therefore involves the legal access to minerals and matters incidental to that access. Mining law has a relationship with property law through the requirement that mining interests be registered, and through the fact that there can be an issue as to whether the minerals are part of the soil, or separate from the soil. In R v Parker [1989] WAR 233 it was held that minerals are chattels, unless they are so spread and mingled with the earth that they have their lost their separateness and are considered to be part of the soil. Once mined, minerals are clearly chattels. Under the common law whoever owned the land also owned the minerals, except for the royal metals, namely silver and gold, which were reserved for the Crown. However, the relevant statutes now reserve all minerals in the Crown, although there are a few privately owned deposits on land that was granted before the enactment of the relevant statutes.

Chapter 3: What is land?

Relevant statutes The property of all minerals is vested in the Crown: Mineral Resources Act 1989 (Qld) s 8 Mining Act 1971 (SA) s 16 Mineral Resources (Sustainable Development) Act 1990 (Vic) s 9 Mining Act 1978 (WA) s 9

While the states have full ownership of the land to the low water mark, the Seas and Submerged Land Act 1974 (Cth) gives the Commonwealth control of offshore waters, including their resources. However, the Coastal Waters (State Powers) Act 1980 (Cth) and the Coastal Waters (State Title) Act 1980 (Cth) gives the states rights, including mining, out to a distance of three nautical miles. Within each state the relevant statutes provide several mining tenements that allow the means of access to the minerals. These are: • prospecting permit • mining claim • exploration permit • mineral development licence • mining lease. A prospecting permit does not give the holder the right to mine, just the right to look for deposits. It only allows for hand mining (that is, picks and shovels), and the permission of the owner must be obtained. If you have a prospecting permit and find minerals, then a mining claim can be obtained, which allows for hand mining and small-scale prospecting. Exploration permits, meanwhile, are designed for large-scale mining companies to explore potential areas, but do not give permission to mine. However, even if minerals are discovered, an exploration permit does not vest the property of those minerals, because the exploration permit only authorises exploration, not actual mining. A mineral development licence is the next stage, and gives security when mineral deposits with possible economic potential are found, but the miner does not want to start actual mining at that particular time. When an eligible entity, namely a company, local government or adult person, wants to commence mining, then a mining lease can be obtained. This is the highest form of tenure within the mining industry, and any minerals taken become the property of the holder of the mining lease; that is, they are considered to be chattels, or goods, and can be treated as such. Compensation must be paid to the land owner, and in regard to the payment of compensation there is a basic distinction between the three exploration titles and

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the two mining titles. If a holder of an exploration title must compensate the land owner, the compensation is made retrospectively for actual damage caused by the exploration; while a holder of a mining title must make an agreement before mining commences. A mining lease holder may also have to take into consideration any native title that may exist on the relevant land. In Australia, warden’s courts have been established under the relevant states as the mechanism for resolving mining disputes. There is also a concurrent jurisdiction with the respective Supreme Court, and if the dispute falls within the quantum limitation, then the district court may have jurisdiction. The judicial functions of the warden’s court are to hear and determine disputes, actions and proceedings in relation to mining, and in addition to these judicial functions, the warden’s court also has administrative functions, such as dealing with applications for mining leases.

Think about it 1 Do you think that Bernstein v Skyways General Ltd provides a good definition of what ‘land’ constitutes above the soil? 2 Do you consider that the relevant statutes relating to the control of water and water management in Australia have changed the concept of water from being a part of the land to being a separate property right? 3 There is little doubt that water use in the southern half of Australia will be an ongoing issue in the twenty-first century. Given the importance of water, you may wish to consider the following questions: •

•

•

•

Do you think that the continuing crisis in relation to water will require the Commonwealth to take control from the states over water resources? Should the Commonwealth Government buy back water rights from some agriculturalists? How does this reflect on water in the concept of property? If, as some climatologists suggest, the southern part of Australia gets hotter and drier, and the northern part wetter, do you think water should be redirected from the northern part of Australia to the south? If water is to be redirected from the north of Australia to the south do you think this will need to be controlled at a Commonwealth level?

Chapter 3: What is land?

Assessment preparation Problem question 1 While Mary was studying medicine at university she rented two rooms in a house owned by Jack and Joan. She liked the place and continued to live there when she started working at the local hospital. Jack and Joan then told Mary that they were going to sell the house and asked whether she would be interested in buying it. Mary readily agreed and was able to raise the finance with the bank. Mary is aware of the following items that are associated with the house: • a dishwasher set into the kitchen benches • a plasma television, set onto the wall by means of brackets, which is in a separate television room furnished with two lounge suites • airconditioners set into the walls of the lounge room and main bedroom • a small fountain that has been screwed onto a pole on the back verandah • six hanging baskets hanging from the roof of the back verandah • six pot plants sitting on the back verandah. In the back garden, meanwhile, there are the following items: • a small portable shed • a large decorative fountain surrounded by a good-sized fishpond • numerous plants in the ground. Discuss what items Jack and Joan can take with them and which ones the law would require them to leave behind when the house is sold. For suggested answers to these problems, please refer to .

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Chapter 4

The doctrines of tenure and estates Covered in this chapter • • • • • •

The English feudal system The doctrine of tenure The doctrine of estates The doctrine of waste Determinable and conditional estates Future interests

Cases to remember Zapletal v Wright [1957] Tas R 211 Harris v King (1936) 56 CLR 45

Relevant statutes Perpetuities Act 1984 (NSW) Real Property Act 1900 (NSW) Property Law Act 1974 (Qld) Law of Property Act 1936 (SA) Real Property Act 1886 (SA) Conveyancing and Law of Property Act 1884 (Tas) Perpetuities and Accumulations Act 1992 (Tas) Perpetuities and Accumulations Act 1968 (Vic) Property Law Act 1958 (Vic) Property Law Act 1969 (WA)

The English feudal system When William the Conqueror arrived in England in 1066 he became master of all the land, and every other person derived title through the king. Feudalism, therefore, had the king at the apex of a land system that then moved down the line through lords, barons and various other levels of the aristocracy. The fact that all ownership was derived from the king meant that no land was without an owner. It also meant no one had absolute ownership, because there was always a residual ownership with

Chapter 4: The doctrines of tenure and estates

the king. Another important thing to note is that this feudal land tenure system was only for free tenants, and had no direct concern for the majority of the population, namely the serfs. Feudalism gave rise to two important land law concepts: the doctrine of tenure, and the doctrine of estates.

The doctrine of tenure The doctrine of tenure involves a land system whereby land is held by someone other than the owner, rather than there being absolute ownership. It is derived from feudal times, and feudalism involved not only a personal relationship between lord and vassal (that is, the weaker party), but also a land-holding relationship. Historically, at its essence was the concept of being granted land and protection in return for providing service, with the word ‘tenure’ coming from the Latin ‘to hold’. This ‘subletting’ of the land was known as subinfeudation. There were several different types of tenure, namely: • knight service, in which the tenant was obliged to provide forty days of service per year • serjeanty, which involved personal services, such as a butler being rewarded with a grant of land • frankalmoin, involving service of a religious nature • socage, which embraced all the other services, such as agricultural service. Tenure also gave rise to other rights and obligations, known as incidents of tenure. These were: • homage, or respect paid to the king • aid, or financial support, which the tenant was obliged to give the lord in time of need • relief, or a lord’s right to a sum of money when the tenant’s heir succeeded the land • wardship, where, if the heir was a minor, then the heir became the ward of the lord. Gradually, the feudal system began to break down, with this being reflected in several Acts. The Quia Emptores in 1290 prohibited all future alienation by subinfeudation. Historians suggest that this Act was the result of King Edward I’s campaigns during the 1280s, in which he first subdued Wales and then attempted to conquer Scotland, the latter campaign being the subject of Mel Gibson’s movie, Braveheart. These campaigns required more soldiers than could be obtained through the tenure system, and the King had to hire mercenaries for his army. The other significant Act relating to the breakdown of the tenure system was the Tenures Abolition Act in 1660, which abolished all remaining incidents of tenure. The year 1660 was historically significant,

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because it was the year in which the monarch returned to the English throne after the Civil War and the rule of Oliver Cromwell. However, when Charles II ascended the throne he was subject to a more powerful parliament than previous English monarchs. The Tenures Abolition Act is reflected in the present Australian statutes, which state that land is held without incident of tenure. While the doctrine of tenure was a medieval English system of land law, it was held in Attorney-General v Brown (1847) 2 SCR App 30 that this land system had been brought to Australia. Brown went prospecting for coal on vacant land that lay outside the urban limits. The Attorney-General then sued for trespass on Crown land and the Crown’s entitlement to the coal, with Brown arguing that the land was allodial. It was held, however, that every piece of land in NSW was in the Crown’s possession. This was because of the feudal system of land tenure, and with it the principle that the land is held for the Crown, was part of the law in NSW. Thus, by applying the doctrine of tenure, Australia became the possession of the Crown. In Mabo v Queensland (No 2) (1992) 175 CLR 1, Chief Justice Brennan discussed the doctrine of tenure, noting that it was derived from feudal origins, and was then brought to the Australian colonies. His Honour also noted that it was ‘far too late in the day to contemplate an allodial or other system of land ownership’ and that tenure is a doctrine that ‘could not be overturned without fracturing the skeleton which gives our land law its shape and consistency’. All land grants made in Australia are therefore subject to the doctrine of tenure.

The doctrine of estates The doctrine of estates flows from the doctrine of tenure, with the word ‘estate’ coming from the Latin word ‘stare’, which means ‘to hold’. In early feudal times seisin meant possession, and what the tenant owned was a slice of time, and therefore an estate that was quite separate from the land. However, over time, all estates became alienable, and seisin came to mean actual ownership of the estate. There were originally three types of estates or interests in land: fee simple (freehold), fee tail and life estates, with leasehold now also being considered an interest in land. Leases are discussed in more detail in Chapter 10. Fee simple is the greatest estate and can, theoretically at least, last forever. It is the closest thing to absolute ownership under the doctrine of tenure. ‘Fee’ indicates an inheritable interest, while ‘simple’ means that it descends without qualifications; that is, the types of heirs that can inherit are unrestricted. Under common law, it required words of purchase, or words that indicated who was supposed to enjoy the estate, and also words of limitation, which indicated the extent of the interest that had been given away. The common law was strict on what was required, and the correct expression was ‘to A and his/her heirs’. No other words would create a fee

Chapter 4: The doctrines of tenure and estates

simple estate in an inter vivos grant, although the law was more lenient if the grant was made under a will. Words of limitation are no longer required under Australian statutes, although appropriate words are still required in conveyancing. What distinguishes fee simple from other estates is that it can be alienated, and even if the title holder dies without a will, the next of kin can still inherit. Fee tail was an estate given to a person, and then to the specified descendants of that person, usually along the male line. As with fee simple, ‘fee’ meant an inheritable interest, while the ‘tail’ could be ‘tail male’, which meant only male heirs could inherit, or ‘tail female’, which meant only female descendants could inherit. It therefore required words of purchase; that is, ‘to A’, and also words of procreation, which were ‘and the heirs of his/her body’. Those familiar with Jane Austen’s Pride and Prejudice would be aware that the reason the Bennet girls needed to be married off was that the property was a fee tail male, which meant it was going to be inherited by their second cousin, the closest male relative. This problem no longer exists in Australia, because in the 1920s the various statutes in Australia abolished fee tail, and a person entitled to a fee tail thereafter obtained the property in fee simple. Life estates, as the name suggests, are created when an interest in land is granted to a person for the term of their life. This is achieved by stating ‘to A for life’. They can be very useful in providing for a particular person for the rest of their life, but then ensuring that the property is either returned to the grantor, or inherited by the person or persons the testator wishes. Note, however, that a life interest does not have to be determined by the life of the person who actually receives the interest; it can be determined by the life of another person.

Practical example Consider the situation where someone in the family is looking after another member of the family who is disabled. There is then another member of the extended family who wishes to provide accommodation for the carer while they are looking after the disabled member of the family, but does not want to the carer to actually own the house. One way to achieve this would be to give the carer the right to live in a house, but have that life interest determined by the life of the person who is being cared for, rather than by the life of the carer. Thus, when the disabled member of the family dies, the grantor can have their property returned, or if the grantor has died by this time, it will go to those entitled to inherit the property.

While trusts can be used to achieve a similar result, life interests can provide a way of achieving what someone wishes to do with their property in both the short and long term. The use of life interests raises the question as to what liability the person holding a life estate should have in regard to keeping the property in reasonable

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condition for the later interests. The doctrine of waste therefore developed to provide security for the landowner.

The doctrine of waste Waste means to do something that will devalue the property and prejudice someone with a future interest. There are four types of waste: 1 ameliorating waste 2 permissive waste 3 voluntary waste 4 equitable waste. Ameliorating waste involves conduct by the life tenant that alters the character of the land, but does so in a way that actually enhances its value. Doherty v Allman (1878) 3 App Cas 709, for instance, involved land on which there were several buildings that had been used for storing corn, then as an artillery barracks, and finally as dwellings for married soldiers. It had fallen into disrepair and the person who held the lease to the land wanted to convert them into dwelling houses, and the lessor sought to prevent him by means of an injunction. It was held, however, that it involved ameliorating waste, which, far from causing injury or damage to the inheritance, actually improved the inheritance. An injunction was therefore refused. Permissive waste is committed whenever the life tenant fails to keep the property in a satisfactory state of repairs. A life tenant will not be liable for such waste, unless the instrument that created the life estate imposes an obligation on the life tenant to carry out such repairs. In Re Cartwright (1889) 41 Ch D 532 a life tenant died, leaving the house and surrounding fences in a dilapidated condition, and the remainder person then sought damages from the executor of her estate for damages to carry out the required repairs. It was held, however, that the estate of a life tenant was not liable for permissive waste. Voluntary waste involves a positive act that causes damage to the land, such as demolishing a building or cutting down trees. A life tenant will be liable for voluntary waste, unless the instrument that established the interest made the life tenant unimpeachable for waste. However, even if the life tenant was unimpeachable for waste under common law, the courts of equity developed the doctrine of equitable waste to restrain life tenants who unconscionably exercised their legal right to the prejudice of the remainder person. That is, for the doctrine of equitable waste to apply, the behaviour must have an element of callousness or spitefulness. This is illustrated in the case of Vane v Lord Barnard (1716) 27 ER. Lord Barnard, on the marriage of the plaintiff, his eldest son, granted a life interest to himself without impeachment of waste, the remainder to his son for life, and to his first and other sons in tail male. Lord Barnard, having taking some displeasure against his son, hired

Chapter 4: The doctrines of tenure and estates

two hundred workmen to strip the castle of fittings including lead, iron and glass doors, to the value of £3000. An injunction was then granted to prevent the further committing of waste, and the court ordered that the castle should be repaired and put back into its previous condition.

Determinable and conditional estates Determinable estates An estate can be modified by the grantor imposing limits on the duration of the estate by reference to some event that may or may not occur. A determinable estate is one that will automatically determine at the occurrence of some event, which may or may not occur, and which is specified in the instrument establishing the grant. With a determinable estate, the determining event itself sets the limit for the estate being granted. Although it is often a matter of semantics, phrases such as ‘as long as’, ‘until’ or ‘during’ will usually indicate a determinable estate. An example of a determinable fee simple, therefore, would be: To Smithfield Rugby Club until Abbott’s Field ceases to be used for recreational ­purposes.

Abbott’s Field is then owned by the Smithfield Rugby Club, but if the ground ever ceases to be used for recreational purposes, then it automatically reverts to the grantor, or the grantor’s estate if the grantor has died. This is because with a determinable fee simple the grantor’s right of reversion arises immediately on the occurrence of the determining event without the need for legal action. The determinable event in this scenario is therefore the end of using Abbott’s Field for recreational purposes, and it is this event that marks the boundary of the estate that has been given. The case of Bath and Wells Diocesan Board of Finance v Jenkinson [2002] 4 All ER 245 involved a situation of land being given for educational purposes. The School Sites Act 1841 (UK) provided for a determinable grant of land for schools, schooling having become compulsory in 1840. In 1871, some land in Somerset was conveyed for the use of a school. It ceased to be a school in 1984, and the land was sold in 1990. Normally the land would have reverted back to the estate, but the land and all its hereditaments had been sold to a company in 1924. The company had later been dissolved and it was held that the shareholders could not make a claim. It was therefore declared bona vacantia; that is, property that had no owner, which meant that the proceeds of the land sale went to the Crown. The case illustrates the usefulness of determinable estates in that they enable land to be donated for purposes such as education and recreation, but if the land ceases to be used for such purposes, then it automatically reverts back to the

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grantor, or the grantor’s estate, rather than a rugby club or school being able to sell off the land for a profit.

Conditional estates In a conditional estate, the condition is an added independent clause that can operate to defeat the estate before it has reached its boundaries. Thus, a conditional estate has a condition attached, by which the estate given may be cut short before it has run its course. This condition may be a condition subsequent, or a condition precedent. A condition subsequent is a future event upon the occurrence of which the parties agree to terminate their obligations; while a condition precedent is an event that must occur in relation to legal rights of property. Both conditions precedent and conditions subsequent are contingencies, a contingency being an event or circumstance that may or may not happen because it is conditional on something uncertain. Again, while it is a matter of semantics, phrases such as ‘provided that’, ‘on condition’, ‘but if’ or ‘if it happened that’ would indicate a conditional fee simple. An example of a conditional fee simple, therefore, is: To Smithfield Rugby Club, but if Abbott’s Field ceases to be used for recreational ­purposes the estate ceases to exist.

This creates a fee simple in Abbott’s Field subject to the condition subsequent. If this conditional estate was breached, then the grantor or their successor would have a right to reclaim the land; however, the fee simple would remain with the Smithfield Rugby Club until this is done because, unlike with a determinable estate, there is no automatic reversion. Because the relevant clause is an independent one, it can be severed, unlike the wording giving rise to a determinable estate. The condition used in a conditional estate may be held to be void if it is a condition against alienation, marriage or morality, is against public policy, or is uncertain. In Sifton v Sifton [1938] AC 656, for example, a testator left an annual sum to his daughter until she reached the age of forty. This was subject to the condition that the payments ‘shall be made only as long as she shall continue to reside in Canada’. It was held that it was a condition subsequent that was void for uncertainty because it was not known whether she had to live all the time in Canada, or whether she could reside there and make trips abroad. In Hall v Busst (1960) 104 CLR 206 the respondent agreed in a written contract to sell land, and contained in the contract was a clause stating that the applicant could not transfer, assign or lease any part of the land without the respondent’s consent in writing. It was held that the clause was void as a restraint on alienation because the principle applicable to a condition against alienation of land was applicable to a contractual restraint on alienation. In Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394 a testator left his estate to his sons, but on the condition that they

Chapter 4: The doctrines of tenure and estates

profess the Protestant faith, because they had or were about to marry Catholics. This condition was held to be void because it offended public policy in regard to preserving marriage. The case of Zapletal v Wright [1957] Tas R 211, meanwhile, was one involving morality.

A case to remember Zapletal v Wright [1957] Tas R 211 Facts: Wright was a married man, separated from his wife, who had cohabited with Zapletal for fifteen years before she left in 1955 to marry another man. Wright and Zapletal were joint tenants of land, although she had not contributed to the purchase. The trial judge regarded the transaction as being subject to a condition subsequent, the term being that if she ceased to cohabit with Wright then her interest would cease, with there being evidence of conversations to support this. The issue before the Full Court was whether the term was a condition subsequent, or a determinable fee simple. Decision: The term should be regarded as a condition subsequent, because it was not in terms limited to an estate defined by reference to any prior event. It might continue after the event, or might become impossible or irrelevant; that is, after Zapletal’s death. The form of the condition was 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. The condition had its operation in defeating the estate before it attained the boundary or completed the space of time described by the limitation. The objective of the condition subsequent was to bind Zapletal to Wright and provide an inducement for her not to leave. The condition was therefore void as tending to promote immorality.

Ideas on morality do change, however, and just thirteen years later a similar clause was held to be valid in Andrews v Parker [1973] Qd R 93. In this case Parker was living in a house with Andrews, a married woman. At her suggestion Parker agreed to transfer the ownership of the house to her, on the condition that if she returned to her husband, then the property would be transferred back to him. Shortly after the transaction, Andrews’ husband moved into the house and Parker was asked to leave. He was also told that he was not the first man to have been taken for everything. After Parker left the house, he commenced legal proceedings to recover title to the property. It was held that the agreement did not bring about an immoral association, and even if it did, the immorality was not sufficient, according to the current standards of the community, to deprive Parker the right to enforce it. Andrews was then ordered to transfer the title to Parker because this was what the condition provided for should she return to a state of lawful habitation with her husband.

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Future interests An estate may confer a present interest that allows for present enjoyment. A present interest can be a vested interest, and to vest means to transfer legal ownership or rights to another person, or to place property in the possession or control of another person. What a future interest confers is the right to enjoy the property in the future; that is, it is the possession that is absent. Note that under the various statutes future interests are considered to be equitable interests, because they have not reached legality. An estate may confer a future interest, which may be: • a remainder • a reversion • a contingent. A remainder is a new estate that owes its existence to the execution of the first estate. For example: To Mary for life, remainder to Jane in fee simple.

In this situation, Mary has the life interest and therefore present possession; while Jane has the future interest, the remainder. This means that on Mary’s death, Jane or her estate will obtain the property. The grantor, however, has given everything away, and there is therefore no reversion to the grantor, or the grantor’s estate. Thus, a reversion occurs when the property returns to the grantor. It is therefore the portion of the estate previously held by the grantor, and is not a new estate, but almost the same interest they previously had. If, for example, the grant was made ‘to Mary for life’, then there is a reversion to the grantor, or the grantor’s estate. This reversion is a future interest, and while it is not an estate in possession, it is still a presently existing estate, carrying with it a right to possession at some future time. It is said to be a vested interest because it is almost certain that it will be enjoyed by someone. Remainders and reversions are each presently existing estates, deprived of the right to seisin of the land only because of the existence of a current estate in possession. In these future interests, the right to immediate possession of the land lies in the future. A life interest like Mary’s, on the other hand, combines the interest with possession, her life interest in effect being carved out of the fee simple. A contingent interest depends on a particular event occurring, for example: To Henry until he attains the age of twenty-five; remainder to George in fee simple.

George’s interest is therefore contingent on Henry turning twenty-five, and it is not an interest that he can enjoy now. Often, contingent interests are remainders, but the

Chapter 4: The doctrines of tenure and estates

resulting contingent remainder is not an estate at all. This is because it does not vest an interest, and only arises if and when a specified contingency occurs. For example: To Mary for life; remainder to Jane and her heirs if Jane is unmarried at the time of Mary’s death.

In such a scenario, Jane has no estate at all during Mary’s lifetime, and Jane only has the mere possibility of acquiring an estate in the future should the contingency be fulfilled. Similarly: To Henry for life; remainder to George when he attains the age of twenty-one.

Here, George only has the expectation that the property will become his, and he may never acquire the property because he may not reach the age of twenty-one; or, he may not acquire the property straight away; for example if he is only nineteen when Henry dies. Note, also, that if it is a contingent remainder, then the rule against perpetuities will apply.

The rule against perpetuities With the development of legal executory interests that created future interests, legal interests in land could be limited in ways that otherwise breached common law rules, which meant that land was tied up for an inordinate period of time. This then caused a remoteness of vesting problem, because with the recognition of future interests it was possible for a landowner to postpone for considerable lengths of time the vesting of an interest of land. To prevent this remoteness of vesting problem, the rule against perpetuities was developed, with the common law setting a period in which the interest must vest, if it is to vest at all. The perpetuity period is therefore the period during which vesting could be withheld. What the rule of perpetuities reflects is the constant battle between landowners, seeking to restrain the alienation of family property, and the law’s wish to place restraints on alienation. In the Duke of Norfolk’s Case (1681) 22 ER 391 it was held that the vesting of interests in land could be validly postponed for one generation. The underlying principle behind this is that parents should be allowed to secure their landholdings against incompetent children. Vesting, therefore, was allowed to be withheld from that generation of the family, but no further. This then formed the perpetuity period, but the common law then extended it by adding a period of twenty-one years to the lifetime of the relevant present generation member, who was known as the ‘life in being’. The life of the youngest child was obviously the most significant, because this furnished the longest possible perpetuity period. However, the problem with this was that the period could end up being 100 years or more if the person designated as the

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life in being lived to a ripe old age. The statutes have changed this to allow the period to be specified up to a maximum of eighty years, although a shorter time period can be stated in the instrument if the grantor so wishes. If no time is specified, then the common law applies, except in NSW, where the common law has been overruled and replaced with the 80-year rule.

Relevant statutes Power to specify the perpetuity period up to eighty years or to retain the common law: Property Law Act 1974 (Qld) s 209 Perpetuities and Accumulations Act 1992 (Tas) s 6 Perpetuities and Accumulations Act 1968 (Vic) s 5 Property Law Act 1969 (WA) s 101

Common law overruled and replaced by the 80-year rule: Perpetuities Act 1984 (NSW) s 7

Under both the common law and the statutes, the perpetuity period begins to run when the instrument that creates the interest comes into operation. Under a will, for instance, the relevant time would be the date of the testator’s death. There are three conditions for vesting: 1 The person entitled to the interest must be ascertained. 2 The interest must be ready to take effect in possession, subject only to prior interests. 3 If it involves a class gift, then fractional shares to be taken by each member must be known within the perpetuity period. An example of where the rule against perpetuities would apply is the following contingent remainder from a will: To Mary for life, remainder to Mary’s first son to attain twenty-one.

If, at the time of the testator’s death, Mary is alive, but has no son aged twenty-one, then her life interest is vested, with the remainder to the son being contingent on him reaching twenty-one within the perpetuity period. Under common law Mary would be the life in being, and therefore the son would need to turn twenty-one within twenty-one years of her death in order to fulfil this contingent. Under the relevant

Chapter 4: The doctrines of tenure and estates

statutes it can be within an 80-year period from the time of the testator’s death, unless a shorter time had been stated in the instrument. An Australian case involving the common law perpetuity period is Harris v King (1936) 56 CLR 45.

A case to remember Harris v King (1936) 56 CLR 45 Facts: In 1880 a businessman had, in his will, put three properties, 218, 220 and 222 Pitt St, Sydney, into trusts that respectively favoured each of his three daughters: Florence for 218, Wilhelmina for 220 and Emma for 222. Each of the trusts was for the daughter for life, and if any of the daughters left a husband then the husband was to receive half the income from the trust, and any children the other half. When both the daughter and the husband had died, the trustees were to sell the land and divide the money between any of the grandchildren from that daughter. Decision: The disposition infringed the rule against perpetuities, and was therefore void for remoteness. This was because it was conceivable that the daughter might marry a man born after the testator’s death and he might survive her by more than twenty-one years. His death, and the time when the land would be sold and distributed amongst the grandchildren, could lie outside the perpetuity period.

Under common law there was also the requirement of the initial certainty rule, with that rule being directed at possibilities, not probabilities. Therefore, if the interest can possibly vest outside the perpetuity period, even if highly improbable, then it is invalid. This is illustrated in the case of Re Wood (1894) 2 Ch 310, where the testator devised gravel pits that were to be worked until they were exhausted. They were then to be sold, with the proceeds to be divided amongst his living issue. The perpetuity period was twenty-one years, because no life in being had been nominated. At the time of his death, it was estimated the pits would last four years, although they actually lasted for six years. It was held, however, to have breached the perpetuity period, because it was possible that the pits would not be exhausted until after the perpetuity period. This initial certainty rule has been changed by the relevant statutes to a wait-andsee rule; that is, you wait and see what actually happens. Under this rule, with the scenario in Re Wood you would wait and see whether the gravel beds were actually exhausted within eighty years of the testator’s death, which would have made the devise of the gravel pits valid. If the rule that is now in the statutes was in operation at the time of Harris v King then you would wait and see whether the daughter’s husband was still alive eighty years after the testator’s death.

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Thus, there have been two fundamental statutory changes to the rule against perpetuities. The first is that the perpetuity period can be eighty years, rather than having to be determined by the lifetime of a life in being plus twenty-one years, and the second is that the wait-and-see rule applies rather than the initial certainty rule. Both Re Wood and Harris v King clearly indicate that it is easier to fulfil the requirements under the wait-and-see rule than under the initial certainly rule. If a certain age is required in order for a class gift to be valid, the relevant statutes allow for the age to be reduced to a minimum of eighteen if this will prevent the gift from being invalid.

Relevant statutes Common law possibility requirement replaced by the wait-and-see rule: Perpetuities Act 1984 (NSW) s 8 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 Reducing the age to a minimum of eighteen in order to prevent a class gift being invalid: Perpetuities Act 1984 (NSW) s 9 Property Law Act 1974 (Qld) s 213 Perpetuities and Accumulations Act 1992 (Tas) s 11 Perpetuities and Accumulations Act 1968 (Vic) s 9 Property Law Act 1969 (WA) s 105

Think About It A New Zealand Law Commission discussion paper entitled Tenure and Estates in Land states that if a land system were set up today it would not be the tenure system. Do you agree with this statement, or is there any advantage in having a tenure system in Australia? You may wish to read the relevant pages of Justice Brennan’s judgment in Mabo v Queensland (No 2) (1992) 175 CLR 1 at 43–52 where his Honour discusses the tenure system and its ­application to Australia.

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Chapter 5

Native title Covered in this chapter • • •

Common law native title Statutory native title: The Native Title Act 1993 (Cth) Extinguishment of native title

Cases to remember Coe v Commonwealth (1978) 53 ALJR 403 Mabo v Queensland (No 2) (1992) 175 CLR 1 Wik v Queensland (1996) 187 CLR 1 Ward v Western Australia (2002) 213 CLR 1 Yorta Yorta v Victoria (2002) 214 CLR 422

Relevant statutes Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) Native Title Act 1993 (Cth)

Common law native title Native title involves rights or interests owned by Indigenous people in respect of land or water, in accordance with their traditional laws and customs. While Mabo v Queensland (No 2) (1992) 175 CLR 1 is the case known for establishing native title in Australia, it was not the first case to examine the issue of Indigenous rights to land.

Pre-Mabo cases In the case of Cooper v Stuart (1889) 14 AC 291 the Privy Council held that NSW was a territory practically unoccupied, without settled inhabitants or settled law. By reaching such a conclusion the Privy Council was declaring that Indigenous rights to land did not exist in Australia. English law at the time stated that if a colonised or conquered land was occupied, then the laws of that country continued to exist until overruled. It was only when the land was terra nullius; that is, an empty land, that the laws of the colonising country became the law of the land. The wording in Cooper v Stuart enforced the concept known as ‘enlarged terra nullius’, whereby if there were people on the territory who were not cultivating the land in a European way,

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then the country could still be considered ‘empty’ with no recognition being given to Indigenous law. While in Milirrpum Justice Blackburn had stated that the Indigenous people had no proprietary interest in the land, one of the outcomes of Milirrpum was the establishment of a Royal Commission. The commission made recommendations that led to legislation in the form of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth). This and other state-based legislation allowed Aboriginals potentially to obtain freehold title over some Crown land, known as land rights. Significantly, the international case Advisory Opinion on Western Sahara [1975] 1 CJR 39 held that the Western Sahara was not terra nullius at the time of colonisation by Spain in 1884. Despite this decision, a statutory majority in Coe v Commonwealth (1978) 53 ALJR 403 upheld Cooper v Stuart and the application of the enlarged notion of terra nullius in Australia.

A case to remember Coe v Commonwealth (1978) 53 ALJR 403 Facts: Paul Coe, an Aboriginal, claiming to sue on behalf of the Aboriginal community, alleged, inter alia, the wrongful proclamation of sovereignty by Captain Cook in 1770 over the territory of Australia, and the wrongful assertion of possession and occupation by Captain Phillip. The relief sought included that all lands and waterways in Australia presently occupied and used by the Aboriginal people should remain free from interference, and that any authorisation of mining or other activity that interfered with the rights of Aboriginal people should be restrained. Decision: Chief Justice Gibbs stated that the Aboriginal people were subject to the laws of the Commonwealth and the states in which they lived. His Honour also stated that it was fundamental to our legal system that the Australian colonies became British possessions by settlement, and not by conquest, and referred to Cooper v Stuart to enforce the application of the enlarged notion of terra nullius to the settlement of Australia. In his dissenting decision, however, Justice Murphy stated that Coe was entitled to try to prove that the concept of terra nullius had no application to Australia, and that the lands concerned were acquired by conquest. Alternatively, Coe could rely on common law rights, which would arise if there had been a peaceful settlement. In either event, Coe was entitled to argue that sovereignty acquired by the British Crown, whether by conquest or settlement, did not extinguish ‘ownership’ rights in the Aboriginals; that they had certain proprietary rights, at least in some lands, and were entitled to a declaration and enjoyment of their rights or to compensation.

Therefore, in a 2–2 decision, the statutory majority dismissed Coe’s claims for native title, with Gibbs CJ being critical of the vagueness of Coe’s argument. For a native title case to be successful, what was required was a clearer, better defined concept

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of native title that could be applied to a smaller, better defined area. A garden plot on one of the Murray Islands, contested in the first Mabo decision, proved to be the ideal test case.

Mabo and native title A case to remember Mabo v Queensland (No 2) (1992) 175 CLR 1 Facts: While it was Mabo (No 2) that established native title in Australia, before it could be heard, the High Court had to decide the earlier Mabo v Queensland (No 1) (1988) 166 CLR 186. In this case it was argued that legislation enacted by the Queensland Government to extinguish any native title, should it exist, on Murray Island was in breach in of the Racial Discrimination Act 1975 (Cth). In a 4–3 decision the High Court held that it was in breach, leaving the way for native title to be once again argued before High Court. Decision: In what is now considered to be the leading judgment in Mabo, Brennan J stated that in conquered or ceded countries that already had laws of their own, such laws survived until they were changed. Thus, the laws of England became the laws of the land, protecting and binding colonists and Indigenous inhabitants alike. His Honour also described the theory that Indigenous inhabitants of a settled colony had no proprietary interest in the land as dependent on a discriminatory denigration of Indigenous inhabitants and their customs. In a joint judgment Justices Gaudron and McHugh were also highly critical of the decision by Justice Blackburn in Milirrpum, where his Honour had held that Indigenous people had no proprietary interest in the land. Justice Brennan went on to state that if the international law notion that inhabited land be classified as terra nullius no longer commanded general support, then the common law notion of native people being so low on the scale of rights known to our law could not be retained. The concept of terra nullius to justify conquest and colonisation therefore had to be condemned, since the common law of Australia would have perpetuated an injustice if it continued to embrace the enlarged notion of terra nullius. Justice Brennan then set out a nine-point summary that has been accepted as outlining what common law native title constitutes in Australia. A summary of these nine points is as follows: 1 The Crown’s acquisition of sovereignty cannot be challenged. 2 On its acquisition of sovereignty, the Crown acquired radical title. 3 Native title to the land survived the Crown’s acquisition of sovereignty and radical title, but the acquisition of sovereignty exposed native title to extinguishment by a valid ­exercise of such power that was inconsistent with native title. 4 A Crown grant wholly or partially inconsistent with native title will extinguish native title to the extent of that inconsistency. Thus, a grant in freehold will extinguish native title, but not necessarily a grant of lesser interests. 5 Land validly appropriated by the Crown, such as for roads, railways or public buildings, will extinguish native title to the extent of the inconsistency. 6 Native title to particular land is ascertained according to the laws and customs of the people who have a connection with the land.

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7 Native title to an area of land is extinguished if the group who have a connection with the land lose that connection, cease to acknowledge their laws and customs, or when the last member of that group dies. 8 Native title can be surrendered to the Crown, but is otherwise inalienable to those who are not members of the group to whom alienation is permitted by the traditional laws and customs. 9 If native title to any parcel of wastelands belonging to the Crown is extinguished then the Crown becomes the absolute beneficial owner. Thus, in a 6–1 decision (Dawson J dissenting), native title was held to exist on the Murray Islands, except for two acres that had been leased to a church in the nineteenth century, with Justice Toohey pointing out that these principles equally applied to the Australian mainland.

Pastoral leases and native title While the Mabo decision settled the general question as to whether native title existed in Australia, the question that the High Court had to address in Wik v Queensland (1996) 187 CLR 1 was whether pastoral leases were true common law leases that extinguished native title, or whether they fell into the category of a lesser interest that did not.

A case to remember Wik v Queensland (1996) 187 CLR 1 Facts: The Wik peoples and Thayorre people had claimed native title over lands known as the Holroyd River holding, over which a pastoral lease had been granted under the Land Act 1910 (Qld) in 1945, and the Mitchelton Pastoral Lease, which had been granted under the same Act in 1915. A further pastoral lease had been granted in 1973 for the Holroyd River holding under the Land Act 1962 (Qld). It was claimed native title had not been extinguished by the granting of these pastoral leases, but that it coexisted with the interest of the lessees. Decision: Justice Toohey examined the statute that established pastoral leases in Australia, namely the Crown Lands Unauthorized Occupation Act 1839 (NSW), which made it unlawful to occupy Crown lands beyond the limits of location. Since pastoral leases were created by a Crown grant, they were therefore creatures of statute with any accompanying rights and obligations being derived from statute law. His Honour then stated that there was nothing in the authorising statute or in the lease itself that conferred on the grantee rights to exclusive possession. Therefore, pastoral leases were not exclusive of all rights and interests of the Indigenous inhabitants whose occupation derived from their traditional title.

Chapter 5: Native title

Justice Gaudron, meanwhile, examined s 199(1) of the Land Act 1910 (Qld), under which the leases in question had been granted. This Act provided for personal licences to enter pastoral holdings to cut, get and remove timber, stone, gravel, clay, guano or other material. Section 205 allowed for a drover on a stock route passing through a pastoral leasehold to allow stock to graze within half a mile of the road. The grant of a pastoral lease under the 1910 Act, therefore, did not confer a right to exclude native title holders, and thus did not extinguish native title. A pastoral lease granted under the 1962 Act, likewise, did not confer a right of exclusive possession. Justices Gummow and Kirby also held that pastoral leases did not extinguish native title, resulting in a 4–3 majority in favour of the Wik People. Justices Brennan, McHugh and Dawson were in dissent, stating that the lessees did have a right of exclusive possession, which had extinguished the native title.

In Ward v Western Australia (2002) 213 CLR 1, a similar decision was reached in regard to pastoral leases under the relevant statutes.

A case to remember Ward v Western Australia (2002) 213 CLR 1 Facts: A native title claim was contested in regard to an area of 7900 square kilometres of the East Kimberley area of Western Australia and the Northern Territory. Decision: Where the rights and interests granted under pastoral leases were not inconsistent with native title rights and interests, native title was not extinguished, although the rights and interests of the pastoralists had priority. The reason for this was that, like in Wik, the statutes did not provide for the holders of the pastoral leases to have exclusive possession. It was also stated that the nature of native title in Australia consisted of a bundle of rights, with it being noted that attached to those rights were responsibilities, such as the duty to care for the country and to care and protect Dreaming and art sites. It was also stated that the metaphor of ‘bundle of rights’ was useful in drawing attention to the fact there may be several kinds of rights and interests existing under traditional law and custom in relation to particular land.

It should be noted that in Wik Justice Brennan also addressed the issue of where native title lay within Australia’s land system, stating that native title was not tenure, and that it was not an interest held of the Crown. On the contrary, it was derived from the traditional laws and customs of the Indigenous people, and was recognised by the common law until extinguished. It should therefore be considered as sitting with the tenure system, rather than being derived from, or being a part of that system. In Fejo v Northern Territory (1998) 195 CLR 96, the High Court likewise stated that native title was not an institution of the common law, nor a form of common law tenure, but an interest recognised by the common law. There was, therefore, ‘an intersection of traditional laws and customs with the common law’.

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Statutory native title: The Native Title Act 1993 (Cth) Objectives of the Native Title Act 1993 (Cth) Immediately after the Mabo decision the Native Title Act 1993 (Cth) was enacted, with several amendments having subsequently been made to the Act. Section 4 of the Act states that it recognises and protects native title, and that title cannot be extinguished contrary to the Act. The main objectives are set out in s 3, with these being: • the recognition and protection of native title • the establishment of ways in which future dealings that affect native title may proceed • the establishment of a mechanism for determining claims to native title • provisions for validating past and intermediate acts. It is stated in the preamble to the Native Title Act that ‘acts’ affecting native title should only be able to be done if they could also be done to freehold land; that is, the acts should be non-discriminatory. Section 226(1) defines acts as those that affect native title. Examples of these are given in s 226(2): the making of legislation, the granting of licences, permits or authorities, the creation of any legal or equitable right, the exercise of any executive power of the Crown, or an act that has any effect at common law or equity. Section 238 of the Native Title Act meanwhile establishes a non-extinguishment principle with s 238(2) stating that if an act affects native title, the native title is not wholly or partly extinguished. Section 238(3) goes on to state that if the act is inconsistent with native title rights and interests, native title continues to exist, although the rights and interests are considered to have no effect in relation to the act.

Past, intermediate and future acts Past acts cover the period between 30 October 1975, when the Racial Discrimination Act 1975 (Cth) was enacted, and 1 January 1994, when the Native Title Act 1993 (Cth) came into effect. They consist of freehold grants and other interests made since 1975 that, while not prima facie racially discriminatory, may have had a discriminatory effect. Discriminatory effects may occur if the grants extinguished native title interests without procedural rights and compensation, but would not have extinguished other relevant interests without compensation. Division 2, Part 2 of the Native Title Act validates these past acts, but allows for compensation. Intermediate acts cover the period from the date the Act came into effect until the Wik decision was handed down; that is, between 1 January 1994 and 23 December 1996. Intermediate acts include grants that may have been made without observing the future act regime, and procedures for pastoral lease land where, if they affected

Chapter 5: Native title

native title, could be invalid because of the Native Title Act. Division 2A of Part 2, which is one of the post-Wik amendments, then validates these acts. Division 3 of Part 2 covers future acts. In s 233 such acts are stated to be the passing of legislation on or after 1 July 1993, when the Native Title Act was passed by the Commonwealth Parliament, and the carrying out of any other act on or after 1 January 1994. The future act regime allows the Commonwealth to decide that some grants of native title land and waters should be prohibited, while others should be allowed. Thus, a future act is one that affects the legal rights of native title holders, and the Native Title Act future act regime sets out what governments can do that affects native title, and how they can do it. An important aspect of future acts is the use of Indigenous land use agreements (ILUAs). These agreements can authorise future acts with the Native Title Act giving priority to the authorisation of future acts by ILUAs.

Definition of native title The definition of what constitutes native title is now set out in s 223(1) of the Act, which states: 223 Native Title (1) The expression native title or native title rights and interests means the communal, group or individual rights and interests of Aboriginal people 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 and waters; and (c) the rights and interests are recognised by the common law of Australia.

Section 223(1) therefore indicates that common law native title still underpins native title in Australia, because the interest must be recognised by the common law as based on traditional laws and customs of the people, who must show a connection with the land in question.

Native title tribunal Section 107 of the Native Title Act established the National Native Title Tribunal (NNNT), with appeals on matters of law to the Federal Court being allowed under s 169. The NNNT has two primary roles: the mediation of native title and compensation, and the administration of the future act regime. The power of the NNNT to determine native title is essentially grounded in consensual conduct through mediation, because it cannot determine native title

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except by agreement. Agreements therefore form a major part of how native title operates in Australia. In Lovett v Victoria [2007] FCA 474 it was stated that the focus of s 87 of the Native Title Act, which outlines the powers of the Federal Court if the parties reach an agreement, was the making of an agreement. It therefore reflected the importance under the Act of mediation as the primary means of resolving applications for native title, with the NNNT having been established for such a purpose.

Agreements ILUAs were introduced as part of the 1998 post-Wik amendments to the Native Title Act. These agreements allow voluntary negotiations in regard to native title issues, with the Native Title Act giving priority to the authorisation of future acts made under an ILUA. Such agreements create a contractual relationship between the parties to that ILUA. An ILUA may be for an area where the existence of native title has already been established, or for areas over which native title may exist, but has not yet been determined. An ILUA can also be registered, with this registration providing security for the validity of any future acts that have been authorised under the ILUA. These agreements are registered with the Register of Native Title Claims if a claim has been lodged, or the National Native Title Register for determinations.

Extinguishment of native title In Justice Brennan’s summary of native title in Mabo, one of the most significant points was that certain acts could extinguish any native title. This has often been a major issue in later cases and is a component of the Native Title Act. In Wik, and also Ward, the issue was whether pastoral leases had extinguished native title, which in both cases it had not. In Fejo, it was decided that extinguishment resulting from a grant in fee simple interest was irreversible, even when the land was later reacquired by the Crown. Land had been granted in 1882 to ‘John James Benham, his heirs and assigns for ever’. The land was then compulsorily acquired by the Commonwealth in 1928, after which it was used as a quarantine station, and later a leprosarium. In 1980 the proclamation of land for these purposes was revoked. It was then held by the High Court that the words used in the grant had created a fee simple estate, and that this had extinguished any native title that had existed in respect of the land. However, in Bennell v Western Australia [2006] FC 1243 it was held that native title could exist, and had never been extinguished, on the areas of Crown land in Perth that had never been the subject of a freehold or leasehold grant.

Chapter 5: Native title

Connection with the land Another important aspect of Brennan J’s nine-point summary was the requirement that native title claimants show a connection with the land, with this requirement being maintained in the definition of native title in s 223 of the Native Title Act. This requirement of native title was examined by the High Court in Yorta Yorta v Victoria (2002) 214 CLR 422.

A case to remember Yorta Yorta v Victoria (2002) 214 CLR 422 Facts: Members of the Yorta Yorta Aboriginal Community made a claim for native title over several areas that lay within an oval-shaped area measuring approximately 150 km on its north–south axis and 200 km on its east–west axis, bisected by the Murray River. It was contended by the claimants that, in accordance with Aboriginal custom and tradition, they had inherited native title rights and interests to the area from their ancestors who had occupied the area before European settlement. However, they also acknowledged that European settlement in the area and government policy, which had resulted in children being separated from their parents and tradition ceremonies being banned, had changed the group’s traditional laws and customs. Decision: The court noted that s 223 (1) of the Native Title Act recognised and protected native title rights and interests that had survived the Crown’s acquisition of sovereignty and radical title in Australia. Gleeson CJ, Gummow and Hayne JJ stated that changes and adaptations to traditional laws and customs or some interruptions to the enjoyment of native title rights in the time since European settlement will not necessarily be fatal to a native title claim. However, the term traditional refers to laws and customs acknowledged and observed at the time of sovereignty. Observance, therefore, must have continued substantially uninterrupted since sovereignty, otherwise what was being observed now could not be said to be the traditional laws and customs of the people concerned. Their Honours, therefore, upheld the original judge’s decision that before the end of the nineteenth century, the claimant’s ancestors had ceased to occupy their land in accordance with their traditional laws and customs. Justice Callinan, meanwhile, held that a physical presence was essential for the enjoyment of the rights and interests contained in s 223, and that tradition requires a high degree of continuity with intergenerational transmission, acknowledgment and observance.

However, in Lovett v Victoria evidence including the existence of stone dams for controlling water, traps for capturing eels and stone huts was accepted as indicating a longstanding connection with that land. Members of the Gunditjmara people were therefore successful in establishing a connection with the land, which is required for a native title claim.

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Native title rights and interests: A Bundle of Rights As previously mentioned, native title is derived from the traditional laws and customs of the people holding the native title to a particular area. The content and nature of the rights and interests enjoyed by native title owners will therefore be determined by their own traditional laws and customs, and are described as consisting of a bundle of rights. In Lovett v Victoria, for instance, the content and nature of the native title owned by the Gunditjmara people comprised the right to access and remain on the lands and waters where they had native title; the right to camp on those lands and waters; the right to use and enjoy those lands and waters; to take resources from them; and to protect places and areas of importance. In Bennell v Western Australia (2006) 230 CLR 603 the native title was held to consist of the non-exclusive right to occupy, use and enjoy the claimed land and waters around the Perth Metropolitan area. This included the right to live on, and access the area; make use of the natural resources; maintain and protect sites of significance; hunting, fishing and gathering food; using the area for teaching traditional law and customs. In Yanner v Eaton it was held that the native title held by Yanner included the right to hunt for young crocodiles, a traditional food source, even though such hunting was prohibited under the Fauna Conservation Act 1974 (Qld). It should also be noted that native title rights may be restricted by other rights, and in Wik, for example, it was held that where the native title was in conflict with the rights of the pastoralists, the rights of the pastoralists would prevail.

Think about it The Mabo case was a major decision in Australia’s legal history and established common law native title in this country. Do you think Australia should have kept native title as common law, or do you think that it was better to put it into legislation? What are the advantages of leaving an area of law to the common law? What are the advantages of putting it into ­legislation?

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Chapter 6

Co-ownership of property Covered in this chapter • • • • • •

The history of co-ownership Joint tenancy Tenancy in common The rights of co-owners Termination of co-ownership Strata title and community title

Cases to remember AG Securities v Vaughan [1988] 3 All ER 1058 Wright v Gibbons (1949) 78 CLR 313 Delehunt v Carmody (1986) 68 ALR 253 Henderson v Eason (1851) 117 ER 1451 Squire v Rogers (1979) 39 FLR 106 Corin v Patton (1990) 92 ALR 1 Abela v Public Trustee [1983] 1 NSWLR 308

Relevant statutes Conveyancing Act 1919 (NSW) Real Property Act 1900 (NSW) Strata Scheme Management Act 1996 (NSW) Body Corporate and Community Management Act 2000 (Qld) Property Law Act 1974 (Qld) Law of Property Act 1936 (SA) Real Property Act 1886 (SA) Strata Titles Act 1988 (SA) Conveyancing and Law of Property Act 1884 (Tas) Partition Act 1989 (Tas) Strata Titles Act 1998 (Tas) Property Law Act 1958 (Vic) Property Law Act 1969 (WA) Strata Title Act 1985 (WA)

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The history of co-ownership While land law allows several interests to coexist in the one estate—for example, one person can hold the fee simple and another can hold a life interest—co-ownership involves two or more people owning the land together. Historically, there were four types of co-ownership under the common law: • co-parcenary • tenancy by entireties • joint tenancy • tenancy in common. Co-parcenary arose after a person died intestate and the land became owned by several people who then constituted the ‘heir’. This type of co-ownership was usually applied when there were several daughters entitled to inherit, but no son. It was abolished by the Intestacy Act 1877 (UK) and under the various statutes it was converted into a tenancy in common. Tenancy by entireties was a form of co-ownership unique to married couples where the common law regarded husband and wife as one person, with each party having seisin of the whole estate. It was abolished by the Married Women’s Property Act 1844 (UK), meaning that today there are just two types of co-ownership: joint tenancy and tenancy in common.

Joint tenancy A joint tenancy can be defined as land ownership by two or more people where, in relation to all people other than themselves, the land has the properties of a single owner. Common law had a preference for joint tenancy because it ensured that someone was always in possession of the land and feudal lords found it easy to obtain dues from a survivor if a joint tenant passed away. This meant that if there was a question as to what type of co-ownership had been created, a presumption in favour of a joint tenancy developed under common law. The main characteristics of a joint tenancy are the four unities that must be present: 1 possession 2 interest 3 time 4 title. The unity of possession means that each owner in a joint tenancy is entitled to the whole interest and none can exclude the others. The unity of interest, meanwhile, means that the interest of each joint tenant must be of the same character; that is, the holder of a life interest cannot be a joint owner with a fee simple holder. This interest must also vest at the same time and must also derive from the same source; that is, from the one deed, document or instrument. The requirement that these four unities be present is illustrated in AG Securities v Vaughan [1988] 3 All ER 1058.

Chapter 6: Co-ownership of property

A case to remember AG Securities v Vaughan [1988] 3 All ER 1058 Facts: AG Securities granted four individuals the right to occupy a furnished fourbedroomed flat under separate short-term agreements. These were described as ‘licences’ and were made at different times, on different terms and provided for monthly rents. Each entitled the occupier the right to use the flat in common with the other residents, without the right to exclusive possession of any part of the flat. In a separate case heard at the same time, a young unmarried couple were let a flat under separate, but identical agreements, which were also described as being ‘licences’ and stated that neither was to have exclusive possession of any part of the flat. These had been executed at the same time with each paying the same monthly rent. Decision: In regards to the first situation it was held that there was no joint tenancy, because the agreements were independent of each other, had commenced on different dates, covered different periods of time and provided for different payments. They were therefore held to be licences. However, in the second case the agreements were interdependent and were considered to constitute one single transaction. Because it was the intention of the couple to occupy the flat as man and wife, and this intention was known to the owner, the nature of the arrangement created a joint tenancy, not just a licence.

The issue in AG Securities v Vaughan was whether at the beginning of the arrangement a licence or joint tenancy had been created. In the case of Wright v Gibbons (1949) 78 CLR 313, it was a clear that initially a joint tenancy had been created, with the question then being whether this joint tenancy had been severed.

A case to remember Wright v Gibbons (1949) 78 CLR 313 Facts: Olinda, Ethel and Bessie Gibbons were registered as joint tenants for an estate in fee simple in Hobart. In 1945, Ethel transferred to Olinda her one-third share of the estate and interest in the land, and Olinda transferred to Ethel her one-third share of the estate and interest. With a memorandum of transfer, the former joint tenants were registered as tenants in common in equal shares. Bessie, as survivor, sought a declaration that the memorandum of transfer did not effect the severance of the joint tenancy and that, as survivor, she was entitled to the entire estate in fee simple. Wright, the executor of the wills, was the defendant. Decision: A joint tenancy may be severed and converted into a tenancy in common by an agreement, but in this case Bessie was not a party to the transaction between her co-tenants. The interests of each joint tenant in the land are always the same in respect of possession, interest, title and time. No distinction can be drawn between the interest of one tenant and that of the other tenant. If one joint tenant dies, her interest is extinguished.

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When one joint tenant transfers their interest to another joint tenant, the transfer does not operate by way of extinguishment of the estate. If there are three joint tenants, A, B and C, and one joint tenant, A, transfers her interest to another, B, the result is that A has no interest in the land. B becomes a tenant in common as to one-third of the interest in the land, and remains a joint tenant with C as to the two-thirds interest. If B subsequently transfers to A the interest that she still has as a joint tenant, there is further and complete severance. A becomes a tenant in common as to one-third of the interest with B and C, the transfer working as a severance of the joint tenancy between B and C in the twothirds interest in the land. The final result is that A, B and C become tenants in common, each having a one-third interest. The transaction can be upheld by regarding the words of transfer by A to B as being equivalent to a release, and by regarding the words of transfer by B to A as constituting a grant. The plain intention of the parties was that A, B and C became tenants in common.

The other essential characteristic of a joint tenancy is survivorship. This means that on the death of one of the joint tenants, that particular share of the property will be inherited by the surviving members of the joint tenancy, until eventually it is all inherited by the last surviving joint tenant. In Re Robertson (1943) 44 SR (NSW) 103 it was held that survivorship is the most important incident of a joint tenancy and unless the right of survivorship exists, a co-ownership will not be considered to be a joint tenancy. This raises the question of whether the law should allow a joint tenant to inherit through survivorship if they have been responsible for the unlawful death of that other joint tenant. For instance, in Re Stone (1989) Qd R 351, after killing his wife in circumstances that amounted to manslaughter, the husband acquired her interest as a joint tenant. It was held, however, that the husband held the property on trust for the persons entitled to inherit under her will and was therefore required to hand over his certificate of title. Similarly, in Gonzales v Clariades (2003) 58 NSWLR 211 children who murder their parents cannot inherit. However, in Public Trustee v Evans (1985) 2 NSWLR 188 a wife shot and killed her husband during a domestic dispute involving violence that had been commenced by her husband. The wife had therefore been acting in self-defence and it was held that on public policy grounds the wife would not be excluded from inheriting through the right of survivorship because the criminality was very limited.

Tenancy in common A tenancy in common involves a situation where property is conveyed to two or more people to enjoy and hold in distinct, proportionate, undivided shares. Undivided means that although each is a distinct share, it has not been physically divided from the other shares. The undivided share may be dealt with as the tenant wishes and can be alienated in fee simple, be granted for life with remainders, or left in a will. The shares in the property owned by the tenants in common can be equal in size, such as two tenants in common owning half each, or they can be in unequal in

Chapter 6: Co-ownership of property

size; that is, one tenant can own one-quarter and another three-quarters. While the common law prefers a joint tenancy, the relevant statutes in NSW and Queensland have a presumption in favour of a tenancy in common.

Relevant statutes Presumption in favour of a tenancy in common: Conveyancing Act 1919 (NSW) s 26 Property Law Act 1974 (Qld) s 35

An important feature of a tenancy in common is that only the unity of possession is required. This means that each tenant has equal right to use of the whole property, but the other three unities are not required. For example, the unity of interest is not necessary, meaning that one tenant in common may hold an estate in fee simple, another can have it as a life interest, and another may have a leasehold interest. The most important feature of the tenancy in common is that there is no right of survivorship and on the death of one tenant in common, that share will go to that tenant’s heirs. Equity prefers a tenancy in common, particularly when money to purchase land is advanced by two or more people in unequal portions. In these circumstances equity will presume an intention to hold as tenants in common because otherwise, one tenant could gain survivorship on very little input. Business situations are another area where equity gives preference to a tenancy in common. In Delehunt v Carmody (1986) 68 ALR 253 the High Court discussed how such a purchase is viewed from an equity perspective, even though the presumption under the relevant Act was applied.

A case to remember Delehunt v Carmody (1986) 68 ALR 253 Facts: Carmody and Delehunt contributed equally to the deposit and purchase of a house under an oral agreement where they would hold it in equal shares, although there was no indication whether it would be as joint tenants or tenants in common. Carmody was the registered proprietor of the property at the time of his death. Decision: When two purchasers have contributed equally to the purchase price of a property they will each have a beneficial interest as a tenant in common. When the contribution of the purchase price has been made in unequal shares the property will be held on trust for the contributors as tenants in common in proportion to the amounts they contributed. If equity follows the law it will follow the rules of the law in their current state. Where, as a result of following the law, a beneficial joint tenancy would formerly have been created, a beneficial tenancy in common will come into existence. The land was held for Delehunt and Carmody beneficially as tenants in common because this was the presumption under the relevant Act, namely s 26 of the Conveyancing Act 1919 (NSW).

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This statutory preference for tenancy in common is also illustrated by the case of Mitchell v Arblaster [1964] NSWLR 119, where a man provided in his will for Harry and Nellie Mitchell, who were husband and wife. Harry predeceased the testator, but there had been no words to indicate a joint tenancy and there was no new will to rectify the situation when Harry died. Nellie then claimed survivorship. However, it was held that a tenancy in common had been created under s 26 of the Conveyancing Act 1919 (NSW), which meant that there was intestacy for the share that had originally been given to Harry. It should also be noted that co-ownership can apply to property other than land, with racehorses being a common example. In Dennis v Dennis (1971) 45 ALJR 605, for instance, Dennis claimed he was a co-owner of a horse, and although in this case there was insufficient evidence to support that claim, it still illustrates that co-ownership of a horse can exist.

Practical example Ben and Barbara were married for twenty-five years and purchased as joint tenants a family home in which their four children were raised. Ben, however, decided to leave the family home to move in with Jill, a woman he met at work. Ben and Barbara then decide to separate and amicably agree to split the assets equally, with Barbara keeping the house and Ben taking other assets in the form of money and shares. Despite the amicable split, Barbara is still affected by the breakup, and it is over a year before she transfers the title of the house to her name. During that one-year period, however, had something happened to her, Ben could have obtained the house under survivorship, which could have left the children with no family home and no inheritance, because he could then have left the house to Jill. While there are reasons for a married couple having a family home as joint tenants, there are also good practical reasons for having it as tenants in common.

The rights of co-owners The law provides rights and obligations for co-owners, and these include: • equal enjoyment • duty to account for profits • compensation for repairs and maintenance • liability for trespass and waste. The unity of possession for both joint tenants and tenants in common means that all parties have the right of equal enjoyment of the property, because each co-owner is presumed to possess every part of the property. This means that one co-owner cannot be excluded from the property or any part of the property, and unless there has been an agreement between the parties, one co-owner cannot claim occupation rent from another. For instance, in Luke v Luke (1936) 36 SR (NSW) 310, two sisters,

Chapter 6: Co-ownership of property

Laura and Ada Luke, occupied as tenants in common land given to them by their father in his will. Laura died intestate in 1920 and Ada remained in possession of the land for a further fifteen years when a claim was made by Laura’s next of kin for occupation rent. It was held to be well established law that a tenant in common who has occupied the property and excluded another co-owner will be liable to be charged with an occupation rent. However, no occupation rent could be charged in this particular case because Ada had not excluded the other co-owners, and it had been the duty of the next of kin to claim Laura’s portion. However, if one co-owner is forced out by another co-owner, then that co-owner can be compensated for the loss of enjoyment and possession of that property. In Dennis v McDonald [1982] 2 WLR 275, for instance, a man and woman had bought a house with equal contributions. Over the following twelve years, because of the man’s violence towards her, the woman had left on several occasions before leaving permanently with her five children. It was held that there had been an ouster, because it would be unreasonable to expect her to exercise her rights as co-owner, and therefore, as a tenant in common, she was entitled to occupation rent. Domestic violence, therefore, is one situation where occupation rent can potentially be claimed. In the Queensland case of Re Thurgood (1987) Q ConvR 54–239 a man and woman lived together, but because of his heavy drinking, the woman asked him to leave and threatened to call the police if he did not. The court ordered occupation rent to be paid even though no actual violence had occurred, stating that in such circumstances the proper test is to find out whether it is unreasonable to expect a co-owner who is being driven off to exercise their right to occupy the property. While in Forgeard v Shanahan (1994) 35 NSWLR 206 the majority upheld the entitlement to occupation rent in situations of wrongful exclusion, Kirby P, dissenting, stated that there should not be a blanket rule that a co-owner who is not actually ousted or excluded is treated as not having exercised their legal right to occupation. This was because it fails to take into account the multitude of reasons which may explain a withdrawal from a co-owned land after a relationship has broken down, with this approach being evident in W v D (2012) 115 SASR 61. W and D purchased a house and farmlet in the Adelaide Hills in 1989 as joint tenants. When the relationship ended in 1997, W remained there while D returned to her own house Adelaide, with another woman then coming to live on the farmlet as D’s partner in 2005. In 2009 D instigated proceedings for its sale, and claimed an occupational fee for W’s sole use of the farmlet. It was held that an occupation rent could be claimed because the breakdown of the domestic relationship made it unlikely W would share it again with D. In these circumstances there was an operational inconsistency amounting to an ouster. In Beresford v Booth [1999] SASC 166 it was held that physical exclusion in the form of changing of the locks on doors so that other co-owners could not gain

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access amounted to an ouster, with half the estimated market rent having to be paid. It was held in Biviano v Natoli (1998) 43 NSWLR 695 that where the co-owner was the subject of an apprehended violence order the co-owner’s removal and then continuing exclusion from the property did not amount to an ouster, because it occurred under an express statutory power. However, denying that a co-owner actually had an interest in the property did amount to an ouster and an ‘occupation fee’ was to be paid. The court stated that this occupation fee was not rent as such, but mesne profits from the wrongful ouster, even though it was calculated on market rental value of the property. Mesne profits are the damages owed to a lessor when a lessee has committed trespass by remaining on the property after a lease has terminated. The common law position in regard to an account of profits is that co-owners are not required to share income or profits made from the co-owned property. This is illustrated in Henderson v Eason (1851) 117 ER 1451. However, under the principles of equity, there can be a requirement for an account of profits between co-owners. In Queensland this has been incorporated into s 43 of the Property Law Act 1974 (Qld).

A case to remember Henderson v Eason (1851) 117 ER 1451 Facts: There were two co-owners of land that was used to grow produce for market gardens. One of the co-owners, however, refused to participate in the running of the land and left it to the other co-owner to work the land and sell all the produce. The first co-owner then asked for an account of all the profits. Decision: The second co-owner had employed capital and labour, and taken all the risks of cultivation and the potential profits or losses. All the profits, therefore, were his, because it could not be said that he had received more than his just share, but a return for his labour and capital. Thus, while there is a duty to account for profits, the other co-owner must contribute by labour and capital in order to share in the profits.

In Leigh v Dickeson (1884) 15 QBD 60 it was held that, at common law, if a co-owner improved or repaired the property without the consent of the other co-owners, that co-owner could not recover a contribution from the other co-owners to the cost of the improvements or repairs, even though they benefited from the expenditure. In equity, however, when a co-ownership comes to an end, a co-owner is given credit for the improvements and lasting repairs. It is therefore a defensive or passive equity, in that it cannot be enforced until an appropriate suit is brought, such as a sale or a partition, as illustrated in the case of Squire v Rogers (1979) 39 FLR 106.

Chapter 6: Co-ownership of property

A case to remember Squire v Rogers (1979) 39 FLR 106 Facts: In 1961 Squire and Rogers obtained, as co-tenants, a perpetual lease in Darwin for use as a caravan park. A covenant on the lease required that money be spent on buildings. In 1963 Rogers, an American citizen, returned to the United States. Squire erected flats and other improvements to the sum of $100 000 while carrying on the business of running a caravan park. Rogers made no contribution. She returned to Australia in 1976 and sought an order for the sale of the estate and an account of the rents and profits Squire had obtained. Decision: Rogers voluntarily left the subject land and was aware of Squire’s improvements on the land. Rogers was not entitled to a share of the rents and profits that Squire received as a result of the use of the improvements. Squire was allowed to be compensated for his work and labour and upon sale was to be fully reimbursed for all expenditure involved in the capital improvements that had contributed to the profits.

In the case of McMahon v Public Curator of Qld [1952] St R Qd 197 it was held that a co-owner making improvements may be entitled against another co-owner to an amount limited to the actual cost of the improvements, not one that takes inflation into consideration. It was also held that if the present value of the increment to the property is less than the actual cost of the improvements, then it is further limited to the present value of the property. The unity of possession also means that one co-owner generally cannot sue another for trespass and in Thrift v Thrift (1975) 10 ALR 331 it was held that this prohibition included the right to invite someone to live on the premises. Since committing waste is a normal part of owning property, one co-owner usually cannot complain that another co-owner has committed waste. Thus the cutting down of trees, for instance, by one of the co-owners does not amount to waste, because this is something that an owner can generally do with their property.

Termination of co-ownership There are three ways in which a co-ownership can be terminated: • survivorship/severalty • severance • sale or partition. Severalty involves all of the joint tenants agreeing to transfer their interest to one of the other co-owners or to a third party. It is derived from the right of survivorship. The concept of severance, meanwhile, involves the joint tenant defeating the operation of survivorship by converting, during their lifetime, the interest as a joint tenant into one of tenancy in common. While joint tenants do not have proportionate shares in the

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land, they do have potential proportionate shares; that is, with two joint tenants there are potentially two half shares, and with three joint tenants, potentially three one-third shares. A joint tenant share may be severed and converted into an undivided share held as a tenant in common, not as a joint tenant. This severance can be effected by alienation, by an agreement between the joint tenants or by the conduct of the joint tenants. In Wright v Gibbons, for instance, several documents of title were created to turn the joint tenancy into a valid tenancy in common, and therefore removed the right of survivorship. However, in Freed v Tafeel [1984] 2 NSWLR 322 a husband signed two memoranda purporting to transfer the property from himself as a joint tenant to himself as a tenant in common, with the consideration for the transaction being $1. The intention was to sever the joint tenancy so that the unit could be sold. The question was whether the joint tenancy was in fact severed, with it being held that an attempt by one joint tenant to alienate his interest to himself as a tenant in common will not be sufficient. In the case of Corin v Patton (1990) 92 ALR 1 the issue was whether sufficient steps had been taken to complete the alienation and therefore sever the joint tenancy.

A case to remember Corin v Patton (1990) 92 ALR 1 Facts: Mr and Mrs Patton were joint tenants of a fee simple estate. Mrs Patton died on 17 July 1984, but on 12 July 1984 had taken steps to sever the joint tenancy in order to benefit her children. A transfer to her brother, Mr Corin, had been executed by means of a Deed of Trust, which declared that Mr and Mrs Patton were tenants in common. However, Mrs Patton had not acquired the certificate of title held by the mortgagee bank, so the transfer had not been registered at the time of her death. Decision: A unilateral declaration of intention is not sufficient to sever a joint tenancy. Mrs Patton had not divested herself of her estate or interest in the land prior to her death and she therefore remained a joint tenant, because she had not done all that was necessary to vest control of the common law title with Mr Corin.

Abela v Public Trustee [1983] 1 NSWLR 308 involved a situation where an agreement existed in regard to severing the joint tenancy of the house, but not personal items.

Chapter 6: Co-ownership of property

A case to remember Abela v Public Trustee [1983] 1 NSWLR 308 Facts: The plaintiff and the deceased were married in 1973 and their house was transferred to them as joint tenants in 1977. Personal property was purchased during the course of the marriage from a joint bank account. They separated in 1980 and the house was sold, with the proceeds being deposited into two building society accounts awaiting further orders from the Family Court. The husband then died and the wife then sought a declaration that, at the date of her husband’s death, the joint tenancy had not been severed. Decision: The parties agreed upon the severance of the joint tenancy at the time of the terms of the settlement. If this is not the proper analysis, the same result would be reached from consideration of the parties’ course of conduct. In relation to the personal estate, the evidence of the purchase from the joint bank account points strongly to a joint tenancy. The incidents of joint tenancy and the principles of severance are the same in the case of personalty as they are in the case of realty. The plaintiff has made out her claim to a joint tenancy in respect of the items of personalty claimed.

The case, therefore, illustrates that co-ownership can involve personal property as well as land. It also shows that a course of conduct can be sufficient to sever a joint tenancy when all the joint tenants indicate a common held belief or assumption that their interests are held in undivided shares without any right to survivorship. However, there are times when co-owners cannot agree what should be done with a co-owned property, and in such instances there may be a need to go to court. Under the relevant statutes, the court may grant a sale of the property as performed by a trustee for sale, in which all the profits from the sale are shared, or a partition, which involves a physical splitting of the property. If there is a partition, then each co-owner becomes the sole owner of a specifically ascertained portion of the land; that is, their interests are now divided. Partition, therefore, involves the division of co-owned property into appropriate parts so that each of the co-owners becomes the sole owner of the portion allocated to them.

Relevant statutes A co-owner may apply to the court for a sale or partition of the co-owned property: Conveyancing Act 1919 (NSW) s 66G Property Law Act 1974 (Qld) s 38 Law of Property Act 1936 (SA) s 69 Partition Act 1989 (Tas) Property Law Act 1958 (Vic) s 223 Property Law Act 1969 (WA) s 126

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Strata title and Community title Strata title is a statute-based system of title that allows for the ownership of parts of a building, such as units or apartments. Strata title is a distinct area of land law, but it can also be viewed as a type of co-ownership where several people enjoy the ownership of land. It should also be noted that the term ‘community title’ is now often used, because the relevant statutes now cover a more diverse range of developments, such as subdivisions, rather than just multi-storeyed buildings. Before the advent of strata title legislation, one of the two ways that people could own apartment blocks was as a tenant in common. By this scheme, several people held title as tenants in common of the land on which the apartment building had been erected, with this meaning that they held a share in the building as well. Because they were tenants in common, each had the right to possession to all of the land and all of the buildings. To overcome this, each tenant in common then entered into a contractual agreement whereby each relinquished the right to occupy the whole in return to exclusive possession of a particular part, namely the unit they had purchased. However, the most popular form of high-rise ownership was company title. Under this system the land and the buildings are owned by a company that has been set up for the purpose of owning and running the building. The company’s constitution of that company then give a unit owner a specified block of shares in the company and the right to exclusive possession of a specific part of the building. Each owner, however, does not acquire ownership of that part, just a contractual right against that company on account of the ownership of those shares. In Commonwealth Bank of Australia v MacDonald (2000) 10 BPR 18, meanwhile, it was held that co-owned shares in a company title—owned unit were included in the definition of property under the relevant Act that allowed a statutory partition or sale. These articles of association also contain provisions relating to the rates that have to be paid, the maintenance of the property, and the right to use the common areas of the building. One advantage with company title is that directors can refuse to register shares and prevent the leasing of any part of the building without consent. There is, therefore, directorial control over who lives in the building, and while the vast majority of high-rise buildings are now strata title, some are still company title, including some of the ‘icon’ buildings in Australia’s major cities. Australia was the global pioneer of strata title, with the Conveyancing (Strata Title) Act 1961 (NSW) being the first statute that established this system of property ownership. Other states soon followed, and today all states now have legislation covering the legal requirements for strata title. Legislation was required to create strata title because the common law had been reluctant to allow for the subdivision

Chapter 6: Co-ownership of property

of multi-storey buildings because it gave rise to a complex legal situation because the levels higher up in the complex had to be physically supported by the level below. Originally, the legislation was drafted to enable the subdivision of high-rise residential buildings, but this created problems for buildings involving both retail and residential developments. The solution was to allow subdivision of the building into different parts with a separate body corporate, or owners’ corporation, for each part of the complex. Central to the concept of the statute-based strata title is a strata plan. This consists of a location plan, which sets out the perimeter of the land and the location of any building that has been built on it, and a floor plan, which outlines the position of the lots on each floor of the building. Each of these lots consists of one or more cubic spaces whose vertical and horizontal boundaries are set out on the floor plan. The boundaries for each lot are usually the inner surface of the walls, the upper surface of the floors and the lower surface of the ceiling. Any area beyond this forms part of the common property, although the internal walls and the balconies are part of the lot. This was confirmed in Venables v Owners of Cambridge Court Strata Plan 4879 (2012) 78 SR (WA) 190 after Venables, owner of Lot 28, suffered water damage, caused either from a tiling fault in the bathroom of the unit above, or from a pipe in common area. It was held that under the Strata Titles Act 1985 (WA) the upper surface of a floor, the inner surface of a wall and the under surface of a ceiling formed the boundaries of a unit. Everything else was common property, for which the strata company was responsible to keep in good and serviceable repair. Together, the owners of the lots in a strata plan constitute a body corporate or owners’ corporation. A body corporate has to comply with the relevant statutes, which set out, amongst other things, the management of the scheme, administrative matters and the procedures for dispute resolution should any problems arise. Each owner of a lot will pay levies to the body corporate, there being two funds: an administrative fund to cater for the day-to-day running of the block and a sinking fund for more substantial requirements that are needed on a periodic basis, such as a new roof or painting the common areas. Because it is a legal entity, the corporation can be sued if, for example, it fails to keep the common areas in adequate repair and someone is injured. As a legal entity, it can also commence court action if there are any problems involving the property, such as problems that may arise after repairs are carried out on the building. By-laws, meanwhile, set the requirements that regulate the day-to-day running of the strata scheme and these cover matters such as noise, vehicle parking, the appearance of the lot and the keeping of animals. Re Saunders [1993] 2 Qd R 335 was a case where an owner had installed airconditioner equipment on the balcony of the lot and the body corporate claimed that he was in breach of a by-law that

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prohibited any variation of a lot’s external appearance without prior consent. The lot, however, was on the thirty-second floor, and therefore could not be seen from the street or any other buildings. It also required the taking up of ‘an unusual and dangerous vantage point’ to see it from any of the other lots in the strata scheme. It was therefore held that the owner had not varied the external appearance of the lot as this was restricted to what might a person might reasonably be able to see.

Time-shares and retirement villages Two recent developments in what can be described as co-ownership are time-share schemes and retirement villages. Time-share arrangements usually involve holiday resorts where someone can purchase the right to occupy a specific apartment for a given number of weeks in a year. Usually it is title-based, which gives the purchaser an interest in the overall resort as a tenant in common. For example, if there are 100 apartments in a resort and there are fifty-one weekly intervals for sale (one week reserved for maintenance) then someone who purchases two weeks will have 2/5100 interest in the resort as a tenant in common. This illustrates that the potential number of tenants in common is, theoretically at least, open-ended. An alternative way to set up a time-share is as a strata title, making the resort the subject of a strata plan, with each purchaser receiving an interest as a tenant in common for a particular lot in that plan. If, for example, someone bought an interest that entitled them to two weeks in lot 1 of a strata plan, then their interest would be 2/51 in lot 1. With retirement villages there are several ways that a person can obtain an interest in the complex. It is possible to buy a freehold title to a unit within a body corporate, or a unit can be owned by having shares in a home unit company. Premises can be leased, or a licence can be obtained from the village owner that entitles the person to live there and use the village’s facilities.

Think about it The common law preferred an interpretation of co-ownership that favoured a joint tenancy, while some of the relevant statutes now favour a tenancy in common if there is any doubt as to what type of co-ownership exists. What does the relevant legislation in your state say in regard to the interpretation to be given should there be any doubt about whether a co-ownership relationship is a joint tenancy or a tenancy in common? If there is any doubt, do you think that a tenancy in common should be preferred, or is it more appropriate to favour a joint tenancy?

Chapter 6: Co-ownership of property

Assessment preparation Problem question 2 Oscar, who was a barrister, bequeathed Monarch Estate, a farm and mansion, to his three daughters, Peace, Quia and Rosa ‘jointly and to share amongst themselves’. Since ­childhood the three girls had quarrelled incessantly, although Peace and Rosa could ­tolerate each other. As adults an uneasy truce prevailed between them. However, in an effort to spurn Quia, Peace and Rosa devised a scheme by which each transferred her interest to the other without the knowledge of Quia. Since the relationship between Quia and her two sisters remained frosty, Quia decided to move out. Two years later Quia decided to buy herself a flat. She mortgaged her interest in Monarch Estate to Toogood Bank to raise the purchase price of the flat. Unbeknown to Quia, Peace and Rosa had also moved out a year ago and leased Monarch Estate to Unus Pty Ltd for a term of ten years. While driving to a movie last Saturday, Peace and Rosa were killed in a motor accident. Neither Peace nor Rosa had made a will. Discuss all the relevant legal issues in relation to Monarch Estate. For suggested answers to these problems, please refer to .

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Creation and enforcement of ­property interests Covered in this chapter • • • • • •

The development of equity What are legal and equitable interests? The doctrine of part performance The doctrine of specific performance Priorities under the Torrens system Priorities under the common law

Cases to remember Maddison v Alderson (1906) 8 AC 467 Regent v Millett (1976) 133 CLR 679 ANZ v Widen (1990) 102 ALR 289 Jared v Clements [1902] 2 Ch 399 Rice v Rice (1853) 61 ER 646 Latec Investments v Hotel Terrigal (1965) 113 CLR 265 Barry v Heider (1914) 19 CLR 197 Heid v Reliance Finance Pty Ltd (1983) 154 CLR 326

Relevant statutes Real Property Act 1900 (NSW) 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)

The development of equity The common law developed from the various judgments made throughout England, and while this application of principles from previous decisions to new cases provided consistency, the common law also proved to be a rigid system. It required the right forms to be filled and proper procedures to be followed. Consequently, rather than being decided on their actual merits, cases could depend more on finding the proper

Chapter 7: Creation and enforcement of ­property interests

writ, which was the way all common law actions were commenced. In order to overcome this problem, the principles of equity developed in the Court of Chancery to offset the injustices that sometimes arose from the rigid application of the common law. Equity therefore involves the concept of equality and fairness, although in more recent times it has been the concept of unconscionability that has often been applied. For instance, in Smith v Tamworth City Council (1997) 41 NSWLR 680, it was stated that: ‘Equity acts as a court of conscience, and the conscience is what is right in the eyes of the community for the time being.’ Equity will always try to be consistent with the law. However, if there is a conflict between the law and equity, equity will prevail. The concept of equity also requires that the conduct of any potential plaintiff be fair and conscionable, hence the saying: ‘Those who come to equity must come with clean hands.’ Equity also assists the active person, not a passive sleeper; that is, you cannot sit back and do nothing, then expect equity to step in and assist. Until the late nineteenth century the common law and equity were heard in different courts, which meant that a litigant had to choose between arguing their case in common law or seeking an equitable remedy. However, the Judicature Act 1873 (UK) saw the fusion of the common law and equity in the sense that a litigant could go to the one court and argue both the common law and equity. An early case after the fusion was Walsh v Lonsdale [1882] Ch D 9, where an agreement had been made on 29 May 1879 that the plaintiff (tenant) would be given a lease for a weaving shed, associated buildings and machinery for a period of seven years, commencing from the time the defendant (landlord) put the building into working order. The agreement required the tenant to run 300 looms the first year and no less than 540 looms for the following years with the rent to be paid a year in advance. On 1 July 1879, the tenant took possession of the premises, but on 13 March 1882, the landlord claimed the following year’s rent in advance, plus some past rent that was owed. On 15 March the tenant sought specific performance of the agreement for the lease. It was held that the agreement for a lease meant that the tenant held the lease under the same terms in equity as if a lease had been granted by means of a written contract recognised by the law. However, since it was a case in which both parties admitted that relief was capable of being given by specific performance, the tenant also had to pay into court one year’s advance rent, because this was the agreed method of payment. This decision created some confusion in regard to what the fusion of equity and the common law courts actually meant, with it being suggested that there was no longer any difference between legal and equitable interests. However, in Manchester Brewing v Coombs [1901] 2 Ch 608 it was stated that the decision in Walsh v Lonsdale did not take away all differences between legal and equitable estates and the limits of its applicability were very narrow. Thus, only a fusion of the administration of the

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principles had occurred, not the fusion of the principles themselves, with there still being a clear distinction between the common law and equity. The Judicature Act was then introduced into various statutes in the then colonies of Australia, leading to the same administrative fusion of the common law and equity. This means that in Australia today a litigant does not have to decide in which court the action will be taken in and can argue both the law and equity.

Practical example Kerrie has an idea for a television program, although she has no actual script. She discusses the idea with a television executive in a two-hour meeting in his office. He shows interest in the idea and informs Kerrie that he will get in contact with her once he has discussed the idea with other executives. She hears nothing more about it, but a year later she sees a new television show based on her idea. In such a scenario, Kerrie could look at suing for breach of copyright under statutory law, breach of contract under the common law, or a breach of confidential information, which is an equitable remedy. These can now all be heard in the one court, although before the fusion she would have had to decide whether to argue a breach of the law or of equity. In this scenario the idea has probably not been sufficiently developed to be protected by copyright, the dealings are not detailed enough to form the basis of a contract, but the idea may well be sufficiently developed to find protection by means of confidential information.

What are legal and equitable interests? A legal interest is created when someone has fulfilled all the requirements for that interest to be recognised in law. The Statute of Frauds in 1640 required that all transactions involving land be in writing, with this requirement being preserved in the relevant statutes in Australia. Therefore, for an interest in land to be recognised as a legal interest, the requirements of the relevant statutes need to be fulfilled, namely, the transaction must be in writing and under the Torrens system, also be registered. Legal interests are rights in rem; that is, they fasten to ‘things’; unlike equitable interests, which are in personam; that is, against a particular person. A legal interest is considered to be good against the world and will even bind third parties who may not know of the interest. An equitable interest is one that has not reached the status of a legal interest, but is recognised by equity. An equitable interest can arise where there is no intention to create a legal interest. For example, when a trust is set up the trustees have a legal interest, while the beneficiaries have an equitable interest. There is no intention, therefore, for the beneficiaries to have anything but an equitable interest, although there may be a time when they will have the right to be granted the legal interest. An equitable interest also arises when all the requirements to create a legal interest have not been fulfilled. For example, where there was no written document in regard

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to a land transaction, but there were sufficient acts done in execution of the contract, an equitable interest could exist under the doctrine of part performance. In such a situation, an interest in the property may be created and enforced by equity on the grounds that it would be unconscionable for the legal owner of the property to retain the benefit of the property. It is said that bona fide purchasers are equity’s little darlings, because equity will try to protect the interests of a bona fide purchaser without notice. A bona fide purchaser without notice is one who has acted honestly but does not know that the property is burdened with another person’s interest. To become a bona fide purchaser without notice, a party must have acted innocently, must not have engaged in related fraud or been reckless, and must have given valuable consideration. The other requirement is that the purchaser be without notice; that is, they must have no information that the property was burdened with another interest. The notice can be one of three types: • actual notice • constructive notice • implied or imputed notice. Actual notice means that the purchaser has come face-to-face with all the information needed in regard to the property. Constructive notice means that you are considered to have done all the things a prudent purchaser would have done. With implied notice you are considered to know whatever an agent or a solicitor hired by you knows about the matter. It is only if none of these applies that you are considered to be without notice. While equity will try to take care of a bona fide purchaser without notice, a legal interest will be good against the world and will even bind those who may not know of that interest. An equitable interest, on the other hand, will bind the whole world, except for the bona fide purchaser without notice. For example, because the lease in Walsh v Lonsdale was an equitable lease, it would not have been enforceable against a new owner who was not aware of it. If it had been a legal lease, then it would have been enforceable against a new owner—even if that new owner was a bona fide purchaser without notice of that lease. That is why it is incorrect to say that an equitable lease is as good as a legal lease.

The doctrine of part performance The requirement that all land transactions be in writing can still create injustices, which is why equity developed the doctrine of part performance. Under the doctrine of part performance, there can be equitable intervention even if the contract is oral, provided the plaintiff can establish sufficient acts of part performance. Part performance arises from the acts done in execution of the contract—not from the contract itself—and deals with conduct that makes it inequitable or

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unconscionable for the defendant to rely on the writing requirement of the relevant statute. This doctrine is illustrated in Maddison v Alderson (1906) 8 AC 467.

A case to remember Maddison v Alderson (1906) 8 AC 467 Facts: Maddison looked after an elderly man, without pay, for many years. This was based on an oral agreement that she would be left a life interest in the house, and a will to this effect was later signed but not properly witnessed. When her interest was challenged after the man’s death, she claimed part performance. Decision: No contract had been formed because the acts relied upon as part performance must be unequivocally and in their own nature referable to the alleged agreement. Her service was not of this nature, and therefore there was no part performance to take the case out of the operation of the Statute of Frauds.

The principles in Maddison v Alderson were applied in Watson v Delaney (1991) 22 NSWLR 358. Roy Singleton was the registered proprietor of a house that he had trouble renting out because it was in a poor state of repair. He therefore said to his niece and her husband—the Watsons—that they could live there in return for a small rent to cover expenses and a commitment to carry out any necessary repairs. Roy later died and left the property to his son, Kevin, and when he died the house passed to the Delaneys. The Delaneys wanted to sell it, but the Watsons placed a caveat and claimed an interest in the property. It was subsequently held that the giving and taking of possession, the regular paying of rent and the effecting of repairs were all acts of part performance unequivocally referable to a contract of the general nature as the alleged agreement. The Watsons, therefore, had an equitable interest in the property. Regent v Millett (1976) 133 CLR 679 is another case where part performance was successfully argued.

A case to remember Regent v Millett (1976) 133 CLR 679 Facts: The Millets were a married couple who occupied a house that the wife’s father had bought for $4500. He had paid a $1000 deposit, and a $3500 mortgage remained. There was an understanding that the Milletts could live in the house, treat it as their own, and have the title transferred to them when they had paid the mortgage and deposit off. A few years later they wished to borrow money from the bank to carry out renovations, and

Chapter 7: Creation and enforcement of ­property interests

also sought to borrow an extra $1000 in order to pay off the father. The father, however, changed his mind about transferring the title. Decision: If a vendor permits a purchaser to take possession to which a contract of sale entitles him, the giving and taking of that possession will amount to part performance, notwithstanding that under the contract the purchaser was entitled, rather than being bound to take possession. The acts of part performance were sufficient to prove the oral agreement that upon the fulfilment of certain conditions the plaintiffs should become owners of the property.

Thus, part performance is an equitable doctrine that enables an oral contract to be enforced if acts have been completed in actual performance of the contract, but the acts relied upon must be unequivocal and referable to the alleged contract. The equity arises because it would be unconscionable for the defendant to plead the Statute of Frauds as a bar to the plaintiff’s claim. It then allows the entire contract to be carried into execution by both sides, because, for the court to intervene, the contract must be capable of specific performance.

The doctrine of specific performance Specific performance is an equitable remedy requiring the contract to be carried out by both parties. In Lysaught v Edwards (1876) 2 Ch D 499, an agreement between the vendor and the purchaser, Lysaught, had been signed on 22 December 1874. The sale price was £59 000 and Lysaught paid a £3000 deposit, with the balance being due in October 1875, when settlement was to be made. However, the vendor died in May and the executor, Edwards, did not want to sell the land. Lysaught then sued Edwards for specific performance. It was held that Lysaught was entitled to specific performance. The court applied a constructive trust, which meant the vendor was a trustee for, and on behalf of, the purchaser. The land that had been contracted to be purchased by Lysaught therefore passed to him as the beneficiary under the devise of trust estates. The case therefore illustrates that there are two stages for the selling of land: the contract stage and the settlement stage. ANZ v Widen (1990) 102 ALR 289 is another case where there were sufficient acts of part performance to enforce the performance of the agreement.

A case to remember ANZ v Widen (1990) 102 ALR 289 Facts: On 24 December 1982, the ANZ approved the grant of a commercial bill to be secured by a mortgage over a house. This gave Anthony Wardle the means to buy out his former accountancy partner. On 5 January 1983 he signed an authority allowing the

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bank to form this mortgage, although neither this authority nor the mortgage contained any title particulars or a description of the property to be secured. The only reference to the property was a note in the bank manager’s diary referring to the 5 January meeting with Wardle. Funds were nevertheless credited to Wardle’s account on 14 January 1983. Wardle was then declared bankrupt on 24 August 1983, with the issue being whether the mortgage had become effective on or after the 24 February 1983. Under the Bankruptcy Act 1966 (Cth) any transfer in the six months before bankruptcy would be void. The bank sought to adduce oral evidence of the diary note in support of its contention that there was sufficient notice of the mortgage as required under the Conveyancing Act 1919 (NSW). Decision: Prior to 24 February 1983, the bank had carried out sufficient acts of part performance so as to render the mortgage grant agreement enforceable in equity, because the bank’s acts were unequivocal and in their own nature referable to a contract of the general nature alleged by it.

It should be noted that in all states except NSW the would-be purchaser obtains an equitable interest at the contract stage. Section 43A of the Real Property Act 1900 (NSW), however, gives purchasers in NSW a legal interest when the contract is completed, which provides would-be purchasers with better protection.

Priorities under the Torrens system There are times when there will be two or more parties who will each have a genuine claim to have an interest in the property. When such competition arises the courts will be required to decide whose interest should have priority, and under the Torrens system it is registration that gives priority. Thus, for two legal interests in regard to land under the Torrens system, the order of registration will provide the basis for priority. However, not all interests have to be registered, and there are also times when interests requiring registration are not registered. Under these circumstances the common law principles relating to priorities will apply, because, as Chief Justice Griffiths noted in Butler v Fairclough (1917) 23 CLR 78, there is no reason why common law priorities should not apply to Torrens system land. Thus, even under the Torrens system it is necessary to have an understanding of how common law priorities work in regard to competing equitable interests, while an understanding of the problem the common law sometimes faces with other priority disputes helps to illustrate some of the advantages of the Torrens system.

Priorities under the common law When dealing with the question of priorities there are four possible scenarios: • a prior legal interest followed by a subsequent legal interest • a prior legal interest followed by a subsequent equitable interest

Chapter 7: Creation and enforcement of ­property interests

• •

a prior equitable interest followed by a subsequent legal interest a prior equitable interest followed by a subsequent equitable interest.

When examining the common law priorities system, what should be kept in mind is that the problem has usually arisen after party A has dealt with party B who has then been involved in, for example, some form of fraud with party C. Party B has then absconded, died or gone bankrupt, leaving parties A and C to compete for the property, each with a creditable claim to the property.

Prior legal interest and subsequent legal interest In a situation where there has been an earlier legal interest and a later legal interest, the maxim nemo dat non quod habet; that is, you cannot give better title than you yourself have, will apply. Thus, if a car is stolen the legal title remains with the original owner and cannot be given to someone who later purchases the stolen car. In relation to land, if you have sold or given away the fee simple estate then you have nothing left to give to another party. Therefore, with two legal interests, the interest that is prior in time will have priority. As already noted, under the Torrens system it is the earlier registration that will have priority in a dispute involving land, so there is no need to revert to the nemo dat rule.

Prior legal interest and subsequent equitable interest Generally, where a prior legal and a later equitable interest exist, the legal interest will prevail. There are certain situations, however, where the earlier legal interest may be postponed to the later equitable interest. This will involve some conduct on the part of the party holding the prior legal interest that warrants it being postponed. In Northern Counties of England Fire Insurance Company v Whipp (1884) 26 Ch 482, Crabtree, who was the manager of Northern Counties, executed a legal mortgage to Northern Counties of his own freehold estate in order to secure £4500. Four months later, in May 1878, he mortgaged another freehold property for the sum of £2500. The title deeds of the two places were handed over to the company and placed in a safe to which Crabtree had a key. He then appropriated the title deeds and secured a further mortgage of £3500 from the defendant, Mrs Whipp. She received the title deeds but not the mortgages to Northern Counties, which meant she had no notice of the company’s security. In November 1879 Crabtree went into liquidation and Mrs Whipp claimed that the securities of Northern Counties were fraudulent and void against her. It was held that the court will not postpone a legal mortgagee to a subsequent equitable mortgagee on the ground of mere carelessness on the part of the legal mortgagee. Nothing but fraud or negligence that the court considers to be evidence of fraud will be sufficient to postpone a legal mortgagee to an equitable mortgagee.

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However, in Walker v Linom [1907] 2 Ch D 104 the prior legal interest was postponed. In this case George Walker purchased property in September 1896, which he then conveyed to Thomas Walker on trust for sale, with George Walker and his wife taking a life interest determinable upon alienation. The solicitors omitted to obtain the title deeds of the property, allowing George Walker to mortgage the property in February 1903. The mortgagee then sold the property. Neither the mortgagee nor the purchaser had any notice of the original settlement. When Walker absconded, his wife, as plaintiff, sought a declaration that the purchaser’s interest in the property was subject to hers. It was held, however, that any conduct of the legal estate holder in relation to the deeds that then allows the creation of a subsequent equitable estate without notice will be sufficient to postpone the legal estate to the subsequent equitable estate. All the parties except George Walker had acted honestly, but because the trustees had acted negligently, the wife could not be in a better position than that of the trustees, and their estate had to be postponed to the subsequent equitable interest.

Prior equitable and subsequent legal interest The Torrens system’s indefeasibility principle means that the interest of the later, registered interest will not lose priority to the earlier equitable interest. Under the Torrens system a dispute between an earlier equitable and a later legal interest is unlikely, although it could apply in the situation where there has been settlement, and therefore a transfer of the property, but the change in ownership has not yet been registered. While under common law the bona fide purchaser without notice doctrine may allow a later legal interest to have priority over an earlier equitable interest, the relevant statutes have abolished this notice requirement. Under the relevant statutes, more than mere notice of the unregistered equitable interest is required for the legal interest to lose priority. A dispute between a prior equitable and a later legal interest involves the question as to whether the later legal interest should be held subject to the prior equitable interest. This situation is illustrated in the case of Jared v Clements [1902] 2 Ch 399.

A case to remember Jared v Clements [1902] 2 Ch 399 Facts: In January 1897 Joseph Taylor purchased two leasehold properties, and through his solicitor, Charles Parr, obtained the necessary money from Jared. Taylor signed the memorandum of deposit in favour of Jared for the money advanced, and charged the houses in the title deeds by means of an equitable mortgage. The title deeds remained with Charles Parr. In July 1899 Taylor contracted to sell the two houses to Clements, and while the abstract of title delivered to Clements did not disclose the equitable mortgage,

Chapter 7: Creation and enforcement of ­property interests

a search of the bankruptcy file discovered its existence since Taylor had been declared bankrupt. A written request was then made requiring it be discharged. Parr handed over a signed receipt that Jared had been paid all the money owed. The purchase was completed, but it was subsequently found that Parr had forged Jared’s name, and the money had not in fact been paid. Jared then took legal action to establish the priority of his charge. The question was whether Clements, who had the legal estate and possession of the title deeds, was entitled to hold the property free from the mortgage, or whether Jared, as equitable mortgagee, could uphold his security. Decision: It was held that the contention of Jared prevailed because there was a subsisting charge in his favour, of which Clements had notice prior to the payment of the purchase money. It was for Clements, or his solicitors, to be satisfied that the encumbrance was discharged before parting with the money.

This case highlights a difficulty that courts often face when dealing with the question of priorities when both parties have creditable claims. The trial judge, Byrne J, noted it was a hard decision on Clements, particularly because it is unlikely the mortgage would have been found if the solicitor had not been so diligent, because Clements would then have had priority as a purchaser without notice. Justice Byrne also noted that a decision against Jared would have been equally hard on him, because he would have been deprived of his security without any default on his part. A more recent English case is that of Collings v Lee [2001] 2 All ER 232. Mrs Collings and her late husband were the joint owners of freehold property, and when they wished to sell the property they were introduced to Lee. He agreed to find them a purchaser and was paid a fee of £6500 for this. He then claimed to have found a buyer, Martin Styles, and Lee obtained the title deeds to the property. Styles, however, was simply an alias of Lee. Mr and Mrs Collings received none of the £250 000 sale price, and after being registered as the legal owner of the property, Lee (as Styles) executed a legal charge over the property with Halifax Building Society in order to secure the repayment of a £125 000 advance to him. At all these material times Mr and Mrs Collings were in actual occupation of the property. It was held that registration of Lee as the proprietor of the property was effective to vest the legal estate in him, but it was clear that he held it on trust for Mr and Mrs Collings, and that they had an overriding interest in the property. Mr and Mrs Collings did not intend to transfer the property to Lee, and did not intend to do it for no consideration; therefore, an equitable interest remained vested in Mr and Mrs Collings. The court also noted that the bank could have gone to the house to see who was actually living there, and if it had done this it would have discovered that the Collings were still doing so.

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Prior equitable and subsequent equitable interest Even under the Torrens system disputes will arise between two equitable interests, and when there are competing equitable interests it is the principle established in Rice v Rice (1853) 61 ER 646 that needs to be applied.

A case to remember Rice v Rice (1853) 61 ER 646 Facts: George Rice conveyed land to his cousin, Michael, but did not receive the purchase price, so there had been no consideration. George, as vendor, therefore had an equitable charge on the property known as a vendor’s lien. A vendor’s lien is a security recognised by equity that occurs when the vendor has not been paid the full purchase price, but the property has been transferred to the buyer. George then signed documents to the effect that the purchase price had been paid and Michael mortgaged it to a third party, Ede. The issue was whether the equitable interest of George as vendor was to be preferred to the interest of Ede as equitable mortgagee. Decision: It was then held that as between persons having only equitable interests, if the interests are in all other respects equal, priority of time gives the better equity under the maxim qui prior est tempore potier est jure. To determine which of the two equitable interests is superior, courts will examine: • the nature and condition of the respective equitable interests • the circumstances and manner of their acquisition • the whole conduct of each party with respect thereto.

Thus, in Rice v Rice the mortgagee was not guilty of any negligence, and was not obliged to go and inquire whether the vendor had received all their purchase money. Upon a comparison of the conduct of the two parties and the circumstances, especially the fact that the mortgagee acquired the deeds with perfect bona fides, the equity of the mortgagee was far better than that of the vendor, and therefore prevailed. This principle from Rice v Rice has been applied in several Australian cases such as Latec Investments v Hotel Terrigal (1965) 113 CLR 265, where the equities were also considered unequal.

A case to remember Latec Investments v Hotel Terrigal (1965) 113 CLR 265 Facts: Latec Investments, as mortgagee, exercised its power of sale over the Hotel Terrigal, which was in liquidation. The auction was held on a Friday, an unsuitable day, and the interval of time available for advertisements was significantly less than usual. The reserve price was set at £85 000, which was the amount owing under the mortgage. The best offer was £58 000 and Latec made no attempt to see if the bidders would increase their offer. Latec then sold it to Southern Hotels, a wholly owned subsidiary of Latec

Chapter 7: Creation and enforcement of ­property interests

Investments, for £60 000. Southern Hotels then gave a security by way of a charge over the land to a trustee for debenture holders. Five years after the purported sale, Hotel Terrigal sought to set aside the contract and transfer of land to Southern Hotels on the grounds that the power of sale had been fraudulently exercised. Decision: Latec Investments and Southern Hotels were guilty of fraud and the transfer was to be set aside. The trustees of the debenture holders had an equitable interest in the property. The approach is to determine where the better equity lies, and if the merits are equal, priority in time of creation is considered to give the better equity. But where the merits are unequal, the maxim may be displaced and priority accorded to the later interest. This would be the case, for instance, where the conduct on the part of the earlier interest has led the other to acquire the interest on the supposition that the earlier interest did not exist. The trustee of the debenture holders had acquired its interest without notice of any interest by Hotel Terrigal, and their interest prevailed.

Thus, it should be remembered to determine first whether the equities between the two parties are in fact equal, with the first-in-time priority maxim being the principle of last resort. The case of Barry v Heider (1914) 19 CLR 197 meanwhile illustrates that even with the Torrens system’s requirement for registration, there can be reasons why property is not registered, in which case common law priorities must then be applied.

A case to remember Barry v Heider (1914) 19 CLR 197 Facts: Charles Barry had signed a memorandum of transfer for land to Hector Schmidt on 19 October 1912 for the consideration of £1200. Part of the land had previously been transferred, and while an application had been made for a new certificate of title, it had not yet been issued. Later that month, Schmidt applied through his solicitor, Peterson, for a loan from Selina Heider for £800, to which Heider agreed on the security of the transferred land. On 29 October Schmidt received the certificate of title. On the faith of these documents, Schmidt was given the £800, and in return executed a mortgage to Heider. On 30 October Barry, as an unpaid vendor, lodged a caveat forbidding the registration of any instrument except Heider’s mortgage, although this caveat was later withdrawn by Peterson, purporting to act as Barry’s solicitor. On 3 December Schmidt executed another mortgage for £400 to Charles Gale. None of these documents were registered by 20 December, the delay being caused by an adjustment of the land boundaries due to a fresh alignment of the fronting streets. Barry then commenced legal action, claiming that his signature had been obtained by a false and fraudulent representation, and that he had in fact agreed to sell the land to Schmidt for its true value of £4000. He sought an injunction preventing Schmidt from registering the original transfer. This injunction was granted and the transfer declared void. The issue then was whether Barry’s interest was subject to the two mortgages.

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Decision: It was held that the transfer of 19 October, if valid, would have conferred an equitable claim that was then assignable by any means appropriate. Schmidt had an interest that entitled him to possession of the certificate of title, and Heider had the right to register Schmidt’s mortgage. Barry was not entitled to any relief against Heider. But by not having established through positive evidence Peterson’s authority to withdraw the caveat, Gale could not rely on the withdrawal as a further representation by Barry. The first-in-time rule applied, and Gale’s mortgage was postponed to Barry’s vendor’s lien.

In Abigail v Lapin [1934] AC 491 Mr and Mrs Lapin executed two memoranda of transfer on 5 December 1923 to Olivia Heavener for 1800 guineas and 1200 guineas, in relation to properties held in fee simple. Heavener registered the title deeds, and in March 1924 registered a mortgage she took out with the English, Scottish and Australian Bank, the Lapins still being subject to a registered mortgage of 1320 guineas with the Union Bank. Heavener’s mortgage was discharged on 2 September 1925, with the sum of 5500 guineas lent to her by Abigail on the security of the fee simple titles that she held. Abigail then held the certificates of title and lodged a caveat on 4 September 1925. On 24 February 1926 Abigail lodged the mortgage for registration. While it was returned to them for some minor formal defects, the Lapins lodged a caveat. The Lapins’ claim was that the certificates had only been handed over as collateral for a loan. It was held that the Lapins’ equity should be postponed to that of Abigail because they had armed the transferee with the power to deal with the land as owner. Abigail’s failure to search the register did not affect the case because his priority did not arise from any representation to him by the respondents and because the Lapins had not lodged a caveat. The Lapins were bound by the natural consequences of their acts in arming Heavener with the power to go into the world as the absolute owner of the lands, and thus execute transfers or mortgages of the land to other persons. The Lapins’ interest was therefore postponed to the equitable rights of Abigail. Another Australian case involving the issue of competing equitable interests is that of Heid v Reliance Finance Pty Ltd (1983) 154 CLR 326.

A case to remember Heid v Reliance Finance Pty Ltd (1983) 154 CLR 326 Facts: Harold Heid, the registered proprietor of the land, orally agreed to sell it to Connell Investments, a company controlled by Newman, McKay & Co., on 27 May 1977. The price was $165 000, with $15 000 to be paid on completion, $100 000 to be deposited on call with Chancellor Finance, and $50 000 secured by a mortgage over the land. Heid agreed that the transaction would be completed by Peter Gibby, whom Newman,

Chapter 7: Creation and enforcement of ­property interests

McKay & Co. held out to be a solicitor, but who was in fact an unqualified employee. Heid signed an authority on 2 June authorising the Bank of NSW to deliver the title deeds. At the same time Heid signed a contract for sale and a memorandum of transfer of the land, which contained an acknowledgment that the $165 000 had been paid. He also signed a memorandum of mortgage with Connell Investments, whereby it mortgaged the land to secure the $50 000. This document was undated and was never registered. The $100 000 was never paid, which meant that Heid now had a vendor’s lien on the land for this sum. Once Gibby had obtained the certificate of title and memorandum of transfer, McKay commenced using the document to raise money the company desperately needed. A memorandum of mortgage was used to secure $80 000 from Reliance Finance, whose solicitor, Raphael, relied on the acknowledgment of the receipt of the purchase money and the fact that the transfer was regular on the face of it. On 22 June 1977, Raphael lodged the memorandum of transfer from Heid to Connell Investments and lodged a caveat to protect the interests of Reliance Finance. On 4 July 1977 Connell Investments secured a loan of $40 000 from Mr Alexander, who lodged a caveat, and another $20 000 from Reliance Finance on 5 July 1977. It was not until 23 September 1977 that Heid lodged a caveat in respect of his interest as a mortgagee. Decision: It was held that Heid’s conduct in handing over the completed memorandum of transfer containing an acknowledgment of payment allowed Connell Investments to represent itself as the true owner and to engage in fraudulent and deceptive conduct that was foreseeable. Heid’s priority for his equitable interest in relation to the $50 000 mortgage had therefore been lost and his vendor’s lien for the $100 000 was postponed to the subsequent equitable mortgages.

In Breskvar v Wall (1971) 126 CLR 376, meanwhile, the Breskvars were the registered proprietors as joint tenants of a two-acre property in Brisbane. On 5 March 1968 they borrowed $1200 from Petrie, which was used to discharge the mortgage on the property, and this was registered on 13 March 1968. To secure the loan, the Breskvars executed an instrument of transfer of their interest in the land with the name of the purchaser left blank, and gave it and the title deeds of the land to Petrie. In October 1968 Petrie fraudulently inserted the name of his grandson, Wall, for whom he had the power of attorney, into the transfer and caused it to be registered on 15 October 1968. Petrie then sold the land for $3500 to Alban Pty Ltd, which was a bona fide purchaser without notice, because a check of the register had indicated that Wall was the registered owner. The transfer was dated 7 November 1968 and lodged on 8 January 1969, and Breskvar lodged a caveat on 13 December 1968, which was entered on 6 March 1969. It was held that if there had been no transaction by Wall with Alban Pty Ltd the Breskvars would have been entitled to succeed against Wall. But the purchase by Alban Pty Ltd without notice intervened before the equitable right of the appellants was fulfilled, and Alban Pty Ltd thus acquired an equitable interest in the land. There

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was therefore a competition between the respective interests that had to be resolved on equitable principles. The priority of creation would only be lost by some conduct on the part of the Breskvars. However, they had armed Petrie with the means of placing himself or his nominee on the register by executing the memorandum of transfer without inserting the name of a purchaser, and had also handed over the relevant duplicate certificate of title. The right of Breskvars were therefore postponed to the equitable interest of Alban Pty Ltd as a bona fide purchaser for value and without notice. In Taleb v National Australia Bank (2011) 82 NSWLR 489 both parties had been involved in providing finance to Hock a Car Investments Pty Ltd. After Taleb had been making loans to the company for two years, Kay and he entered into a deed of acknowledgment, dated 28 January 2010, although it also referred to the loans over the two previous years, the total amounting to $700 000. Arrangements were made for a caveat to be prepared, with Taleb leaving this to Kay’s solicitors who did not lodge it. Taleb eventually lodged one himself on 26 November, claiming he had an equitable interest. NAB likewise claimed an equitable interest arising from a loan to the company made in October at a time it was unaware of money being owed to Taleb, although it did not lodge its mortgage for registration until 7 December. When Kay died suddenly on 3 March 2011 his fraud had left competing equitable interests. It was held that Taleb had not acted prudently in allowing Kay’s solicitors to lodge the caveat, because this involved placing his trust in people whose interests were adverse to his own, with the fact he did not have possession of certificate of title increasing his need to obtain protection. Taleb’s conduct since 28 January allowed Kay to deal with title to the land in ways inconsistent with his interest, and if he had lodged a caveat at that time, NAB would have been aware of it. NAB, however, had also not acted prudently in not registering the mortgage until 7 December, and because it was for $1.5m, this should have been ‘an urgent project for any lender’. It was held, however, that Taleb’s failure to lodge a caveat in due time, and not having done so in time to influence NAB’s decisions, meant he did not have a better equity than NAB. Since NAB had the better equity it then had priority.

Think about it Do you think that there are established principles in regard to the question of priorities, or do you think that priorities are ascertained on the individual merits of the case?

Chapter 7: Creation and enforcement of ­property interests

Assessment preparation Problem question 3 Two friends, Arthur and Terry, entered into negotiations concerning the sale of Arthur’s plot of land. Upon conclusion of a contract of sale, a deed of conveyance was drawn up for the parties to sign. Without actually receiving the agreed purchase price of $150 000 from Terry, Arthur signed a receipt on the deed of conveyance acknowledging that he had received the agreed purchase price. The transfer was completed and Terry became the registered owner of the property. Six months later Terry used the title to the ­property as security to obtain a loan of $100 000 from All Star Banking Services, with the ­intention being to use the money to build a house on the land. This mortgage, however, was not registered by All Star Banking Services. Terry is now in financial difficulty, having s­ quandered the money gambling, with his only asset being the block of land he had bought from Arthur. Discuss who should have priority in the dispute that has now arisen in regard to the property. For suggested answers to these problems, please refer to .

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The Torrens system Covered in this chapter • • • • • • •

Old system title The Torrens system The indefeasibility principle Limits to the indefeasibility principle How the caveat system protects equitable interests Volunteers and Torrens system transactions Torrens system remedies

Cases to remember Gibbs v Messer [1891] AC 248 Frazer v Walker [1967] AC 569 Mercantile Mutual Life v Gosper (1991) 25 NSWLR 32 Allen v Roughley (1955) 94 CLR 98 Jessica Holdings v Anglican Property Trust (1992) 27 NSWLR 140 Butler v Fairclough (1917) 23 CLR 78 J & H Just Holdings Pty Ltd v Bank of NSW (1971) 125 CLR 546 Brunker v Perpetual Trustees Co Ltd (1937) 50 CLR 555

Relevant statutes Real Property Act 1900 (NSW) 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)

Old system title The registration of land under old system title was established through a series of instruments and events going back many years. Ownership of land could only be proven with absolute certainty by tracing all documents relating to that land back to the original grant. This was not only expensive, but it also did not guarantee secure title, because there could have been problems not recorded in the line of transfer.

Chapter 8: The Torrens system

In Australia, a further problem was the shortage of lawyers in the early days of settlement. A simpler system for the transfer of land was required, and in 1802 a system involving the registration of deeds was established, the deed being a written document that was sealed and delivered, thereby creating an interest in land. However, what was registered was the deed, not the actual title, and therefore the difficulties and uncertainties inherent in the old system of title were not overcome by the deeds registration system. If, for instance, fraud was involved with the deed, the difficulties with title continued to exist, because the registration of the deed did not cure the defects in title. The solution to these problems was the Torrens system created by Robert Torrens.

The Torrens system Torrens was a Collector of Customs who later became a member of the South Australian Parliament. He not only had a strong dislike for the complexity of the English land law system inherited by the Australian colonies, but was also familiar with the registration system for merchant ships. This system involved the registration of the ownership of ships, with all dealings relating to a particular ship being recorded on a separate folio in the register. Whenever ownership of a particular ship changed, this was shown on the relevant folio, which meant anyone could look through all the transfers to find out who the present owner was. Torrens proposed a similar system for the transfer of land in the Australian colonies. The main aspect of the Torrens system is that it involves independent titles, as opposed to the dependent nature of old system title, which required a retrospective investigation of title each time the land was conveyed. In the Torrens system, on each conveyance the land is effectively surrendered back to the state, which then re-grants it to the new purchaser. This, therefore, removes the need for retrospective investigation of the title, with the purchaser being protected against all prior interests under the principle of indefeasibility. In Breskvar v Wall (1971) 126 CLR 376 it was stated that the Torrens system involves ‘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’. All transactions affecting the land are then included in the folio, together with a description of the parcel of land and, usually, a plan of the land. As with the shipping folio, the name of the current registered proprietor will be the last that appears on the folio. Until the mid-1990s, when the system became computerised, purchasers received a certificate of title, which was effectively a copy of the folio from the register for the land concerned. Torrens’ system was first introduced in South Australia in 1858, with the other colonies soon adopting this new system through legislation. Once the Torrens system

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was adopted by a colony/state, all new grants of land in that state were issued under the new system. Land that had been granted or purchased as old system title was brought under the Torrens system when it was next transferred, and today over 99 per cent of land in Australia has been brought under the system. Thus, the Torrens system underpins the transfer of land in Australia, with its main features being: 1 It deals with the registration of land title, not the documents. 2 Registration is conclusive evidence of a legal interest in the property. 3 It involves legal title by means of registration, and a purchaser is assured of legal title by the registration. 4 Registration is compulsory in order to obtain legal title, although not all interests have to be registered. 5 The government guarantees title. 6 Each state has legislation that sets out the mechanisms for registration and what can be registered.

Relevant statutes A register must be kept that contains a complete record of all land and all interests in regard to each lot of land: Real Property Act 1900 (NSW) s 31B Land Title Act 1994 (Qld) ss 27, 28 Real Property Act 1886 (SA) ss 48, 51B Land Titles Act 1980 (Tas) s 33 Transfer of Land Act 1958 (Vic) ss 27, 27A Transfer of Land Act 1893 (WA) s 48 Instruments are registered in the order in which they are lodged: Real Property Act 1900 (NSW) s 36 Land Title Act 1994 (Qld) s 178 Real Property Act 1886 (SA) s 56 Land Titles Act 1980 (Tas) s 48 Transfer of Land Act 1958 (Vic) s 34 Transfer of Land Act 1893 (WA) s 53

The indefeasibility principle The Torrens system involves title by registration, which means that, on becoming the registered proprietor of an estate, a purchaser acquires good title even if there are fundamental defects in the purchaser’s title. The title therefore cannot be set aside on the grounds of a defect existing in the title before the interest was registered, because the indefeasibility of title doctrine protects the purchaser, even if the purchaser becomes the registered proprietor by means of a forged transfer. Thus, indefeasibility is the foundation of the Torrens system, because its main characteristic is that the interest of the registered proprietor is considered paramount,

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with the purchaser’s interests being protected against all prior interests in relation to that estate. An issue relating to indefeasibility has been whether it is obtained immediately on registration or whether it is deferred. An early decision, Gibbs v Messer [1891] AC 248, suggested that indefeasibility was deferred.

A case to remember Gibbs v Messer [1891] AC 248 Facts: Mrs Messer, who resided in Scotland, was the registered proprietor of land in fee simple in Hamilton. In 1884, her husband left the duplicate certificates of title and also power of attorney with Charles Cresswell, a solicitor, and returned to Scotland. Cresswell then forged a transfer of land by Mr Messer, as his wife’s attorney, to ‘Hugh Cameron, of North Hamilton, county of Dundas, grazier’. There was, however, no such person. In 1885, purporting to act as an agent for Cameron, Cresswell registered Cameron as the new proprietor. Cresswell then arranged a loan of £3000 with the McIntyres secured by mortgage. This was then registered in the folio containing Hugh Cameron’s certificate of title. In 1886 Mr Messer returned and discovered these frauds and Cresswell absconded, leaving no assets. Decision: It is clear that the registration of the name of Hugh Cameron, a fictitious and non-existing transferee, cannot impede the right of the true owner Mrs Messer to have her name restored to the register. The question is whether the mortgage is an encumbrance affecting the title. Those who deal, not with the registered proprietor, but with a forger who uses the proprietor’s name, do not transact on the fact of the register and they cannot by registration of a forged deed acquire a valid title in their own person. The McIntyres cannot bring themselves within the protection of the statute because the mortgage they had put on the register is a nullity. The result is unfortunate, but it is due to 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. It was the duty of the mortgagee to ascertain the identity of the principal for whom the agent professed to act.

This case gave rise to an early theory of deferred indefeasibility, but cases such as Frazer v Walker [1967] AC 569 and Breskvar v Wall clearly indicated that indefeasibility was immediate. However, several South Australian and Victorian decisions in the 1990s suggested that, based on the wording of the statutes in those states, indefeasibility was deferred. In Rogers v Resi-Statewide Corporation (1991) 101 ALR 377, Mr and Mrs Rogers were joint tenants of their home. Mr Rogers, without the knowledge and consent of his wife, forged her name in order to obtain a mortgage with Resi-Statewide. The amount obtained was greater than the already existing mortgage, which was paid out with the money obtained from Resi-Statewide. This allowed it to be the registered first mortgagee. When default in payments occurred, Mrs Rogers sought to restrain the sale of her interest on the grounds that,

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because of the forgery, the title of Resi-Statewide was void against her interest. This was based on the provisions of s 69 of the Real Property Act (1886) (SA). It was held that the registered interest of Resi-Statewide, as the mortgagee of the property, was not immune from the adverse claims of Mrs Rogers. While this decision could be seen as interpreting indefeasibility under s 69 to be deferred, another interpretation is that fraud is an exception to indefeasibility of title provided in s 69. Overall, however, the decisions clearly assert that under the relevant Torrens statutes, immediate indefeasibility applies. It should also be noted that Gibbs v Messer has never actually been overruled, but can be considered as limited to situations involving fictitious persons. However, s 3(1) of the Real Property Act 1900 (NSW) now defines fraud to include fraud involving a fictitious person. Note too that in Salia Property Pty Ltd v Commissioner of Highways (2012) 112 SASR 384 land owned by Salia was compulsorily acquired by the Commissioner of Highways, who became the registered proprietor, with Salia seeking a declaration that the acquisition should be declared void. It was held that s 17 of the Real Property Act 1886 (SA) meant that once the Commissioner became the registered proprietor, he gained the benefit of indefeasibility, because his title was no less sound than any other registered proprietor.

Limits to the indefea sibility principle The relevant statutes, while outlining the principle of indefeasibility, also set several limits to it. These limits are: 1 fraud 2 in personam rights 3 short-term leases 4 easements 5 adverse possession 6 claim under a prior certificate 7 another interest from a second certificate of title because the first has not been cancelled 8 wrong description of land and its boundaries 9 statutory exceptions.

Fraud Fraud is not defined in all the relevant statutes, which means that these jurisdictions must rely on the common law definitions. In Assetts Co v Mere Roihi [1905] AC 176 the Privy Council defined fraud as being actual fraud; namely, conduct involving dishonesty of some sort. This definition does not include constructive or equitable fraud. Constructive fraud involves a fraudulent breach of an obligation; that is, it

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involves a person violating, however innocently, an obligation that a court of equity will assume was known to the person. Equitable fraud is conduct recognised by a court of equity as offending the conscience. The question of fraud arose in Loke Yew v Port Swettenham Rubber [1913] AC 491. Port Swettenham Rubber bought 322 acres of land, with native title being held on eighty-eight of the acres. The purchaser had notice of the native title and the selling price was discounted to take it into account. However, once the land was registered, the company tried to evict the people who held the native title. It was held that the transfer was obtained by fraud and misrepresentation and that the purchaser could not better their position by obtaining registration under circumstances which made it dishonest to do so. Thus, it is fraud for a purchaser to refuse to recognise an unregistered interest where the purchaser has taken the land not only with notice of that interest, but also having given an assurance that the interest will be preserved. In Friedman v Barrett [1962] Qd R 498, it was held that fraud means actual dishonesty, not constructive fraud. Therefore, it was not fraud to purchase with notice of an unregistered interest and then, on becoming registered as proprietor, to invoke indefeasibility of title to defeat that unregistered interest. In Bahr v Nicolay (No 2) 164 CLR 604, meanwhile, there were obiter statements that not all equitable fraud stands outside the statutory concept of fraud. Similarly, in Grgic v ANZ (1994) 33 NSWLR 202 it was held that the types of equitable fraud that can be regarded as falling within the statutory concept of fraud are those in which there has been an element of dishonesty or moral turpitude on the part of the registered proprietor. In Conlan v Registers of Titles (2001) 24 WAR 299 it was held that fraud was an exception to indefeasibility and that fraud means actual dishonesty or moral turpitude.

Relevant statutes Real Property Act 1900 (NSW) ss 42, 43 Land Title Act 1994 (Qld) s 184 Real Property Act 1886 (SA) s 69 Land Titles Act 1980 (Tas) s 40 Transfer of Land Act 1958 (Vic) ss 42, 43, 44 Transfer of Land Act 1893 (WA) ss 68, 134

In personam rights The in personam exception involves an action, or a right of action, against a specific person. What this means is that the Torrens system, even though it confers certainty of title, cannot undermine fundamental equitable doctrines and courts will therefore enforce conscientious obligations entered into by owners of land. This is known as

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the rights in personam exception to indefeasibility. The rights in personam may arise out of the unconscionable conduct of the registered proprietor. They may also arise from the conduct of agents or employees for whose acts the registered proprietor is responsible. Frazer v Walker is a case that illustrates when and why the exception may arise.

A case to remember Frazer v Walker [1967] AC 569 Facts: Allan Frazer and his wife Flora were the registered proprietors of property over which they had a £1700 mortgage. Flora, professing to act on behalf of herself and her husband, arranged to borrow £3000 from the Radomskis. A form of mortgage was prepared by their solicitors and Flora then took it to her solicitors. A clerk in the office witnessed her genuine signature and also the purported signature of her husband, which she had already inserted. Some of the £3000 was given to Flora’s solicitors and some was used to discharge the existing mortgage. On 21 July 1961, the memorandum of mortgage, together with a discharge of the previous mortgage, was registered at the land registry office. When no payment was made, the Radomskis used their power of sale, and on 26 October 1962 the property was sold to Douglas Walker for £5000. A memorandum of transfer was registered on 29 November 1962, with both parties acting in good faith and with no knowledge of the irregularity on the part of Flora Frazer. The husband began proceedings on 16 March 1964 for possession of the property, relying on his title as registered proprietor to argue that the land was not affected by the purported mortgage. Decision: Registration conferred upon the Radomskis the interest as registered proprietors, as the concept of indefeasibility was central in the system of registration. Frazer’s failure against the Radomskis meant he also failed against Walker. Registration confers on the registered proprietor a title to their registered interest, which is immune from adverse claims other than those specifically excepted. This principle in no way denies the right of Frazer, the plaintiff, to bring against a registered proprietor a claim in personam, founded in law or equity, for such relief as a court acting in personam may grant.

In Mercantile Mutual Life v Gosper (1991) 25 NSWLR 32 it was held that the conduct may predate or postdate the registration.

A case to remember Mercantile Mutual Life v Gosper (1991) 25 NSWLR 32 Facts: In 1982 Vivienne Gosper was the sole registered proprietor of land in Neutral Bay for which she paid $205 000. In 1985 it was remortgaged for $265 000, and this variation of the mortgage was registered. In 1988 her husband, a barrister, fraudulently procured a transaction with Mercantile Mutual whereby he would receive a bank cheque for $285 000, with that amount being secured against the property. His wife had no knowledge of the

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fraud, as her signature was forged by her husband. The company lodged the forged variation of the mortgage with the Registrar-General, and the certificate of title and the variation of mortgage were registered accordingly. Vivienne Gosper found out about these matters upon the death of her husband in 1989. She then claimed that while registration of the mortgage variation meant that the statutory rights became vested in the company, there were also personal equities enforceable against the company that would lead to the restoration of her position prior to the registration of the variation. Decision: Vivienne Gosper was the sole registered proprietor of the subject land in which her husband had no legal interest whatsoever and the company never did her the courtesy of communicating directly with her. Where a legal relationship existed between the parties immediately prior to registration the court may examine their pre-registration positions in equity, and is not forbidden from doing so by the state of the register. Where equity so requires, the court may restore the parties to those pre-registration positions and order the register to be amended accordingly. The personal equities that existed prior to registration of the forged variation in this case were wholly unaltered by the registration, and Vivienne Gosper was entitled to a restoration to the original position that existed before the forgery.

Short-term leases Under the relevant statutes the registered proprietor’s estate is subject to certain unregistered short-term leases. The purpose of this exception to indefeasibility is to save short-term tenants from the expense of registration, at the same time giving them security of tenure against later registered proprietors. Leases of a specified duration can therefore be left unregistered and be covered by this exception to indefeasibility. In NSW, Queensland and Tasmania a short-term lease is one with a duration of three years or less, in South Australia it is one year or less, and in Western Australia it is five years or less. Victoria has no time limit for the length of the lease, which means that no lease has to be registered in order for it to be considered an exception to indefeasibility. Note also that an option to renew a lease may be protected by this exception, but could also be seen as a separate transaction and therefore not covered.

Relevant statutes Real Property Act 1900 (NSW) s 42 Land Title Act 1994 (Qld) s 185 Real Property Act 1886 (SA) s 69 Land Titles Act 1980 (Tas) s 40 Transfer of Land Act 1958 (Vic) s 42 Transfer of Land Act 1893 (WA) s 68

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Easements The registered proprietor holds the land subject to certain easements that do not appear on the register. The owner of the land burdened by an easement must submit to the exercise of the easement, even if it has not been registered, in circumstances where it has been omitted or misdescribed. The omission could be the result of a mistake in the register, but there could be other explanations, such as the omission having occurred when land was transferred from old system title to the Torrens system. Note also that an easement by means of prescription may arise after there has been at least twenty years of usage.

Relevant statutes Real Property Act 1900 (NSW) s 42 Land Title Act 1994 (Qld) s 185 Real Property Act 1886 (SA) ss 69, 119 Land Titles Act 1980 (Tas) s 40 Transfer of Land Act 1958 (Vic) s 42 Transfer of Land Act 1893 (WA) s 68

Adverse possession Adverse possession involves the acquisition of title through another person’s possession of the land after the registered proprietor has not asserted their rights within the limitation period. Under the various state limitations Acts a person must assert an adverse possession right for land within twelve years, although under the common law it was twenty years. In Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464 it was stated that when a person enters into adverse possession of land, they have title to the land in the nature of a fee simple, good against the whole world except the true owner. Allen v Roughley (1955) 94 CLR 98 is a High Court case involving adverse possession.

A case to remember Allen v Roughley (1955) 94 CLR 98 Facts: In 1950 Oliver Roughley, a trustee of the will of the deceased Henry Cusbert, issued a statement of claim that Edmund Allen had no interest in land known as Plunkett’s land, which consisted of 49 acres. Cusbert had acquired the land in 1880 by conveyance from Plunkett as mortgagor and Catherine Hyland as mortgagee, but had done nothing to develop the land. The land was originally granted to Turner in 1823, although there was no documentary evidence of the state of the title. Cusbert occupied the land until his death, then gave a life interest to his son William, with a remainder to all his children. Allen took

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control of the land in 1898. Because he had been working the land since that time, he claimed the interests of the beneficiaries were barred, because he had acquired a fee simple title at the end of twenty years. Decision: Allen must establish his documentary title, or if he relies upon prior possession, he must show a period of possession of not less than twenty years. Proof that he is in possession confers on him a good title against the whole world except those who show a better title. The onus of proof was on Allen to prove that his possession was adverse to William Cusbert and not merely permitted on behalf of William Cusbert. Evidence showed that Allen and his wife were permitted by William Cusbert to live in the homestead and work the land. In that event the occupation by Allen was not adverse to William Cusbert but was on his behalf.

In Petkov v Lucerne Nominees (1992) 7 WAR 163, adverse possession was claimed for a small strip of land that formed the boundary between two properties. It was held that adverse possession was an exception to the indefeasibility of title under the relevant Act. The party claiming adverse possession must show a possession in fact that is both continuous and exclusive and that is accompanied by a conscious intention to possess the land to the exclusion of all other parties. It was then held that the plaintiffs were entitled to possession. Under the relevant statutes, an adverse possessor may apply for registration once the limitation period has elapsed, although a system of checks is then undertaken and the application must be advertised. A caveat may also be lodged by anyone who claims to have an interest in the land and objects to the application. However, if the proper procedures are carried out then the land can be registered in the name of the adverse possessor. In Queensland, Victoria and Western Australia adverse possession works as an actual exception to indefeasibility, while in Tasmania the effect is that the land is held on trust by the registered proprietor for the adverse possessor, who may then apply for registration. In both NSW and South Australia, however, it is not considered to be an exception to indefeasibility, although an adverse possessor can still apply for registration.

Relevant statutes Real Property Act 1900 (NSW) Part 6A Land Title Act 1994 (Qld) Part 6, Division 5 Real Property Act 1886 (SA) ss 80A–80I, 251 Transfer of Land Act 1958 (Vic) ss 60–62 Transfer of Land Act 1893 (WA) ss 222–223A

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It should also be noted that there have been recent UK developments in regard to adverse possession following the case of JA Pye (Oxford) v Graham [2003] 3 All ER 238. This case involved a farmer, Graham, who had sought rights to graze or cut grass in fields owned by Pye. Graham was prepared to pay, but Pye failed to respond and because of Pye’s inaction Graham enjoyed full use of the land for twelve years without any payment. It was held that Graham had obtained title to the land since he had done what any other farmer would have done in this position; that is, continue to farm the land. Changes were then made to the relevant UK legislation so that after ten years an adverse possessor must try to notify the true owner, which gives the true owner two years to reassert their possession of the land. However, at present, this is not the law in Australia and adverse possession can potentially be claimed after twelve years without any prior notice being given to the true owner.

Claim under a prior certificate If there are two certificates of title with two people vying for the land then the registrar can determine whose interest shall prevail, with this usually being the earlier title.

Relevant statutes Real Property Act 1900 (NSW) s 42 Land Title Act 1994 (Qld) s 185 Real Property Act 1886 (SA) s 69 Land Titles Act 1980 (Tas) s 40 Transfer of Land Act 1958 (Vic) s 42 Transfer of Land Act 1893 (WA) s 68

Wrong description of land and its boundaries A registered proprietor’s interest is not indefeasible in regard to a portion of land that has been included in the folio of the register due to wrong description of parcels of land or boundaries. This includes surveying mistakes and mistakes made in an application to convert old system title land to the Torrens system, for example, if the folio misdescribes the land by including an area which the applicant did not intend to be included.

Relevant statutes Real Property Act 1900 (NSW) s 42 Land Title Act 1994 (Qld) s 185 Real Property Act 1886 (SA) s 69 Land Titles Act 1980 (Tas) s 40 Transfer of Land Act 1958 (Vic) s 42 Transfer of Land Act 1893 (WA) s 48

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Statutory exceptions It should also be noted that there may be provisions in other statutes that override the indefeasibility principle. Taxes and council rates, for instance, may be the first charge that can be made against the land.

How the caveat system protects equitable interests A caveat is a warning to ‘beware’ and can therefore be considered to be a ‘danger post’. It can prohibit the recording of any dealing affecting the estate or interest. An unregistered Torrens title interest may therefore be protected by a caveat that has been lodged with the Registrar. Thus, it is the recognition of equitable rights that forms the basis of the caveat system in the Torrens system. In Butler v Fairclough (1917) 23 CLR 78, for instance, it was stated that ‘it must be taken to be well settled that under Australian system of registration of titles to land the courts will recognise equitable estates and rights. This recognition is the foundation of the scheme of caveats, which enables such rights to be temporarily protected in anticipation of legal proceedings’. Caveats are therefore an important component of the Torrens system, providing protection for unregistered or unregisterable interests of legal or equitable nature. This is reflected in s 74F of the Real Property Act 1900 (NSW), which states that ‘any person who, by virtue of any unregistered dealing or by devolution of law, claims to be entitled to a legal or equitable estate or interest in land’ may lodge a caveat that prohibits ‘the recording of any dealing affecting the estate or interest to which the person claims to be entitled’. Examples of interests for which caveats may be lodged include: • interests of the purchaser under a contract for the sale of land • interests of a mortgagee • interests of a lessee • interests of a person arising from contributions made to the purchase price of property. A caveat must disclose the following information: • It must bear the name and address of the caveator. • It must provide a description of the property. • It must provide information as to the interest of the estate that is being claimed. • It must have the signature of the guarantor. A caveat can prohibit the recording of any dealing affecting the estate or interest, because it is enough that the caveator possesses the claimed interest. The claim must be an interest in the land, and therefore cannot be lodged to protect a mere contractual or personal right. The interest must exist at the time the caveat is lodged.

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Its primary purpose is to protect the caveator’s interest until they have the chance to go to court. The effect of a caveat therefore is to freeze the register, thus preventing further registration, except for what was lodged in registrable form before the caveat was lodged. A caveat can be removed or cancelled, although another caveat can be lodged if one has been withdrawn or removed, and in some states it will also lapse after a specific period of time.

Relevant statutes An application can be made to have a caveat removed: Real Property Act 1900 (NSW) ss 74J, 74M Land Title Act 1994 (Qld) s 127 Real Property Act 1886 (SA) s 191 Land Titles Act 1980 (Tas) s 135 Transfer of Land Act 1958 (Vic) s 89A Transfer of Land Act 1893 (WA) s 141A A court can order that a caveat be removed: Real Property Act 1900 (NSW) s 74MA Land Title Act 1994 (Qld) s 127 Real Property Act 1886 (SA) s 191 Land Titles Act 1980 (Tas) s 135 Transfer of Land Act 1958 (Vic) s 90 Transfer of Land Act 1893 (WA) s 138

Note that in Statewide Developments Pty Ltd (in liq) v Azure Property Group (Holdings) Pty Ltd (2012) 84 NSWLR 133 involving a land development that was in liquidation, caveats were lodged by an unsecured creditor, a real estate agent, in relation to a claim for commissions and fees. It was noted that there was both a public and a private interest in ensuring that unjustified caveats were not permitted to remain on the title to land. A caveat will usually lapse or be ordered to be removed by a court unless the caveator can establish entitlement to an interlocutory injunction to prevent the registered proprietor from dealing with the relevant land. An interlocutory injunction in this context requires: • a serious question to be tried involving a proprietary interest, with the onus being on the caveator to prove this and • a balance of convenience; that is, the caveator must show that it is better to maintain the register as it is until the trial. The granting of an interlocutory injunction therefore involves the concept of what is just and fair, because the court will not allow a caveat to oppress the registered

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proprietor, and for an injunction to be granted there must be a genuine need to protect the caveator’s interest. Jessica Holdings v Anglican Property Trust (1992) 27 NSWLR 140 is an example of a case involving the use of a caveat and an injunction.

A case to remember Jessica Holdings v Anglican Property Trust (1992) 27 NSWLR 140 Facts: By two contracts dated 11 July 1991, Jessica Holdings contracted to sell to Anglican Property Trust two parcels of land in a proposed subdivision. The land was intended for use as a site for the residence of an assistant curate or for a church hall. Prospect Electricity, however, planned to build a substation on these lots, which would have prevented the construction of these buildings. A dispute arose and Anglican Property Trust lodged a caveat preventing the registration of such a plan. Jessica Holdings then brought proceedings, claiming the caveat should be withdrawn. Anglican Property Trust then sought an order that it be extended. Decision: A purchaser has an equitable interest in the land in respect of which the court can order specific performance or order the vendor to do what is necessary to enable the purchaser to obtain any necessary consent. A purchaser of land should be treated as having an interest in the land if the contract contains a condition requiring some stranger to the contract to give consent or take some other step before the contract can be regarded as unconditional. In the present case, since Anglican Property Trust has an interest that ought to be protected by an injunction, it follows that it also has an interest that may be protected by a caveat.

Because caveats can have a potentially damaging effect on the registered proprietor’s interest, there are penalties for lodging caveats without care, and a person who lodges a caveat without reasonable cause must compensate any person who suffers pecuniary loss as a result of the caveat. The onus of proof is on the person claiming compensation, and that person needs to show that the caveator acted without reasonable cause.

Relevant statutes Real Property Act 1900 (NSW) s 74P Land Title Act 1994 (Qld) s 130 Real Property Act 1886 (SA) s 191 Land Titles Act 1980 (Tas) s 138 Transfer of Land Act 1958 (Vic) s 118 Transfer of Land Act 1893 (WA) s 140

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A caveat may be lodged by an equitable mortgagee, who can then start legal proceedings to establish the interest that is being claimed. However, in Bell v Custom Credit Corporation [1976] Qd R 57 a caveat lodged in relation to an equitable mortgage did not prevent the transfer since a caveat does not operate as a stay of dealings; it is only an encumbrance notified on the register. The caveat system also plays a role in regard to determining priorities between unregistered interests. While the Torrens system itself will determine priorities between registered interests, with unregistered interests common law priorities will be applied, provided no basic objective of the Torrens system is frustrated. In Butler v Fairclough, for instance, it was stated that when dealing with competing equitable interests the courts will act on the principles applicable to equitable interests not subject to the relevant statutes. Thus, in a case involving a contest between two equitable claimants, all things being equal, the first in time is entitled to priority. When looking at the conduct of the parties concerned, a failure to lodge a caveat to protect an unregistered interest may be a factor warranting the postponement of an equitable interest to a subsequent interest acquired by a party in the mistaken belief that the registered proprietor had an unencumbered title. The decisions vary, however, as to the significance of a failure to lodge a caveat, and when it needs to be lodged, as was the case in Butler v Fairclough.

A case to remember Butler v Fairclough (1917) 23 CLR 78 Facts: William Good was the registered proprietor of a Crown lease, subject to a registered mortgage. On 30 June 1915 he agreed to charge the lease with a debt then due by him to Butler. He also agreed to Butler’s request to execute a proper and legal mortgage, but this was not registered. On 2 July 1915, Good sold the lease to Fairclough, who had searched the titles and found that Good’s title was clear except for the earlier registered mortgage. On 7 July Butler lodged a caveat claiming an equitable estate as equitable mortgagee, and forbidding the lodging of any instruments affecting Good’s estate. On 12 July Fairclough lodged his transfer for registration, and Butler was given notice of this on 23 September. On 6 October Butler’s solicitor claimed that he was entitled to priority by virtue of his equitable mortgage, with which the solicitor for Fairclough agreed, and his transfer was withdrawn. Fairclough was later advised that his transfer was entitled to priority over Butler’s equitable mortgage, and on 7 March 1916 he again lodged his transfer for registration. The registrar did not give notice to Butler, believing that Butler’s caveat was no longer in force, and Fairclough was registered as proprietor of the lease. Decision: If a person with 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 first will have precedence, notwithstanding notice of any earlier instrument received before the lodgment. However, it is not possible to draw any line prescribing the time

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within which a caveat should be lodged. The person who does not act promptly loses the advantage they would have gained by promptitude. Butler, by omitting to lodge a caveat before Fairclough, paid the purchase money and obtained the transfer, had lost the priority arising out of his equitable interest having been created first in time. The registration of the transfer was valid notwithstanding the existence of Butler’s caveat and the omission of the registrar to notify Butler of Fairclough’s application.

In IAC (Finance) Pty Ltd v Courtenay (1968) 110 CLR 550, meanwhile, Thelma Austin, the registered proprietor of land in fee simple, agreed to sell it to the Courtenays in February 1958. A memorandum of transfer and a memorandum of mortgage was then made out between the two parties. The memorandum of transfer was retained by Austin until the mortgage was discharged, with the consent of the Courtenays. Subsequent to the lodgment of the documents, Austin agreed to sell the land to Denton Subdivisions. On 16 September 1959 the memorandum of transfer was removed by Austin’s solicitor, and on 23 November 1959 the land was transferred to Denton Subdivisions, which had a mortgage with IAC and a further mortgage with Hermes Trading and Investment Pty Ltd. The Courtenays claimed they were entitled to have their transfer dealing relodged for registration and registered in priority to the other dealings. It was held that the failure of the Courtenays to lodge a caveat to protect their interest in the land was no ground for attributing neglect and unreasonable conduct to them, which would prevent them from missing out on their statutory right to priority of registration on equitable grounds. Similarly, in J & H Just Holdings Pty Ltd v Bank of NSW (1971) 125 CLR 546 there was no loss of priority because of the failure to lodge a caveat.

A case to remember J & H Just Holdings Pty Ltd v Bank of NSW (1971) 125 CLR 546 Facts: Oscar Josephson was the registered proprietor of land in Castlecrag on which a house was built. On 4 September 1961 he executed a memorandum of mortgage with the Bank of NSW in registrable form. At the same time he deposited the duplicate certificate of title with the bank as security and to enable the bank to register the mortgage, but the bank did not do so. On 28 May 1964 J & H Just Holding lent Josephson $2000 and took a memorandum of mortgage, with Josephson maintaining that the land was unencumbered. When asked about the duplicate certificate of title, Josephson stated that it was with the bank for safekeeping. J & H Just Holdings searched the register and found no encumbrances nor any caveats, but no enquiry was made of the Bank of NSW as to the terms on which it held the certificate of title. J & H Just Holdings also did not inform the Bank of NSW about the memorandum of mortgage they had with Oscar Josephson.

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On 5 June 1964 Josephson lodged a caveat on behalf of J & H Just Holdings against dealings with the land without notice to them. In August 1964 the Bank of NSW lodged the memorandum of mortgage for registration together with the certificate of title. J & H Just Holdings then claimed that its interest in the land had priority over that of the Bank of NSW. Decision: The failure to lodge a caveat does not necessarily involve the loss of priority that the first-in-time creation of the equitable interest would otherwise give. This is not merely unwarranted by general principles or by any statutory provision, but would be subversive of the well-recognised ability of parties to create or maintain equitable interests in such land. The priority of the bank’s equitable interest had not been lost by its failure to lodge a caveat on the grounds that under the circumstances the failure did not make it inequitable that the bank should retain its priority.

It should be noted, however, that in Black v Garnock (2007) 230 CLR 438 Justice Callinan respectfully disagreed with the limited operation and purpose attributed to caveats in J & H Just Holdings. He stated that as well as preventing the RegistrarGeneral from registering further dealings with the land until notice had been given to the caveator, it also served as notice to anyone searching the register that they should be aware of other dealings or transactions in regard to that land. In regard to the question of priority and the failure to lodge a caveat, his Honour again disagreed, stating that: What is 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 had not acted fraudulently, might suddenly and unexpectedly be saddled with, or postponed to, an equitable estate or interest in the land which could have been, but was not made subject of protection by prompt lodgment of an instrument or the filing of a caveat pending the lodgment.

In Black v Garnock judgment had been obtained by the appellants for $228 000 against the respondent, who then agreed to sell the property for $1 million. The respondent then informed the appellants that they would probably receive little of the proceeds due to the fact that the property was heavily encumbered. The appellants therefore obtained a writ of execution, which was not registered when the purchasers checked the register, although the solicitors acting for the purchasers were informed of the judgment in favour of the appellants. The purchaser’s solicitors were also informed that the property was being sold at less than market value, and that the purchasers were related to the respondent. The writ was entered on the register and settlement of the sale, without any intervening search of the register, took place two hours later. The purchasers were then granted an injunction restraining the execution of the writ, with an appeal then being made to the High Court concerning whether

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ss 105 to 105D of the Real Property Act 1900 (NSW) ‘had the effect of reducing or postponing the rights of holders of equitable interests in land, whether they had caveated or not’. It was held that the purchasers could have protected their position by lodging a caveat as a third-party purchaser, pursuant to a sale by the sheriff, would have been able to register the transfer while the caveat remained in place. In Osmanski v Rose [1974] VR 523, meanwhile, there was a contract for sale to Osmanski with part payment and therefore part performance. No caveat was lodged and the proprietors then executed another sale note to Rose, who searched the register and found no caveat or prior equitable interest. Rose paid the balance of the money, with Osmanski then lodging a caveat before Rose took action to have it removed. It was held that since Osmanski had not lodged a caveat that would have served as notice, and that Rose, after searching the register and finding nothing, had completed the contract for sale on the basis that no encumbrance had been found, the prior interest of Osmanski had to be postponed to the subsequent interest of Rose. Likewise, in Abigail v Lapin no caveat had been lodged, and the interest was postponed to a subsequent interest. In summary: 1 The lodging of a caveat will operate as notice to a claimant in regard to an equitable interest created after the caveat has been lodged. 2 The lodging of the caveat and its notation has no effect on the priority of interests created prior to the lodgment. 3 The failure to lodge a caveat will not necessarily affect priorities if the interest being claimed belongs to a person who has not searched the register. 4 Failure to lodge a caveat will not affect an interest where, on account of other circumstances, the registered proprietor is not left free to deal with the interest as if it were unencumbered by an earlier equitable interest. 5 Failure to lodge a caveat may result in the postponement of an interest where the failure leaves the registered proprietor to deal with the property as they like. 6 In considering the issue of priority, including a failure to lodge a caveat, the conduct of the parties is at all times relevant.

Practical example A co-owner of a residential property obtains some supplies for his plumbing business, using the house as security. Six months later the house is put on the market and is sold to another couple. The register is checked and no interest other than the mortgage with the bank is found on the register. However, after the transfer but before settlement the plumbing supplier claims priority over the property in relation to the charge on the property. In this situation the plumbing supplier would lose in the priority dispute despite being first in time, because a caveat could have been lodged to give the buyer notice of the charge. This is an example of an equitable interest that was unregistrable but could have been protected by a caveat.

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Volunteers and Torrens system transactions A volunteer is someone who has not given consideration for property they possess. Under the relevant statutes, a voluntary assignment of property is effective in equity and is complete once everything has been done to transfer the property. Therefore, for a gift to be valid under the Torrens system, the donor needs to make the certificate of title irrevocably available to the donee to enable them to lodge the transfer for registration. A gift can be registered because the benefit of registration is for volunteers as well as purchasers for valuable consideration. A volunteer, however, can only have legal title after they have become registered as the proprietor, as illustrated by Brunker v Perpetual Trustees Co Ltd (1937) 50 CLR 555.

A case to remember Brunker v Perpetual Trustees Co Ltd (1937) 57 CLR 555 Facts: On 1 May 1934 Robert Sellers executed a memorandum of transfer of land registered under the Real Property Act 1900 (NSW) in favour of Bessie Brunker, who had been nursing him. The land had a bank mortgage on it and the nominal fee of 10 shillings had been paid. Robert Sellers died the following day. In his will, he had made gifts to the value of £18 000, and two parcels of land had been voluntarily transferred to his brother Charles. Perpetual Trustees Co, as executor of the will, sought to set aside the memorandum of transfer on the grounds that no consideration had been given, and that undue influence had been exercised by Brunker. Decision: The consideration of 10 shillings was nominal and Brunker cannot, except by registration, obtain a legal estate in the land. A transfer for value before registration confers on the transferee an equitable estate or interest not because it is a transfer, but because the transferee has given value for the land. This then places the transferee in the position of a purchaser who is entitled to specific performance of their contract and has paid purchase money. However, an intended donee cannot stand in such a position since, being a volunteer, an intended donee cannot obtain equitable remedies against the donor compelling them to legal effect to his intention to give. Brunker was the owner of neither a legal or equitable estate in the land, because the memorandum of transfer had not been delivered to Brunker and she had no property in the instrument; nor did she have a right to possession. The memorandum of transfer was also not a registrable instrument because it contained no notification of the mortgage by which the estate was encumbered.

An issue that has been open to debate is whether volunteers should obtain the benefits of immediate indefeasibility of title upon registration. Victoria Valoutin Pty Ltd v Furst (1998) upheld previous decisions that the protection provided by ss 42 and 43 of the Transfer of Land Act 1958 (Vic) did not apply to volunteers. However, Bogdanovic v Kofeff (1988) 12 NSWLR 472 indicated that the benefits

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of indefeasibility in NSW applied to both transferees for value and volunteers. This reasoning was also applied in Conlan v Registers of Titles [2001] WASC 201, while s 180 of the Land Title Act 1994 (Qld) states that the benefit of indefeasibility applies to an instrument whether or not valuable consideration has been given.

Torrens system remedies The Torrens system is based on the principle that once you have completed the registration process, you have legal title, and it then places severe restrictions on other parties. While the relevant statutes do allow for recovery of possession for mortgagees and lessors who can lawfully re-enter and take possession if the requirements of the relevant Act are fulfilled, registration will otherwise provide security of title to the registered proprietor. This, however, can in some circumstances create hardships on another party who has been deprived of their land. An assurance fund that provides compensation to those who have been deprived of their land is therefore an integral component of the Torrens system, although it should be noted that this fund has been abolished in Victoria, with the money now being paid out of consolidated revenue. This compensation may be claimed if there is loss through factors such as fraud by other people or errors, omissions or misdescriptions in the register. Under the relevant statutes there are also limits to when compensation can be claimed.

Relevant statutes The right to compensation: Real Property Act 1900 (NSW) ss 126–129 Land Title Act 1994 (Qld) ss 188, 188A Real Property Act 1886 (SA) ss 203, 205, 208 Land Titles Act 1980 (Tas) ss 152–153 Transfer of Land Act 1958 (Vic) s 110 Transfer of Land Act 1893 (WA) ss 201, 205 No compensation if the loss has been caused by an indemnified solicitor: Land Title Act 1994 (Qld) s 189 Transfer of Land Act 1958 (Vic) s 110 No compensation for losses resulting from breach of trust, misdescription of boundaries or the inclusion of the same land in two or more grants: Real Property Act 1900 (NSW) s 129 Land Title Act 1994 (Qld) ss 188, 188A Real Property Act 1886 (SA) s 211 Land Titles Act 1980 (Tas) s 151 Transfer of Land Act 1958 (Vic) s 109 Transfer of Land Act 1893 (WA) s 196

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It should also be noted that in Heid v Connell Investment Pty Ltd (1989) 16 NSWLR 629, where Heid’s vendor’s lien had been postponed to other equitable interests, it was held that the compensation claim under the relevant Act was an action of last resort, and a litigant could not bring a claim until the primary complaint had been determined. Armour v Penrith Projects [1979] 1 NSWLR 98, meanwhile, highlights another restriction in regard to access to the fund. In this case Armour had entered into a contract to buy land, made all the payments and accepted a transfer before going overseas, leaving a solicitor to ensure that the deed to the land was obtained. The certificate of title was still in the name of the vendor, and the executed transfer remained in the hands of the mortgagee, because the plan of the subdivision had not been registered, which meant it was not possible to obtain a separate certificate of title to the lot Armour had purchased. Long, an employee of the mortgagee, pretending to be Armour, lodged the appropriate documents in the Land Titles Office and was able to obtain a new certificate of title. Long then forged Armour’s signature in order to sell the land to Penrith Projects, who in turn sold it on to a couple by the name of Noble. It was held, however, that Armour was not entitled to compensation from the assurance fund because under s 126 of the Real Property Act 1900 (NSW) it was the innocent purchaser from Long, not Long himself, on whose application the erroneous registration had been made.

Think about it 1 While the Torrens system has been highly successful in both Australia and New Zealand, it has not been implemented in other common law countries and has proven to be unsuccessful in some US states that have tried it. Is there any reason why this should be the case? 2 Do you agree that caveats provide sufficient protection to unregistered and unregistrable interests? 3 Do you agree with the concept of adverse possession? Does it fit in with other general land law principles? Does it fit with the principles and aims of the Torrens system? Do you think that the legislative changes in the UK are a good solution?

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Mortgages Covered in this chapter • • •

The nature and creation of common law mortgages Torrens system mortgages Rights protecting a mortgagor

Cases to remember Knightsbridge Estates v Byrne [1938] 2 All ER 444 Kreglinger v New Patagonia Meat and Cold Storage Company [1914] AC 25 ANZ Bank v Bangadilly Pastoral Co (1978) 52 ALJR 529 Fyfe v Smith [1975] 2 NSWLR 408

Relevant statutes Real Property Act 1900 (NSW) Land Title Act 1994 (Qld) Property Law Act 1974 (Qld) Real Property Act 1886 (SA) Land Title Act 1980 (Tas) Property Law Act 1958 (Vic) Transfer of Land Act 1958 (Vic) Transfer of Land Act 1893 (WA)

The nature and creation of common law mortgages A mortgage involves a mortgagee obtaining an interest in the property of a mortgagor, with this interest being a security over the mortgaged property for the loan. Mortgages have been common since the Middle Ages, and can involve both land and personal property. Under the common law a mortgage was a transaction whereby the mortgagor (that is, the person borrowing the money) transferred the land to the mortgagee (that is, the person lending the money), who therefore had the legal interest. The mortgagor’s only protection was a covenant in the mortgage deed, which meant that when the loan had been repaid, the mortgagor recovered the legal interest. This was referred to as the legal right to redeem, which was a contractual

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right at law to redeem the property on the precise day fixed in the mortgage. This was so strict, however, that even if the mortgagor was a day late, then the legal right to redeem was lost. In addition, even after the mortgagee had taken the property, they could still sue on the covenant to have the mortgagor repay the rest of the loan. The form of the transaction was therefore a conveyance to the mortgagee with the purpose to provide security of payment. What then developed in equity was the right for the mortgagor to redeem at any time after the stipulated date; that is, to pay the debt and call for a re-conveyance of the property. The reason for this was that if the mortgagee had been repaid both the principal and the interest, then it would be against good conscience to allow the mortgagee to retain the property as well. By the seventeenth century the mortgagor’s rights had developed in equity to such an extent that the mortgagor had not only this equitable right to redeem after the contractual date for repayment had passed, but also an equitable interest in the property that arose immediately after the mortgage was granted, known as the equity of redemption. This equity of redemption could be assigned, devised or otherwise disposed of. Equitable mortgages could also be created under the common law, where the mortgagor retained the title and the property was used as security for the loan, usually by depositing the title deeds with the mortgagee.

Torrens system mortgages While mortgages under the Torrens system still carry historical hallmarks from the common law, their characteristics and form are now subject to the relevant statutes. Under the Torrens system the mortgagee does not take a transfer of ownership, and it is the mortgagor who is the registered proprietor of the property and also the one entitled to possession. The mortgage, therefore, is only a charge on the property, although when the mortgage is registered, then the mortgagee is entitled to the protection of the relevant statute, which means the mortgage is a legal interest. However, the interest is not the legal title or legal estate. Thus, the terms that should be used to describe the interest are statutory mortgage, registered mortgage or Torrens mortgage, rather than legal mortgage, because the mortgage is fundamentally different to the legal mortgage available under the common law. In Tessman v Costello [1987] 1 Qd R 283, it was stated that a Torrens system mortgage is clearly different from what is colloquially known as an old system mortgage, because the statutory mortgage does not, on registration, effect a transfer to the mortgagee of an estate in the land; nor does it confer an immediate right to possession. The mortgagee does have an interest in the land, but it is only in the nature of a charge. It should also be noted that unregistered mortgages are considered to be equitable mortgages.

Chapter 9: Mortgages

Relevant statutes A registered mortgage only operates as a charge on the property: Real Property Act 1900 (NSW) s 57 Land Title Act 1994 (Qld) s 74 Real Property Act 1886 (SA) s 132 Land Title Act 1980 (Tas) s 73 Transfer of Land Act 1958 (Vic) s 74 Transfer of Land Act 1893 (WA) s 106 A mortgage obtains legal recognition on registration: Real Property Act 1900 (NSW) s 41 Land Title Act 1994 (Qld) s 181 Real Property Act 1886 (SA) s 67 Land Title Act 1980 (Tas) s 49 Transfer of Land Act 1958 (Vic) s 40 Transfer of Land Act 1893 (WA) s 58

Rights protecting a mortgagor Equity Under equity, once a contract is deemed to be a mortgage, any provision inconsistent with the mortgagee’s right to recover the property after paying off the loan will be invalid, hence the saying ‘Once a mortgage, always a mortgage’. The equity of redemption therefore cannot be fettered or clogged, a clog being anything that prevents or restrains the right to take the property back. Clogs can take several forms: • devices to extinguish the equity of redemption • postponement of the right to redeem • collateral advantages. A mortgagee cannot, as part of the mortgage transaction, exercise the right to purchase the mortgaged property, because this effectively gives the mortgagee the power to extinguish the equity of redemption. In Samuel v Jarrah Timbers [1904] AC 323, for instance, Jarrah Timber borrowed 5000 guineas from Henry Samuel, secured against their debenture stock valued at 30 000 guineas, with the stock registered in Samuel’s name. Samuel also had the option to purchase the whole or any part of the stock at 40 per cent of its value. The advance was to become due and payable with interest at thirty days’ notice on either side. Within twelve months, and before the company gave notice of intention to repay the loan, Samuel claimed the whole of the mortgaged stock. Jarrah Timber sought redemption and a declaration that the option was illegal and void. It was held that the ‘Once a mortgage always a mortgage’ maxim means that no contract between a mortgagor

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and a mortgagee made at the time of the mortgage and as a part of the mortgage transaction (that is, a term of the loan) can be valid if it prevents the mortgagor from getting their property back on paying off what is due on the security. Therefore, any bargain that has that effect is invalid and is inconsistent with the transaction being a mortgage. In this case the option was declared void, with the company being entitled to redeem the loan on the repayment of principal and interest. However, in Reeve v Lisle [1902] AC 396 it was held that a mortgagor and a mortgagee can make a valid agreement giving the mortgagee the option of purchasing the mortgaged property, in this case a steamship, provided it is a separate and independent transaction. A provision that merely postpones the mortgagor’s right to redeem some time in the future is meanwhile not necessarily a clog on the equity of redemption, because it will depend on the nature and the extent of the postponement. Knightsbridge Estates v Byrne [1938] 2 All ER 444 illustrates this point.

A case to remember Knightsbridge Estates v Byrne [1938] 2 All ER 444 Facts: In 1931 Knightsbridge Estates borrowed £310 000 from the trustees of the Royal Liver Friendly Society on terms set out in the mortgage deed. It was a term of the deed that the money was to be repaid by eighty half-yearly instalments over a period of forty years, with the interest rate being 5.25 per cent. The properties involved seventy-five houses, eight shops and a block of units in Westminster. In February 1937 Knightsbridge sought a declaration that it was entitled after the expiration of six months’ notice to redeem the mortgaged property upon the payment of the principal and the interest. Decision: There were no grounds for holding that, on the true construction of the mortgage deed, Knightsbridge Estates was entitled to pay off the mortgage money on giving six months’ notice. An ordinary mortgage is redeemable at, and not before, the contracted date. When that date is past, equity allows redemption at any time thereafter. But in the present case there is no power under the deed to sell even one of the houses or shops freed by the mortgage, and for any lease over three years the permission of the trustees was required. The mortgagor is entitled to redeem, because the period during which it is precluded from redeeming is, having regard to all the provisions of the deed, unreasonable, and offends the equitable doctrine relating to unreasonable postponement of the period of redemption.

Collateral advantages, meanwhile, are additional advantages that the mortgage transaction places on the mortgage. While all a mortgagee is entitled to is the repayment of the interest and principal, this does not mean that all collateral advantages are void, as illustrated by Kreglinger v New Patagonia Meat and Cold Storage Company [1914] AC 25.

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A case to remember Kreglinger v New Patagonia Meat and Cold Storage Company [1914] AC 25 Facts: Kreglinger, a firm of wool brokers, agreed on 24 August 1910 to lend to New Patagonia Meat and Cold Storage Company, a company of meat preservers, the sum of 10 000 guineas at 6 per cent interest. It was stated in the agreement that until repayment, the interest was to be half-yearly, with the principal not being due until 30 September 1915. However, the company was at liberty to pay off the loan at any time on a month’s notice. The agreement also provided that for a period of five years New Patagonia would not sell sheepskins to any person other than Kreglinger, with the price to be market value. The loan, after the month’s notice, was paid out on 11 January 1913. Notwithstanding the repayment, Kreglinger sought to exercise its option to purchase the sheepskins. An injunction was sought to prevent New Patagonia from selling sheepskins to any other purchaser. Decision: If a transaction was found to be a mortgage it must be treated as always remaining a mortgage and nothing but. Any stipulation that restricts or clogs the equity of redemption is void. The question therefore was whether the right to redeem had been interfered with. To be invalid the bargain must, when its substance is examined, turn out to have formed part of the terms of the mortgage and to have really cut down a true right of redemption. In this case, however, the option formed no part of the mortgage transaction, but was a collateral contract that was not a clog on the equity of redemption, or repugnant to the right to redeem.

However, in Noakes v Rice [1902] AC 25 a collateral agreement was held to be a clog. In 1897, Rice had bought a public house held under a lease that expired in 1923. He took out a mortgage with Noakes & Co, who were brewers, and the mortgage included a covenant that Rice, or whoever came into possession of the house, would not, when money was still owed on the security, use or sell on the premises any malt liquors except such as should be purchased from Noakes. Rice, however, wanted to pay off all the money as quickly as possible and sought a release from the covenant. It was held that the covenant to deal exclusively with the brewers continued after the payment of the loan, and was an attempt to charge it on the property, which constituted a clog or fetter on the equity of redemption. It was therefore held to be void. To determine whether a provision is a clog on the redemption, it is the substance, not the form that needs to be looked at, with particular regard to the transaction and the intention of the parties.

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Statute law Under the relevant statutes the mortgagor can require the mortgagee to transfer the property to a third party, as directed by the mortgagor. However, in Ley v Scarff (1981) 33 ALR 653 it was held that while the relevant statute did provide for the assignment of a mortgage to a third person on the direction of the mortgagor, it was conditional on there being no legal objection to the assignment, and there had been a valid objection from the first mortgagee. While the relevant statutes provide for the use of a provision allowing the mortgagee to enforce an accelerated payment (that is, a term that allows the mortgagee to ask for all the capital to be paid immediately if there has been a default), the statutes also provide relief to the mortgagor. Thus, if the court thinks it fit, the mortgagor can be allowed to make the required payment plus any reasonable costs that are incurred, and be relieved from the consequences of such a default. It should also be noted that under the relevant statutes the mortgagor is entitled to request the sale of the property, rather than redemption. Protection for the mortgagor may also come from other, non–property law statutes, most notably the Australian Securities and Investment Commission Act 2001 (Cth), which provides protection for those who obtain financial services when there has been unconscionable, misleading or deceptive conduct. In NSW there may also be relief through s 7 of the Contracts Review Act 1980 (NSW) and s 106 of the Industrial Relations Act 1996 (NSW), both of which can provide possible protection against unfair or unjust contracts. A national credit code has meanwhile been established under the National Consumer Credit Protection Act 2009 (Cth).

Remedies available to a mortgagee Remedies for the mortgagee are now all covered by the relevant statutes, and these are: 1 an in personam right to sue on the contract 2 a right to appoint a receiver 3 power of sale 4 foreclosure 5 a right to possession.

Suing on the contract It should always be kept in mind that a mortgage is a contract to repay a loan that uses property as security for that loan. Under the relevant statutes the mortgagor is required to pay the principal and interest to the mortgagee, and the terms involved in this are set out in a contract; that is, the mortgage document. The mortgagee can vary the interest rates unless the contract stipulates a fixed rate of interest for a set

Chapter 9: Mortgages

period of time, and can also increase and decrease the amount that is being secured. It is also possible to vary any condition or covenant that is in the mortgage.

Appointing a receiver Since it is the property is being used as security for the loan, the mortgagee can also proceed against the property itself. A mortgagee can therefore have a receiver appointed, and the relevant statutes set out the receiver’s powers. These include a power to demand all income from the interest, and an entitlement to retain money to cover the costs involved with the receivership, although the receiver is required to act in good faith in regard to the interests of the mortgagor.

Relevant statutes Real Property Act 1900 (NSW) s 57 Property Law Act 1974 (Qld) s 83 Real Property Act 1886 (SA) ss 6, 47 Land Title Act 1980 (Tas) ss 21, 91 Property Law Act 1958 (Vic) ss 101, 102 Property Law Act 1969 (WA) ss 57, 58

Power of sale The most common remedy is a power of sale, the resulting sale often being referred to as a mortgagee’s sale. Before such a power can be enforced there must be a default in the mortgage repayments, service of a notice on the mortgagor that there has been a default, and a further requirement that the default notice continue for a period of thirty days after the notice has been served.

Relevant statutes Real Property Act 1900 (NSW) s 58 Property Law Act 1974 (Qld) ss 84, 85 Real Property Act 1886 (SA) s 133 Land Title Act 1980 (Tas) s 78 Property Law Act 1958 (Vic) ss 101, 103–106 Transfer of Land Act 1958 (Vic) s 77 Property Law Act 1969 (WA) ss 57, 59–62

While the relevant statutes give the mortgagee a power of sale they also provide protection to the mortgagor, and these statutory provisions regulating the power of sale will be implied into a mortgage. Perhaps the most significant protection is the requirement that reasonable care be taken to ensure that the property is sold at market value. This is a common law requirement that has been enacted into

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Property Law Act 1974 (Qld) s 85 and Transfer of Land Act 1958 (Vic) s 77. Since a mortgagee’s sale must be completed at market value, a sale can be overturned if the mortgagee has not taken reasonable care to obtain market value. In Spencer v Commonwealth (1906) 5 CLR 418 the test for determining the market value of land was stated as: ‘What would a man desiring to buy the land have to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?’ That is, it involves not a forced sale, but a voluntary bargaining between the vendor and the purchaser. In Cuckmore Brick Co Ltd v Mutual Finance [1971] 2 All ER 637 it was held that the mortgagee was not merely under a duty to act in good faith; that is, honestly and without reckless disregard for the mortgagor’s interest, but also had to take reasonable care to obtain whatever was the true market value of the mortgaged property. In Latec Investments v Hotel Terrigal the fact that the auction sale was not held on a suitable day, and the fact that the property was sold below market price to a wholly owned subsidiary of Latec Investments, were reasons for the sale and transfer being overturned. A similar result occurred in ANZ Bank v Bangadilly Pastoral Co (1978) 52 ALJR 529.

A case to remember ANZ Bank v Bangadilly Pastoral Co (1978) 52 ALJR 529 Facts: A first mortgage on a property named Bangadilly was transferred to Halco Products, a company owned by the Halls, and ANZ Bank had the second mortgage. After the first mortgage had been in default an auction was held on 23 December, but after only being advertised once in the Sydney Morning Herald. Bangadilly Pastoral was a company set up eight days before the auction and was largely controlled by the Halls. The Halls told the auctioneers to set the reserve price at $250 000 and Bangadilly Pastoral were successful with a $265 000 bid. ANZ, however, had not been informed of the acquisition of the first mortgage by Halco Products or the auction. Decision: The sale was set aside on the grounds that it was not the result of an independent bargain, because the transaction came about primarily through the deciding minds of the Halls. The reserve price was $30 000 less than the price paid for the mortgage and the auction was not timed and advertised to attract potential buyers best. When a mortgagee sells to a close associate it must be shown that there was genuine primary desire to obtain the best possible price for the mortgaged property, rather than for the close associate to obtain a good bargain. The absence of bona fides was established by the facts and circumstances surrounding the arrangements for the sale and its advertisement, the bidding at the auction and the fact that the ANZ Bank had not been informed.

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Thus, the cases indicate that if the property is to be sold at an auction, reasonable care in obtaining the market value would require the following: • the undertaking of appropriate advertising at suitable times in suitable forms at a reasonable time before the date of the auction • the auction itself being conducted on a suitable day, at a suitable time • if it is going to be sold to a close associate, then it must be shown that there was a genuine attempt to obtain the best possible price for the mortgagor. The issue of a bank selling by means of private tender, rather than by auction, was an issue in Jovanovic v Commonwealth Bank of Australia (2004) 87 SASR 570 and Fortson Pty Ltd v Commonwealth Bank of Australia (2008) 100 SASR 162. The Plaza Hotel in Adelaide had been purchased by Fortson using a loan of $750 000 from the Commonwealth Bank, with the loan being secured by means of a mortgage over the property and a guarantee by the Jovanovics, who controlled Fortson. After the Jovanovics defaulted on the repayments, the Commonwealth Bank obtained an independent valuation of the property, then exercised its power of sale and sold it to Rodin Pty Ltd, the previous owner. In Jovanovic it was held that the bank was in breach of its obligations under s 420A of the Corporations Act 2001 (Cth), because it had not engaged in a competitive tender because there was just the one effective bidder. The sale was also not conducted at arm’s length, because the bank had provided more than three-quarters of the purchase price. It was noted that s 420A was similar to both s 77 of the Transfer of Land Act 1958 (Vic) and s 85 Property Law Act 1974 (Qld). After Jovanovic the matter was remitted to the District Court to determine compensation, if any, for the difference between the price obtained and the market value. After the judge valued the hotel at $870 000, Fortson appealed. In Fortson, the Supreme Court held that the trial judge had erred in setting the market value by determining the best price that might have been obtained. What was required was that: 1 the property be put on the open market 2 it be brought to the attention of potential purchasers by advertising 3 the bank take reasonable steps to ascertain its value before selling it. However, in Fortson the evidence was that the market value of the hotel, which was in a poor state of repair, was actually less than what had been paid for it. This meant that Fortson had not suffered any loss and was not entitled to any compensation. As a general rule, a mortgage over the land will extend to all the fixtures, and therefore the land can be sold with all its fixtures unless the relevant mortgage document states otherwise. The money from the sale is placed in trust before being paid out, first to cover the costs involved in the sale, and then to pay the outstanding

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money owed on the mortgage. Any residue money will go to the mortgagor. However, if the money from the sale does not cover the outstanding mortgage, the mortgagee can still sue on the personal covenant to recover the balance that is owed.

Foreclosure Foreclosure is a remedy whereby the mortgagee takes title to the mortgaged land in full satisfaction of the debt. Under the relevant statutes, if there is a default on the mortgage, the mortgagee can foreclose the right of the mortgagor to redeem the property, although the statutory requirements must be fulfilled. Foreclosure therefore extinguishes the whole of the mortgagor’s interest in the property, including the right to redeem, with the mortgagor’s interest then being forfeited and transferred to the mortgagee. While the whole ownership is now vested in the mortgagee, once exercised, foreclosure also deprives the mortgagee of the right to sue on the personal covenant, because the mortgagee has taken the property in full satisfaction of the debt. It should be noted that a right to foreclosure cannot arise until the equitable right to redeem has arisen; that is, until after the contractual date for redemption has passed. Because the relevant statutes will only apply to registered mortgages, mortgagees seeking foreclosure of an unregistered mortgage must apply to the court. It should also be noted that foreclosure is not popular, because it is usually slow and expensive, and there is also a chance that equity will reopen the mortgagor’s right to redeem.

Relevant statutes Real Property Act 1900 (NSW) ss 61, 62 Property Law Act 1974 (Qld) s 99 Real Property Act 1886 (SA) ss 141, 142 Land Title Act 1980 (Tas) ss 85, 86 Property Law Act 1958 (Vic) ss 87, 91 Transfer of Land Act 1958 (Vic) s 79 Property Law Act 1969 (WA) s 53

Practical example A mortgagor is in default in regard to some mortgage repayments and is also likely to be declared bankrupt. A downturn in the property market, meanwhile, results in the value of the property being less than the money still outstanding on the mortgage. In this situation the mortgagee is likely to lose on the property sale and will also be unlikely to get any of the residue by suing on the personal covenant. A good option, therefore, might be to obtain title to the property and wait for the property market to improve before selling the property.

Chapter 9: Mortgages

Right to possession The other remedy open to the mortgagee on default by the mortgagor is the right to take possession of the property. Under the Torrens system, a mortgagee does not acquire the legal estate, so therefore has no immediate, automatic right to possession. Any right to possession must therefore be based on a contract, or can be established by following the requirements of the relevant statutes, which involves court proceedings.

Relevant statutes Real Property Act 1900 (NSW) s 60 Land Title Act 1994 (Qld) s 78 Real Property Act 1886 (SA) s 137 Land Title Act 1980 (Tas) s 82 Transfer of Land Act 1958 (Vic) s 78 Transfer of Land Act 1893 (WA) s 57

Once in possession, the mortgagee can spend money on the property if it is being prepared for sale, although in Southwell v Roberts (1940) 63 CLR 581 it was held that this expenditure must actually enhance the value of the property. A mortgagee can then be reimbursed for such expenditure. Fyfe v Smith [1975] 2 NSWLR 408 examined the question of an account of profits when a mortgagee is in possession of a mortgaged property.

A case to remember Fyfe v Smith [1975] 2 NSWLR 408 Facts: The Fyfes were the owners in fee simple of a hotel in Fifield. The hotel had been bought from Smith and had a second mortgage with Smith. On 7 May 1965, following default on the mortgage payments, Smith, as mortgagee, entered into possession of the hotel and ran it for two years. In order to run the hotel Smith occupied one room of the hotel. On 7 November 1966, the Fyfes sought redemption of the mortgage, and on 26 April 1967, Smith went out of possession and the Fyfes returned to possession of the hotel. The Fyfes then claimed that Smith owed them $5 a day for board and lodging, which amounted to $3570. Decision: The basic principle on which the court approaches the matter of accounts between a mortgagor and a mortgagee in possession is that the mortgagee will be charged with an account of the rents and profits. This stems from the possession of a mortgagee who, although clothed in a legal title, is regarded as being under a duty to account once they have taken possession. The mortgagee must then give a mortgagor

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the full benefit of what the mortgagor was getting before possession was taken, or could have got from the continued possession of the land. However, in this case, the property had no rental value, so there was no obligation on the mortgagee taking possession to pay an occupation rent.

In some instances the circumstances surrounding how the mortgage was obtained may give rise to an action under the Competition and Consumer Act 2010 (Cth). In Kennard v AGC (Advances) Pty (1987) V ConvR 54–210, for instance, a contravention of s 52 of the then Trade Practices Act 1974 (Cth), which is retained in the new Act, allowed the mortgage to be varied.

Think about it 1 Do you think that the area of mortgages illustrates the importance of equity in providing fairness to certain parties, particularly mortgagors? 2 Do you think that a mortgage registered under the Torrens system provides better protection to the mortgagee than an equitable mortgage does outside of the Torrens system? If so, how is this achieved? 3 Is a mortgage registered under the Torrens system fairer on the mortgagor than a common law legal mortgage? If so, how is this achieved?

Chapter 9: Mortgages

Assessment preparation Problem question 4 Frank was an executive for a large corporation who had bought a $3.5 million bayside mansion in 2006. However, he became a victim of the global credit crisis and lost his job in January 2009. He was given a redundancy package that enabled him to keep up with the mortgage repayments until 30 June. Unable to secure another job, he then fell two months behind on his mortgage repayments. The Aqua Bank, with which he had a ­mortgage, informed him by letter of his default on 31 July. After a further month ­without any ­repayments it informed Frank that it wanted to exercise its power of sale on 1 ­October. An auction was therefore arranged to take place in an inner city hotel at 12 pm on Wednesday 30 October. An advertisement was placed in the metropolitan paper every Saturday in the weeks leading up to the auction, which was also advertised on the ­Internet. October proved to be unseasonably cold and wet, which meant that not many people attended the open day inspections, and those who attended did not see the location at its best. At the auction a reserve of $3 million was placed on the property on the advice of the bank’s property valuators. Ten bidders participated in the auction with the best offer being $2.8 million from an interstate investor. This was accepted by the Aqua Bank, which ­considered this a good price in the economic climate. It meant that Frank still owed the bank $500 000. Frank now wants to have the sale set aside on the grounds that the Aqua Bank has not fulfilled its statutory power of sale properly. He claims that the bank did not advertise the auction properly; that the auction was held at a bad time; that it should have held at the house, not at a city hotel; and that due to the unseasonable weather, the auction should have been postponed for a month to allow people to see it at its best. Discuss. For suggested answers to these problems, please refer to .

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Leases Covered in this chapter • • • • • • • •

The definition of a lease Creation of leases Covenants in leases Options to renew a lease Determination of leases Privity of contract and privity of estate Residential tenancies Retail shop leases

Cases to remember Radiach v Smith (1959) 101 CLR 209 Street v Montford [1985] AC 809 Malzy v Eichholz [1916] 2 KB 808 Aldin v Latimer Clarke, Muirhead and Co [1894] 2 Ch 437 Cruise v Mont [1933] 1 Ch 278 Milmo v Carreras [1946] 1 KB 306 Mercantile Credits v Shell Australia (1975) 136 CLR 326 McMahon v Ambrose [1987] VR 817

Relevant statutes Non-residential and non-retail leases: Conveyancing Act 1919 (NSW) Property Law Act 1974 (Qld) Law of Property Act 1936 (SA) Conveyancing and Law of Property Act 1884 (Tas) Land Titles Act 1980 (Tas) Instruments Act 1958 (Vic) Property Law Act 1958 (Vic) Property Law Act 1969 (WA) Transfer of Land Act 1893 (WA) Residential tenancies: Residential Tenancies Act 2010 (NSW) Residential Tenancies and Rooming Accommodation Act 2008 (Qld) Residential Tenancies Act 1995 (SA) Residential Tenancy Act 1997 (Tas)

Chapter 10: Leases

Residential Tenancies Act 1997 (Vic) Residential Tenancies Act 1987 (WA) Retail shop leases: Retail Shop Leases Act 1994 (NSW) Retail Shop Leases Act 1994 (Qld) Retail and Commercial Leases Act 1995 (SA) Retail Leases Act 2003 (Vic) Commercial Tenancy (Retail Shops) Agreements Act 1985 (WA)

The definition of a lease A lease is the grant of a right to exclusive possession of land for a fixed period of time. In feudal times leases were predominantly contractual, but today a lease is considered to be an interest in land. A leasehold interest arises whenever one person, the landlord or lessor, grants to another person, the tenant or lessee, the following: 1 exclusive possession of the land 2 a certainty of duration for that possession 3 a period of possession that is less than the term for which the landlord holds the land 4 an intention to give the tenant an interest in the land. In return, the tenant gives rent to the landlord, which effectively echoes the ‘service’ that was given to the lord under the feudal tenure system. This rent requirement also relates to the fact that a lease was originally just a contract and therefore required consideration. A question that can arise is whether the parties have in fact created a lease or whether it is a non-exclusive licence. A licence is a permit to occupy land on certain conditions, but does not involve exclusive occupancy of the relevant land. For instance, in Cowell v Rosehill Racecourse Co Ltd (1936) 56 CLR 605 Cowell paid four shillings to attend the races, but was later asked to leave. When he refused to leave he was forcefully removed. Cowell then claimed he was assaulted. It was held that he was permitted onto the racecourse on a revocable licence and that the owners of the racecourse could revoke this permission at any time. The court also pointed out that 50 000 people paying money to watch a football match does not create 50 000 interests in the land, and that even those who had reserved seating had a ‘term of hours in the seat’. In order to determine whether an interest is a lease or a licence, the surrounding circumstances are often taken into account. In Isaac v Hotel de Paris [1960] 1 All ER 348 Isaac had been allowed to occupy the first floor of the Parisian Hotel as the manager of a night bar owned by the Hotel de Paris. Isaac obtained a liquor licence,

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paid all the expenses and rent, and retained all the profits. It was held, however, that the relationship between the parties was not one of landlord and tenant, but that of licensor and licensee. Even though there was exclusive possession, the circumstances and conduct of the parties indicated that Isaac had a personal privilege to run a night bar with no interest in the land. However, what has now been established is that the fundamental difference between the rights of a lessee compared to those of a licensee is that a lessee is given the right of exclusive possession. This right to exclusive possession extends to the whole of the area being leased and therefore involves the airspace above and the soil below, although the airspace can also be leased separately from the surface. Radiach v Smith (1959) 101 CLR 209 is the case that established the need for exclusive possession.

A case to remember Radiach v Smith (1959) 101 CLR 209 Facts: By a deed dated 29 May 1954, George and Ada Smith granted Maria Radiach, as a licensee, for a term of five years, sole and exclusive licence to supply refreshments to the public from a milk bar at 81 Parriwi Road Mosman. Maria entered into possession of the premises pursuant to the deed and paid the weekly rent of five pounds and ten shillings. In June 1956 Maria Radiach applied to the Fair Rents Board of Sydney to have the fair rent determined pursuant to the Landlord and Tenant Act 1954 (NSW). The Smiths claimed a licence existed, not a lease, and therefore the board had no jurisdiction under the Act to determine the fair rent of the premises. Decision: Whether the transaction creates a lease or a licence depends upon the nature of the right which the parties intend the person entering the land has have in relation to the land. If those rights are the rights of a tenant, then it does not avail either party to say that a tenancy was not intended. Conversely, if someone is given only the rights of a licensee, it does not matter that they are called a tenant, because they are a licensee. The fundamental right that distinguishes a tenant’s position from that of a licensee is that they have an interest in land as distinct from a personal permission to enter the land and use it for some stipulated purpose. To ascertain whether such an interest in land has been granted it needs to be determined whether a legal right to exclusive possession of the land for a certain term has been given. If it is has, then the person is a tenant. The substance and effect of the deed was to grant Radiach a right of exclusive possession of the lock-up shop and it thereby created a leasehold interest in her, and the relationship of lessor and lessee between the parties.

What Radiach v Smith establishes is that whether a transaction gives exclusive possession and therefore creates a lease is a matter of substance, not form. That is, the relationship between the owner and the occupant is determined by the legal

Chapter 10: Leases

effect of their agreement, not by the label the parties choose to put on it. It can therefore be described as a lease, but in substance be a licence, and it can be described as a licence and be considered by the court to be a lease. While the test for a lease is one of exclusive possession for a fixed term in consideration of a premium or periodical payments, there are some exceptions. An employee, for instance, may occupy an employer’s premises in order to perform their duties without a lease being created. However, in HA Warner Pty Ltd v Williams (1945) 73 CLR 429 it was held that there was exclusive possession of a house that was being used as part of a remuneration package. A lease can also exist when there is occupation of the premises but the landlord provides attendance or service requiring the landlord or the landlord’s employees to have unrestricted access. It should be noted that sometimes it can be difficult to establish if exclusive possession has in fact been granted, as was discussed in Street v Montford [1985] AC 809.

A case to remember Street v Montford [1985] AC 809 Facts: By an agreement dated 7 March 1983 Mrs Montford and her husband occupied two rooms owned by Street for which a weekly rent of £37 was paid. The agreement was described as a licence agreement and stated that it did not give Mrs Montford a tenancy protected under the rent Acts. When Mrs Montford applied for fair rent, Street sought a declaration that the occupancy was a licence and not a tenancy. Decision: The only relevant intention is that 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 a legal relationship. Sometimes it may appear from the surrounding circumstances that the right to exclusive possession is referable to a legal relationship other than a tenancy. 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 term of the lease must also be certain, which means the date the lease commences and the duration of the lease must be certain. In Pirie v Saunders (1961) 104 CLR 149, the lease was to commence on the ‘completion of the building’ and this was held to be uncertain. The commencement date can be implied by the paying of rent on the taking of possession of the property, while the circumstances may show that the parties intended the lease to commence when a specified contingency occurred. In South Coast Oils Pty Ltd v Look Enterprises Pty Ltd [1988] 1 Qd R 680, for instance, Look Enterprises constructed a service station and negotiations took

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place with South Coast Oil for a lease of the site. On 25 June 1985, an agreement was reached but was never put into writing. Look Enterprises repudiated the agreement and granted a lease to Shell with South Coast Oil then seeking a grant of the lease. It was held that South Coast Oil was entitled to the lease with the commencement date to be 1 November 1985, the date on which the service station was completed and therefore the date from which it could be used. A contract for a lease is enforceable even though the commencement of the term of the lease may be expressed by reference to a contingency that is at the time uncertain, provided that at the time the contract is to be enforced, the contingency has happened. However, a lease without an ascertainable commencement date will be void. What must also be certain is the maximum duration of the lease, or the duration must at least be capable of being rendered certain before the lease takes effect. For example, in Lace v Chantler [1944] KB 368 the term was described as being for ‘the duration of the war’. This was held to be uncertain, and therefore did not create a leasehold interest. However, a lease could be made for five years, subject to the right of the tenant to terminate the lease if the war ended before the expiry of the five years. The lease would then be valid because it created a certain term of five years. However, in Prudential Assurance v London Residuary [1992] 3 All ER 504, the duration ‘until the land is required by the council for road widening purposes’ was held to be uncertain as to the maximum duration of the lease. Again, however, the lease could have been made for a fixed period of time, and made subject to termination if the land was required by the council to widen the road.

Statutory requirements As mentioned in Chapter 8, most of the relevant statutes make a clear distinction between short-term leases, which do not need to be in writing or registered as legal interests; and longer leases, which require both in order to be protected at law. Note, however, that short-term leases must take effect in possession.

Relevant statutes Conveyancing Act 1919 (NSW) ss 54A, 23C, 23D Property Law Act 1974 (Qld) ss 11, 12 Law of Property Act 1936 (SA) ss 29, 30 Land Titles Act 1980 (Tas) s 49 Instruments Act 1958 (Vic) s 126 Transfer of Land Act 1958 (Vic) s 40 Property Law Act 1969 (WA) s 34 Transfer of Land Act 1893 (WA) s 58

Chapter 10: Leases

Types of leases and tenancies A lease can be: • fixed term • a periodic tenancy • a yearly tenancy • a tenancy at will • a tenancy at sufferance • a tenancy by estoppel. A lease may be fixed for any period of time (for example, one week), although usually, fixed-term leases are for months or years. However, it can also be for a discontinuous period. For example, in Cottage Holiday Associates [1983] QB 737 the lease was for one week a year for eighty years; while in Smallwood v Shepherds [1895] 2 QB 627 the lease was for three successive bank holidays. Note that in Dayeian v Davidson (2010) 76 NSWLR 512 there had been an oral agreement to rent a unit ‘for as long as you wish to stay’. It was held that for an agreement to be one that is for a fixed term, the landlord must agree that the tenant is entitled to the premises for a fixed term, and the tenant must also take the premises for the fixed term. There was nothing fixed about the clause ‘as long as you wish to stay’. Periodic tenancies, on the other hand, are measured in terms of weeks, months or years, and may arise from express agreements, but more commonly arise by implication from the manner in which the rent is paid. That is, a weekly periodic tenancy arises when the rent is paid weekly, and a monthly periodic tenancy arises when the rent is paid on a monthly basis. A periodic tenancy continues from period to period on an indefinite basis until terminated by a notice to quit from either party. It is therefore a single continuous tenancy for a period that is determinable by the appropriate notice. The notice to quit must be no less than the length of the period of the tenancy and must expire at the end of a complete period. Under the Statute of Frauds, leases not in writing were only leases at will. The courts then implied a year-to-year lease by stating that on entry into the lease there was a lease at will only, but on payment of rent it ceased to be a lease at will and became a tenancy from year-to-year that was determinable by six months’ notice. In Moore v Dimond (1929) 43 CLR 105, for instance, Dimond leased a shop in Adelaide and it was held that by continuing in possession under the agreement for a further term and paying rent, Dimond had become a tenant from year-to-year. However, under some of the relevant statutes, no tenancy from year-to-year is implied by the payment of rent, but instead a tenancy at will is created. A tenancy at will arises whenever a person, with the consent of the owner, occupies the land as tenant on the terms that either party may determine the tenancy

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at any time. Thus, fundamental to a tenancy at will is the right of either the landlord or the tenant to terminate the lease at will without the need for prior notice. A tenancy at will can be created by an express agreement, but will usually arise by implication after the lease has expired, and the tenant, with the permission of the landlord, stays in possession, but has not yet paid rent on a periodic basis. However, once rent has been paid, then it will usually become a periodic tenancy, and in Turner v York Motors (1951) 88 CLR 55, for instance, it was held that the lease was not a tenancy at will, but a monthly tenancy. A tenancy at sufferance arises when the tenant remains in possession without the landlord’s assent or dissent after the tenancy has come to an end. It therefore assumes no agreement between the landlord and the tenant. However, when the occupant stays on despite the objection of the landlord, the person becomes a trespasser. It is also possible to establish that a tenancy by estoppel has been created. In Lee v Ferno Holdings Pty Ltd (1993) 33 NSWLR 404 there had been a registered lease and sublease, and a further head lease and sublease, although there was then a dispute over the validity of the second sublease. It was held, however, that the second sublease was confirmed in equity when the second head lease was granted, because the doctrine of estoppel by convention operated to estop the sublessees from denying the validity of the renewed sublease.

Creation of leases A lease is an agreement between parties, which means that it involves a contract. However, it also qualifies as an estate under the doctrine of tenure and estates, and thus it becomes an interest in land once the tenant takes possession, although there is no estate in the land until the tenant takes possession. To create a legal lease the writing requirements from the Statute of Frauds, now preserved in the relevant statutes, must be observed, and under the Torrens system, must also be registered.

Relevant statutes Conveyancing Act 1919 (NSW) ss 23C, 54A Property Law Act 1974 (Qld) ss 11, 12 Land Title Act 1994 (Qld) ss 64, 181 Law of Property Act 1936 (SA) ss 29, 30, 31 Land Titles Act 1980 (Tas) s 49 Instruments Act 1958 (Vic) s 126 Transfer of Land Act 1958 (Vic) s 40 Property Law Act 1969 (WA) s 34 Transfer of Land Act 1893 (WA) s 58

Chapter 10: Leases

If the proper legal requirements are not followed, then only an equitable lease will be created. However, under the relevant statutes a short-term lease does not have to follow the formalities. For example, you can have an oral lease taking effect in possession for a short-term lease, usually a lease for three years or less; although, as mentioned in Chapter 8, it is one year in South Australia, five years in Western Australia and there is no time limit in Victoria. Thus, a short-term lease does not have to be registered, and is one of the exceptions to the indefeasibility principle. However, if the grant is for a lease of a period greater than the relevant short-term period, such as a ten-year lease in all states except Victoria, then it needs to go through the formalities of writing and be registered in order to be a legal interest. Equity may intervene to create an equitable lease in three circumstances. These are: 1 where a lease has been validly executed, but not registered 2 where the parties have created an oral lease 3 where there is an agreement to grant a lease. Thus, during the time until a lease has actually been registered, it remains an equitable lease. Walsh v Lonsdale, meanwhile, indicates that specific performance can be obtained if there has been an agreement for a lease, even though such an agreement is only an equitable interest. An oral lease also does not create a legal interest, and is therefore not enforceable at law, unlike a lease that has complied with all the requirements for a lease and created a legal interest in the land. Equitable leases suffer from the insecurity common to all equitable interests, namely that they are liable to be defeated by a bona fide purchaser of a legal interest in the land who does not have notice of the equitable interest. An agreement to grant a lease cannot be the subject of an order for specific performance unless that agreement, or at least some of it, is in writing and signed, although this is subject to the doctrine of part performance. The absence of a written contract therefore is not crucial, but specific performance does depend on there being some form of contract that can be enforced.

Covenants in leases Incorporation In regard to a lease, a covenant means a term or condition of the lease. The lease itself will normally contain these terms or conditions in the written document; that is, the covenants are express. There is no limit to what the parties may wish to include as expressed covenants in a lease, with the relevant statutes setting out various express covenants in schedules attached to the Acts. If, however, the document does not contain express covenants, then the law will fill the gaps by implying terms into the agreement.

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Covenants can be implied into leases by construction; that is, in accordance with the rules governing the implication of terms into contracts generally. This requires that the covenant be necessary for efficiency, or that it be a legal incident of the particular class of lease. The law will also imply the usual covenants into a lease when parties agree to enter into the lease on the basis that the usual covenants will apply, or where the agreement is silent as to what covenants are to apply. Covenants can also be implied through the common law or by virtue of a relevant statute.

The landlord’s covenants The landlord’s covenants (that is, what a landlord agrees to provide the tenant) will be implied under the common law whether or not there is a written contract. These covenants are: • quiet enjoyment • no derogation from the grant • fitness for human habitation. Quiet enjoyment means freedom from the disturbance of possession. When letting the property, the landlord gives the tenant the right to possession for the duration of the lease, and impliedly promises not to substantially interfere with the right of the tenant to peaceful enjoyment of the property. Malzy v Eichholz [1916] 2 KB 808 defines this covenant in more detail.

A case to remember Malzy v Eichholz [1916] 2 KB 808 Facts: Eichholz was the lessee of a block of buildings that included a fully licensed restaurant and two shops. One restaurant was leased to Malzy in 1909 for a period of twenty-one years. In March 1913, a shop was leased to Castiglione for the purposes of carrying on the business of a dealer in fine arts with the power to sell by auction. Castiglione also covenanted not to permit any act that might be an annoyance or disturbance to the other lessees, nor to assign or sublet the premises without Eichholz’s permission. In July 1913, Castiglione gave a licence to Dent to carry out mock auctions in the shop. The auctions were carried out in such a way to be a public nuisance and the police were called in. Eichholz frequently wrote to Castiglione, who was told incorrectly that the Dents would be leaving, but took no active steps to prevent the nuisance. Malzy alleged that his business was being interfered with by the crowds and disturbances and bought an action against Eichholz and Castiglione for an injunction and damages. Decision: There was no breach of the covenant for quiet enjoyment because Eichholz did nothing contrary to the covenant for quiet enjoyment. A lessor is not liable for damages to the lessee under a covenant for quiet enjoyment for a nuisance caused by another lessee simply because they know that the latter is causing the nuisance and do not take any steps to prevent what is being done. There must be active participation on the lessor’s part to make them responsible for the nuisance.

Chapter 10: Leases

However, in Lavender v Betts [1942] 2 All ER 72, the acts of the landlord were found to be a breach of the covenant for quiet enjoyment, which was held to be an implied term of the statutory tenancy. In this case the tenant had fallen behind on the rent and the landlord, not having gained a court order for possession, obtained entry to the flat by telling the wife that he wanted a word with her husband. Some workmen who had been brought along were then instructed to remove all the doors, including the front door and all the windows. In Telex (Australasia) v Thomas Cook [1970] 2 NSWLR 257, repair work made it impossible for the tenant to stay on the premises and this was held to be in breach of the covenant for quiet enjoyment. Note that it can sometimes be difficult to distinguish between the covenant for quiet enjoyment and the no derogation from grant covenant. The no derogation from grant covenant means that the landlord must not do or allow anything to be done that is inconsistent with the purposes for which the premises are being leased, unless the parties otherwise agree, either expressly or impliedly. This covenant will therefore be breached when the lease is made for a particular purpose and the landlord’s

A case to remember Aldin v Latimer Clarke, Muirhead and Co [1894] 2 Ch 437 Facts: Aldin leased land and buildings from Munro, a stonemason and timber merchant, who was the owner in fee simple. In April 1878, Munro agreed to sell to Aldin the goodwill and his business of timber merchant, and also to grant him a lease of the part of the property on which the business was being conducted. A lease dated 1 July 1878 was for twenty-one years, and included a covenant that at all times throughout the term of the lease, Aldin would carry on the timber trade previously carried on by Munro, while Munro covenanted for quiet enjoyment. Munro continued in occupation of the adjoining property as a stonemason until his death in 1892. The property was then sold to Latimer Clark, who proceeded to erect extensive works on the property for the purpose of supplying the town of Richmond with electric light. Aldin then complained that this interfered with the access of air to the drying shed used in connection with his business as a timber merchant. Decision: The lessors are not at liberty to do anything that will make the property unfit for the purpose for which it is let. Where a landlord demises part of his property for carrying on a particular business, he is bound to abstain from doing anything on the remaining portion that would render the demised premises unfit for carrying on such business in the way in which it is ordinarily carried on. However, this obligation does not extend to special branches of the business that call for extraordinary protection. The lease was not merely granted for the purpose that the land demised might be used by Aldin for the purpose of carrying on his business as a timber merchant, but it contains an express covenant binding him to carry on that business. Munro became subject to the obligation to abstain from doing anything on his adjoining property that would substantially interfere with the carrying on of that business and that obligation bound Latimer Clark, as assignee to the existing lease.

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actions makes the premises unfit, or materially less fit, for that particular purpose. Aldin v Latimer Clarke, Muirhead and Co [1894] 2 Ch 437 is an example. AF Textile Printers Pty Ltd v Thalut Nominees Pty Ltd (2007) 17 VR 334, meanwhile, involved a lease containing a covenant that the lessee of a factory would be given quiet possession of the premises and that the lessor would ensure that the roof was kept ‘watertight at all times’. This was held to be ‘an absolute contractual obligation’, which had been breached when the roof was repaired and cleaned with a high pressure jet hose by a repair contractor who was, under the terms of the lease, ‘a person connected with the landlord’. The fitness for human habitation covenant only applies to the condition of the house when the lease begins and there is no implied covenant that the premises will continue to be fit for habitation. It only applies to furnished premises and only to the condition of the premises, not to the furnishings and appliances.

A case to remember Cruise v Mont [1933] 1 Ch 278 Facts: Mont leased a flat to Cruise for ten years, but the flat proved unsatisfactory, and seven months later Cruise wrote to Mont saying that repairs were essential. Cruise then moved out for the repairs to be done and decided not to return. Decision: In regard to the letting of furnished premises there was an implied condition that the premises be fit for human habitation at the date when the tenancy begins, and if they are not so fit then the lessee can give up the tenancy. In regard to unfurnished houses, for reasons including the fact that they are constantly let in a very bad state, no such condition or warranty exists. A landlord is entitled to let a flat in a building without being held to be giving such an implied warranty. Cruise was therefore not entitled to maintain an action for damages for breach of warranty, nor entitled by treating the warranty as a condition to put an end to the lease.

Under the relevant statutes there is an obligation under a short-term lease to make the premises reasonably fit for human habitation, and there can be an express requirement in the lease agreement. In Summers v Salford Corporation [1943] AC 283, for instance, Summers was the tenant of a four-bedroom house. The relevant statute stated that the premises had to be kept ‘in all respects fit for human habitation’. A sash cord of the only window in one of the two bedrooms broke, jamming the window. It was held that the jamming of the window so that it could not be moved without endangering the tenant, impaired the ventilation of the room. In small premises such as the house being leased, this interfered with the ordinary use and therefore was a breach of the fit for human habitation covenant.

Chapter 10: Leases

In Jones v Bartlett (2000) 205 CLR 166, meanwhile, Marc Jones, whose parents held the lease on a Perth property owned by the Bartletts, walked into a glass door that separated the dining room from the games room. The landlords were not liable because the injuries were not caused by the Bartletts’ failure to carry out any responsibilities of maintenance and repair that they were required to do under the contract. The landlord also has the power under the relevant statutes to: • enter and view the property if two days’ notice has been given • enter and repair where the lessee is in default of the repairs • enter and carry out requirements of a public authority or repair under the lease • re-enter and take possession when rent is in arrears or there has been a default in any covenant for two months.

Relevant statutes Conveyancing Act 1919 (NSW) s 85 Property Law Act 1974 (Qld) s 107 Real Property Act 1886 (SA) s 125 Land Titles Act 1980 (Tas) s 67 Transfer of Land Act 1958 (Vic) s 67 Transfer of Land Act 1893 (WA) s 93

Thus the fact that even the landlord as the actual owner of the property has to give two days’ notice if they wish to enter the property illustrates that a lease is an interest in the land with the right to exclude all others, because even the actual owner has limited access while the tenant is not in breach of the lease agreement.

The tenant’s covenants The tenant’s covenants are contained in the relevant statutes, with the most obvious one being the payment of rent, which forms the consideration for the contract. The lease itself will determine when rent is to be paid, and it can be paid in arrears provided the lease does not specify that it has to be paid in advance. If the rent is not paid then the landlord can either sue on the covenant to have the rent paid, or take steps to re-enter the premises and thus defeat the lease. The tenant is also required to keep the premises in good and tenable order. In Proudfoot v Hart (1890) 25 QBD 42, it was held that under an agreement to keep a house in good tenable repair, the tenant’s obligations were to put and keep the premises in such repair as, having regard to the age, character and locality of the house, would make it reasonably fit for the occupation of a tenant of the type who would be likely to take it. If a tenant does not do the repairs, and more damage is

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done, then the tenant is liable for that damage as well. A tenant is also required to manage the property in a manner of a reasonable tenant.

Assignments and subleases An assignment involves the situation where the original lessee gets out of the lease and someone else takes over what remains of the lease. It therefore involves the transfer of the whole of the tenant’s interest in the lease; that is, the whole of the unexpired term of the lease. A sublease, on the other hand, is the transfer of less than the whole of the tenant’s interest in the lease; that is, it involves the unexpired term of the lease less one week or one month, for example. The sublessor therefore retains a reversion in the lease. This difference between an assignment and a sublease is illustrated by the case of Milmo v Carreras [1946] 1 KB 306.

A case to remember Milmo v Carreras [1946] 1 KB 306 Facts: Captain Milmo was an officer in the territorial army who held a tenancy for a flat in Kensington, London. The lease was for seven years, commencing on 29 November 1937 and expiring on 28 November 1944. Captain Milmo was called up for the war and later made a sublease on 25 October 1943 to Colonel Carreras for one year commencing 1 November 1943. However, when the sublease was made Captain Milmo was under the mistaken belief that the original lease had commenced in 1939, not 1937. On 27 April 1945 Captain Milmo wanted to reoccupy the flat and served a notice to quit on Colonel Carreras, who refused to leave the premises. Decision: Where a lessee, by a document in the form of a sublease, divests themselves of a lease, the relationship of landlord and tenant can no longer exist between themselves and the sublessee. By the agreement of 25 October 1943, Captain Milmo had become a stranger to the land because he had transferred to Colonel Carreras the whole of the term that existed under the original lease and he therefore had no reversion.

In Lam Kee Ying Sdn. Bhd. v Lam Shes Tong [1975] AC 247, meanwhile, the lessee, under a 25-year lease, had the use of premises for the carrying on of a general merchant’s business, either as sole proprietor or as a partnership. The lease also contained a covenant stating that the tenant could not part with the premises, or part thereof, without the permission of the lessor. Later, the tenant and his partners agreed to form a limited company that would then acquire the partnership business. When the landlord discovered that the company was now occupying the premises, court action was commenced to claim possession of the premises for breach of the covenant. It was held that the tenant had parted with possession by forming the company and was therefore in breach of the covenant.

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Usually the consent of the lessor is required for a sublease or assignment, but this consent should not be unreasonably withheld. At all times, therefore, the tenant must ask for consent even though they know there is no reason for refusal. In Re Gibbs [1925] 1 Ch 575, there was a 21-year lease for 10 Market Street that commenced on 29 September 1908 with Gibbs as landlord. Under the lease, the lessees, Houlder Bros, could not assign the premises or part thereof without the written consent of the lessor, which could not be unreasonably withheld. Roneo Bros were the yearly tenants of 12 Market St, also with Gibbs as the landlord. Early in June 1924, Houlder Bros agreed to assign the residue of the lease at 10 Market St to Roneo Bros, subject to approval from Gibbs. Gibbs indicated by letter that he had not the slightest objection to Roneo Bros on the grounds of respectability and responsibility, but then refused the request for the assignment on the grounds that he would lose a good tenant at 12 Market St. It was held that the refusal was unreasonable, because the reason given by Gibbs made no reference to the personality of the proposed assignee or to the subject matter of the lease. If the tenant asks for consent and the lessor refuses, the tenant can still assign, because they have performed their obligations under the lease agreement. However, the lessor could then take action in court, and therefore, under these circumstances it would be better for the tenant to seek a declaration from the court that the consent was unreasonably withheld before subletting or assigning the lease. In Barrow v Issacs [1891] 1 QB 417 the lessees were covenanted not to sublet the premises, or part of the premises, without the written consent of the lessor. The lessees, however, sublet part of the premises without such consent after the solicitor who drew up the sublease forgot that the head lease contained the consent clause. The court held that because the lessees were people of the highest class in London who had then subletted to a person of nearly equal position, if consent had been requested it would have been impossible to conceive how any reasonable person could have objected to the sublease. However, there had been a breach of the covenant and the lessor was entitled to recover the land. In International Drilling Fluids v Louisville Investments [1986] Ch 513 it was pointed out that three tests had developed in regard to the assignment and subletting of leases: a narrow test, a broad test and an intermediate test. The narrow test is illustrated by Re Gibbs, where the court looked at the personalities of the prospective lease assignee and sublessee, and the use to which the property would be put. What the intermediate test involves, meanwhile, is examining whether the landlord’s refusal was designed to gain a collateral advantage for the landlord that was not contemplated by the lease. The broad test, meanwhile, requires the court to ask if the landlord’s refusal is unreasonable in all the circumstances of the case, including what is in the lease. In

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Bickel v Duke of Westminister [1977] QB 517, Lord Denning stated that the court cannot determine by strict rules the grounds on which a landlord may or may not reasonably refuse their consent. The landlord is therefore not limited by the contract to any particular grounds for refusing consent and the court should not limit the landlord. However, in Creer v P & O Lines of Australia [1971] 125 CLR 84, a covenant stated that before assigning or subletting the lessee had to offer to surrender the lease. It was held that this provision qualified the operation of the covenant by stipulating the occasion on which it would become effective. The lessor’s consent to the assignment of the lease to a respectable, solvent and responsible assignee was not unreasonably withheld where the lessee had not first offered to surrender the lease. Thus, it was an example of a case that was determined by the terms of the lease.

Options to renew a lease A lease agreement may also include a clause that provides an option to renew the lease or to purchase the reversion of the lease. While this option will contractually bind the parties to such an agreement, the question is whether it would bind other parties. In Friedman v Barrett [1962] Qd R 498, Exton was the registered proprietor of land and premises which, by written agreement, were leased on September 1957 to the respondent for a period of three years. Included in the covenant was an option to extend the lease for a further period of two years, unregistered, on the same terms and conditions as set out in the lease. In August 1958 the applicant purchased the land for £9000 and was aware of both the lease and the option to extend the lease. In July 1960 the respondent gave notice that he was exercising his option, but a year later a notice to quit was served on the respondent, who refused to leave the premises. It was held that the option of renewal was not a tenancy, and if the right to a lease in the future was held to be protected by the relevant provision, namely s 11 of the Real Property Act 1877 (Qld), it could have the effect of enabling an unregistered instrument to confer a right to a series of terms, which would completely defeat the object of the Act. When the appellant became the registered proprietor he held the land free from the respondent’s equitable interest and the option of renewal was not enforceable against the respondent. Thus, only the tenancy was protected under the Act, not the option. Under the present law in Queensland, namely s 185(2)(b) of the Land Title Act 1994 (Qld), if the overall period for both the tenancy and the option of an unregistered lease is more than three years, it will not be protected. However, in Mercantile Credits v Shell Australia (1975) 136 CLR 326 it was held that the option in this case touched and concerned the land, and therefore bound other parties.

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A case to remember Mercantile Credits v Shell Australia (1975) 136 CLR 326 Facts: Shell took a lease on land in Adelaide on which a service station and garage were erected. A lease was granted in October 1958 for a 10-year period beginning 1 March 1959. The lease included a covenant under which Shell was entitled upon notice to renew the term for three successive five-year periods. The lease was registered. In 1973 Celtic Agencies became the registered proprietor in fee simple, although subject to the lease interest. All interest in the land was also mortgaged to Mercantile Credit. In April 1974, a memorandum of extension of the lease was executed and backdated to 2 March 1974. Although it was in registrable form, it was never registered. When Celtic Agencies defaulted on its payments, Mercantile Credit sought to exercise its power of sale on 31 May 1974. On 12 July 1974, Shell lodged a caveat claiming that any dealing with the land was subject to their claims, and that they were entitled to register their last extension of the lease. Mercantile Credit claimed to be entitled to exercise its power of sale free from the leasehold interest, which would add an extra $53 700 to the value of the land. Decision: There was no question that between the registered proprietor and the lessee the covenant of renewal of the term of the lease was binding. The question was whether the mortgagee was bound. The right of renewal was not personal, but ran with the land. The Act gives priority and indefeasibility to the right of renewal contained in the registered memorandum of lease. The right of renewal was so intimately connected with the term granted to the lessee that it should be regarded as part of the estate or interest which the lessee obtained under the lease and, on registration, should be entitled to the same priority as the lease. The mortgagee’s right to sell was subsequent to the lessee’s right of renewal, so the mortgagee was not at liberty to sell the land free from the leasehold interest.

Determination of leases A lease may come to an end by means of: 1 expiration of the lease 2 notice 3 surrender of the lease 4 a merger 5 forfeiture of the lease. On the expiry of the lease the estate is exhausted, because the lease has run its course and the landlord is entitled to resume possession. If the tenant stays on after the expiry of the lease without permission to do so, then, under the relevant statutes, the landlord can charge double the rent. When considering why such compensation should be made available to the landlord, it should be remembered that as lessor, the landlord may well have looked for another tenant and may then become in breach of contract to the other tenant.

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Under the relevant statutes, periodic tenancies can be terminated by the landlord or the tenant giving notice. A tenant can give such notice in writing or orally, while the landlord must give it in writing. A yearly tenancy requires six months’ notice, a monthly tenancy one months’ notice, and a weekly tenancy requires one week. In Queens Club Gardens v Bignell [1924] 1 KB 117 a weekly tenancy ran from Saturday to Saturday each week, and notice was given to terminate the lease on a Monday. It was held that the notice to quit was invalid because it did not expire at the end of the weekly term. Under the relevant statutes, it is likewise the weekly period on which the tenancy is based that dictates the required notice, not a calendar week. A surrender of the lease puts to an end to the parties’ future obligations under the lease, but does not release them from liability for breaches occurring before the surrender. Such a surrender may be expressed, or it may occur by the application of the law. Under the Torrens system, the surrender of a registered lease must be in an approved form and then be registered. A surrender under the operation of law occurs when one party does some act inconsistent with the continued existence of the lease, such as abandonment, and the surrender is then assented to by the other party. With a surrender of a lease there is an implication that the tenant has given up their interest, which may then merge with the greater interest of the landlord. If a reversion and the leasehold interest come to vest in the one person, the leasehold is considered to have merged with the greater interest, namely the reversion, with the leasehold interest then being considered to have been destroyed. However, under the Torrens system, registration keeps the lease alive until the register is notified. In Shell Company of Australia v Zanelli [1973] 1 NSWLR 216 it was held that provided the lease remains on the title it must be regarded as a separate estate or interest, because there is no merger of the lease into the fee simple estate until the register notes it on the title. However, the most powerful remedy for the landlord when there has been a breach by the tenant is the right to re-enter the premises and put an end to the lease; that is, a forfeiture of the lease. The landlord has no right to re-enter the land except what is expressly or impliedly stated in the lease or what is allowed under the relevant statutes, which do provide for re-entry and possession. For example, in Ex parte Whelan [1986] 1 Qd R 500, the rent on a lease of a commercial property fell into arrears. Notice was then given by the landlord, and with no further notice the landlord attempted to effect re-entry to the premises, but the tenant refused entry. It was held that it was not necessary to obtain possession of leased premises to the exclusion of the lessee to effect re-entry, because an unequivocal demand or notice to quit is sufficient. The relevant statutes also provide the tenant with relief against forfeiture, with this relief preventing the landlord from defeating the lease unless notice has been given to the tenant requiring that any default be remedied.

Chapter 10: Leases

Relevant statutes Conveyancing Act 1919 (NSW) s 129 Property Law Act 1974 (Qld) s 124 Property Law Act 1958 (Vic) s 146 Property Law Act 1969 (WA) s 81

It should be noted that in some instances the fault may not be capable of being remedied. For instance, in Rugby School (Governors) v Tannohil [1935] 1 KB 87 premises were leased with the covenant stating that they were not to be used for illegal or immoral purposes. It was then used as a brothel, and the notice to quit did not require the tenant to remedy the situation. It was held, however, that because the breach was incapable of remedy, it was unnecessary to require in the notice that the tenant should remedy the breach. There is therefore a need to distinguish between what can and cannot be remedied; for instance, repairs that need to be carried out can be remedied by the tenant. It should also be noted that if the lessor takes possession of the land, then the lessor does not have the right to recover damages for the non-payment of the rent for the remainder of the lease. In Knockhold Pty Ltd v Graff [1975] Qd R 88 the Graffs were forced to pay for repairs that the landlord was liable for under the lease. The Graffs then set that money off against the unpaid rent and Knockhold sought recovery of the land because of the unpaid rent. It was held that there was a mutuality of contract between a landlord and tenant, and the lessees were entitled to set off money validly expended on repairs against the rent. The claim for repossession of the land was therefore refused. What this case also illustrates is that while it is unwise for a tenant to withhold rent in order to get performance from the landlord, there will be situations when this action by the tenant will be supported by the law or by equity. In this case equitable set-off was applied, and the common law right of recoupment may also be used when a tenant has outlaid money for obligations that belonged to the landlord. Note than in Elite Promotions & Management Pty Ltd v 5A Investments Pty Ltd (2011) 80 NSWLRr 686 Elite Promotions were the lessees of premises at Taren Point owned by 5A Investments, with a third party, the Kingsway Group Ltd, being the mortgagee in possession. Elite paid rent to Kingsway for a time after it had entered into possession, but then claimed the right to set off against rent owed for $125 000 incurred in fitting the premises, claiming this was part of an arrangement with 5A that such expenditure would be treated as repayment of rent. It was held that Kingsway was not answerable for any breach of the lessor’s personal covenant in the lease. Even if a personal claim by the lessee can be set-off against rent payable to the to the lessor, the mortgagee has independent statutory right under s 60 and s 63 of

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the Real Property Act 1900 (NSW), not only to receive, but also to enforce the rent covenant directly against the lessee which is unaffected by any personal claim of the lessee against the lessor. It was also noted that similar provisions existed in both Victoria and South Australia.

Privity of contract and privity of estate In Mercantile Credits v Shell Australia, the High Court had to decide whether the option to renew the lease ran with the land or whether it was a contractual right only enforceable between the original parties to the agreement. Thus, an issue that arises with leases is whether there is a privity of contract and/or estate between the parties who are the landlord and tenant at a particular point of time. While a lease creates an interest in the land it also creates a personal, contractual relationship between the parties. A privity of contract will exist between the original landlord and original tenant, because both are parties to the original lease. The covenants of the lease are therefore enforceable between the two parties under the principles of contract law. This applies even after both have disposed of their respective interests, because the privity of contract survives this disposal. This means that if the tenant assigns the lease and the assignee fails to pay any of the rent, the landlord can sue the original tenant for any arrears. By the same token, if the landlord assigns the reversion and that person breaches the landlord’s covenants in the lease, the tenant can sue the original landlord for the breach.

A case to remember McMahon v Ambrose [1987] VR 817 Facts: Ambrose signed a lease for new premises at 126 George St for three years with two options to extend for similar periods. It then became possible to renew the lease for his old premises, and therefore he sought to sublet the lease in George St, which he was able to do without consent. McMahon was willing to take up the sublease in October 1980. Ambrose was out of the country for most of November, and when he returned was informed by McMahon that he was not able to proceed with the proposal because he had been unable to find others to share the premises. McMahon had paid rent until 5 November, but had not taken up physical occupation of the premises and denied that there had been an assignment of the lease. In November 1981 the landlord, Rojain, issued a writ claiming $37 584.38 damages and interest, because Ambrose had not paid any rent to them. Rojain also re-entered and forfeited the lease. This was settled in August 1983, by Ambrose agreeing to pay Rojain $22 000. Ambrose then sought contribution from McMahon as assignee. Decision: The prime liability for rent was that of Ambrose, and it was a peripheral matter that McMahon had not paid Ambrose. The lease was therefore forfeited by virtue of his default.

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It should be noted, however, that the privity of contract is subject to statutory modifications, and the contract agreement can also have clauses that release the assigning parties from all obligations. A privity of estate exists between parties who stand in the relationship of landlord and tenant. It therefore obviously exists between the original landlord and the original tenant, but it also exists between anyone who succeeds to the interests of the original parties. Thus, if the lease is assigned, a privity of estate will then exist between the landlord and the assignee. If both the landlord and the tenant assign their interests, the privity of estate will cease to exist between them, but will now exist between the two parties who have taken their place as landlord and tenant respectively. When considering the position of the persons who are taking an interest through the tenant, the distinction between assignments and subleases is crucial. With an assignment of the lease, the whole of the tenant’s interest is transferred and, as mentioned earlier, the privity of estate exists between the landlord and assignee. However, a sublease is less than the whole of the interest in the lease, and therefore there is no privity of estate between the landlord and the sublessee. The importance of establishing whether privity of contract or privity of estate exists can be seen in the following situations: • Where privity of contract exists between the parties, the covenants in the lease are enforceable between them as a matter of contract law. • Where privity of estate exists between the parties, the covenants in the lease are enforceable between them if the covenants ‘touch and concern’ the land. • Where neither privity of estate or privity of contract exists between the parties, then the covenants are not enforceable between them. A covenant will touch and concern the land if the covenant affects the nature, quality or value of the leased land. There must therefore be a connection between the covenant and the leased land, a connection sufficiently close so that the covenant should travel with the land despite privity of contract principles. Examples of such covenants are the tenant’s requirement to pay rent and the landlord’s requirement to supply the premises with water or not to build on adjoining land. Note that no distinction is made between a positive covenant, which requires something to be done, and a negative covenant, which requires something not to be done.

Residential tenancies The various residential tenancy statutes were enacted to cover residential tenancy agreements and related matters. Amongst other things, they set out the landlord’s obligations, such as to provide quiet enjoyment; and the tenant’s obligations, for

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example, to pay rent. They outline the powers of the landlord, such as the right of entry; and the remedies of the landlord, which include being able to recover possession after giving notice to the tenant following a breach of the agreement. The statutes set out the rights and remedies of the tenant, such as being able to remedy a breach after being given notice of that breach. These statutes also provide the opportunity to take disputes to non-judicial bodies, such as tribunals. Thus, for a residential tenancy agreement, the relevant statute will be the residential tenancy Act for that jurisdiction, rather than the general property law statutes, although the general principles relating to leases are present in these statutes. Note that in Queensland the Act has now been extended to include rooming accommodation, such as boarding houses.

Retail shop leases The objective of the various retail shop leases Acts is to promote efficiency and equity in the conduct of certain retail businesses by setting out mandatory minimum standards for retail shop leases, and also to provide for low-cost dispute resolution processes for disputes involving retail tenancy. Note that in Fordham Laboratories Pty Ltd v SOR (2011) 81 NSWLR 383 Fordham had leased to SOR retail premises in South Camden for three years in May 2000, with two three-year options, the lease then continuing from May 2009 as a monthly tenancy. In 2005 a dispute had arisen regarding SOR’s failure to pay $21 144 in respect to outgoings. Mediation failed, and in November, 2009, Fordham claimed $68 201 for securing and making good the premises and unpaid outgoings. It was held that in regard to the requirement to mediate in s 68 of the Retail Shop Leases Act 1994 (NSW) it was not a condition precedent to the commencement of court proceedings, although the court may not proceed to hear the hear the dispute unless satisfied that mediation is unlikely to resolve the dispute.

Think about it 1 Do you agree that the payment of rent by a tenant to a landlord can be considered to be the equivalent of the services given by a tenant in feudal times? 2 Do you agree that the requirement of exclusive possession should be the essential element of a lease? Can you think of any situation where exclusive possession may be enjoyed but does not lead to a leasehold interest? 3 Do you think that the requirement of exclusive possession re-enforces the law’s recognition of a lease as an estate?

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Assessment preparation Problem question 5 Jill and Mary are sisters who want to open up their own floral business. In the local paper they see an advertisement for a shop that sounds suitable for them and they arrange a meeting with the owner, Bob, who also owns the adjacent shop, where he runs a ­newsagent. Both Jill and Mary are very happy with the premises and make an oral ­agreement to lease the premises for two years at a monthly rent of $3600. Bob then has a written agreement drawn up, which includes clauses containing the agreed duration and rent. The lease agreement also states that Jill and Mary are only licensees, although it also gives a written assurance that Bob will not enter the premises without Jill or Mary’s ­permission. It also contains a clause that the lease can be subleased or assigned, although Bob’s permission is required. The lease is signed by all of them, although it is never registered. Twelve months later, Jill and Mary receive news that their father is seriously ill. Because they are the only living members of his family they decide they will look after him at home, rather than moving him into a nursing home. They therefore ask a friend, Georgina, to look after the business for them while they are caring for their father. No written ­agreement is made with Georgina because Jill and Mary know her well and trust her fully. It is orally agreed that Georgina will take over the total running of the business, be responsible for all the costs, including the rent, and also keep all the profits. It is also agreed that the arrangement will last for as long as Jill and Mary are required to look after their father. Bob is informed of this and verbally agrees to the arrangement. Soon after Jill and Mary leave the business to Georgina she finds that Bob is continually entering the premises without any reason or permission, and just seems to be always checking up on her. She informs Jill and Mary, who now want to stop Bob from entering their premises. Discuss. For suggested answers to these problems, please refer to .

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Proprietary interests in land owned by another Covered in this chapter • • • • •

Easements Extinguishment of easements Covenants Restrictive covenants Profits

Cases to remember Re Ellenborough Park [1956] Ch D 131 Bursill Enterprises v Berger Bros Co Pty Ltd (1971) 124 CLR 73 Hare v Van Brugge (2013) 84 NSW LR 41 Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 239 ALR 75 Wheeldon v Burrows (1879) 12 Ch D 31 Williams v State Transit Authority of NSW (2004) 60 NSWLR 286 Treweeke v 36 Wolseley Road Pty Ltd (1973) 128 CLR 274 Tulk v Moxhay (1848) 41 ER 1143 Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998) 193 CLR 154 Elliston v Reacher [1908] 2 Ch D 374

Relevant statutes Conveyancing Act 1919 (NSW) Real Property Act 1900 (NSW) Property Law Act 1974 (Qld) Conveyancing and Law of Property Act 1884 (Tas) Land Titles Act 1980 (Tas) Property Law Act 1958 (Vic) Transfer of Land Act 1958 (Vic) Property Law Act 1969 (WA) Transfer of Land Act 1893 (WA)

Chapter 11: Proprietary interests in land owned by another

Easements An easement is a right enjoyed by the owner of one lot of land to carry out some limited activity on another lot of land that falls short of taking actual possession of the land. An example is a right of way across another person’s land to access another piece of land. It is therefore an interest in the land, but one that does not give rise to an estate in that land. Easements are usually granted by the fee simple owner and can be expressly granted or reserved. For example, an owner can sell part of their property and expressly reserve an easement right over that piece of the property. It should also be noted that an easement can be for a specific period or an interest less than a fee simple; for example, an easement can operate for the duration of a lease. Easements can be positive or negative. A positive easement gives a right of entry into another person’s land to enable something to be done to that land. A negative easement involves a right to prevent something being done and confers no right of entry. An example of a positive easement is a right of way, while examples of negative easements include the right to the flow of air although defined apertures, to receive light for a building and also the right to support. While different positive easements can be created from time to time, negative easements are closed to the right to air, light and support. There are four characteristics that form the essential requirements of an easement, with these having been established in Re Ellenborough Park [1956] Ch D 131. These characteristics are: 1 There must be two properties involved, one of which is the dominant tenement (that is, it receives the benefit) and one which is the servient tenement (that is, it is the land over which the right is exercised). 2 The easement must accommodate the dominant tenement. 3 The two lands must not be held by the same person. 4 The easement right must be capable of forming the subject matter of a grant. It is obvious from the nature of an easement that two properties must be involved. However, it should be noted that there can be statutory modification of this principle and statutes such as the electricity, water supply and sewerage Acts, for example, may provide for an easement right in respect of a public utility that involves no other property. Another crucial factor is that the easement must benefit the dominant tenement, and if there is no such benefit then the easement right will not be valid, as was the case in Clos Farming Estates Pty Ltd v Easton [2001] NSWSC 525. Because an easement right involves the carrying out of an activity on another person’s land, the two lands must not be held by the same person. This aspect can be subject to statutory modification, such as ss 86–87 of the Land Title Act 1994 (Qld), which

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allows for the two properties to be owned by the same person in certain situations, such as when land is being subdivided. The fourth characteristic, that the easement be capable of forming the subject matter of a grant, means that the right must not be too wide. In Phipps v Pears [1965] 1 QB 76 the demolition of a house left one side of the house next to it open to the weather, and because the adjoining wall had not been rendered or plastered it was then damaged by the weather. It was held, however, that the law did not recognise an easement of protection from the weather. The case of Re Ellenborough Park [1956] Ch D 131, on the other hand, indicates that there can be an easement for a right to enjoy a park.

A case to remember Re Ellenborough Park [1956] Ch D 131 Facts: In 1855 Henry Davies and Joseph Whereat owned the White Cross Estate, which they were developing for building purposes. It included Ellenborough Park, an empty piece of land, and had a road around it called Crescent Road. A right was granted to the purchasers of each of the blocks of land in Crescent Road to use Ellenborough Park as a pleasure ground. The plot in question was sold to John Porter in 1864. It was typical of the conveyances and included the right to full enjoyment of Ellenborough Park. Each of the vendors and their successors in title covenanted with the purchaser and his successor in title to keep Ellenborough Park as an ornamental pleasure ground. In 1879 most of the houses had been sold off and the unsold portions were then purchased by William Davies, who died in 1889. Ellenborough Park was used by the War Office from 1941 to 1946, with approximately £2500 being owed in war compensation. By 1954 Ellenborough Park was the only part of William Davies’s estate that had not been distributed. There was then a question of who was entitled to the compensation and whether the property owners had enforceable legal rights. Decision: The money was to be used to reinstate the property as a pleasure ground. The conveyances of parts of White Cross Estate conferred on the purchasers and their successors in title legal and effective easements to use the pleasure ground known as Ellenborough Park in the manner in which it was intended by the conveyances to be used.

If one of the four characteristics required for an easement is missing, then a right is a mere licence, not an easement. If it is not annexed to the land, then it is only a personal right, not an interest in the property, and a personal right only binds the parties who made the agreement. An easement, on the other hand, also binds the successors in title and is a right in both law and equity. This is illustrated in Bursill Enterprises v Berger Bros Co Pty Ltd (1971) 124 CLR 73.

Chapter 11: Proprietary interests in land owned by another

A case to remember Bursill Enterprises v Berger Bros Co Pty Ltd (1971) 124 CLR 73 Facts: Bursill and Berger respectively owned sections of land fronting George St, Sydney. The lands that were now Bursill’s and Berger’s had all been part of a grant made to Thomas Torkington in 1839. In 1840 Torkington conveyed part of the land, and gave a right of way over part of the land that he retained. Torkington and his heirs were entitled to build to a height of 12 feet. At some time before 1872 some buildings were erected, although they did not impede the right of way. In 1872 a memorandum extended the right of way a further 110 feet to the west in return for the sum of €450. The right to pull down the buildings and rebuild was also established. Bursill purchased Torkington’s property in 1957, and the certificate of title indicated it was subject to the right of way. Berger’s certificate of title referred to a right of way and an entitlement to continue to occupy, pull down and rebuild the two-storey building above the strip of land by virtue of the memorandum of 1872. Bursill claimed that as registered proprietor, he had title to the buildings subject only to the right of way. Decision: A prudent conveyancer seeing the reference to the right of way would have ascertained exactly what the nature of the right of way was. The need to make such a search seems even more obvious if an inspection showed that there was a building over part of the land that was occupied by his neighbour. The reference to the transfer was constructive notice that the land was subject to the right of way, but also to an interest of the adjoining landowner in the building. Berger has, in law, a right to the exclusive use and occupation of that building.

Easements may provide a means of access, but only for a specific purpose. In Yip v Frolich (2003) 86 SASR 162; (2004) 89 SASR 467 Yip ran a restaurant on land which was the dominant tenement of an easement right for the purpose of the laying down, repairing and maintenance of drainage pipes. The Frolichs, who owned the servient land, claimed that there was no such right of way, or if there was, that it had been abandoned. It was held that the words used, together with the shape, size, configuration and location of the easement, indicated unambiguously that only a drainage easement was intended at the time the easement had been granted. Thus, a drainage easement had been created that did not confer a right of way, although it had not been abandoned. What can therefore be an issue is the extent of the easement right. Both of the following cases illustrate the need to examine the express wording of the right that has been created in order to establish its extent.

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A case to remember Hare v Van Brugge (2013) 84 NSWLR 41 Facts: Mrs Hare and Van Brugge occupied adjoining houses, Lots 500 and 501 respectively, in Seaforth, with the shoreline of Middle Harbour forming the western boundary of both lots. The lots fell away steeply and an inclinator provided a means of transit between the houses and the street frontages where there was a shared garage. The only other means of access was a set of steep stairs. An easement had been created in 1985 over a narrow strip of land along the common boundary benefiting Lot 501 with Lot 500 being the servient tenement. The specific rights of the easement were ‘to go, pass and repass at all times and for all purposes with or without animals or vehicles or both to and from the said dominant tenement’. The inclinator had been installed in 1979, six years before the easement right had been created, and had always been used by the occupiers of both houses. However, in 2011 Mrs Hare told the Van Brugges that they could not use the inclinator without permission, and disconnected the electricity to it. Decision: It was held that because the inclinator was a fixture forming part of the servient land, the right to pass and repass included being able to use the inclinator. Mrs Hare therefore could not stop electricity being supplied to the inclinator, but the court ordered it be connected to a separate meter.

The case of Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 239 ALR 75 likewise examined the extent of an easement.

A case to remember Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 239 ALR 75 Facts: An easement had been created in 1988 on four separately owned parcels of land in King St and Pitt St, Sydney. Westfield became the registered owner of the dominant tenement and wanted to utilise the easement right across the servient land so as to have vehicular access from King St, which was not available in Pitt St because it was a pedestrian mall. This would then provide access to adjacent land that Westfield had purchased and now wanted to develop. Decision: It was noted that the phrase ‘to go, pass and repass for all purposes’ was contained in both the instrument that created the right of way and the relevant statute. Neither, however, mentioned activities ‘across’ rather than ‘to and from’ the dominant tenement. Therefore, while a grant of an easement carries with it ancillary rights necessary for the enjoyment of the rights that have been granted, the enjoyment granted in this case did not necessitate having access to pass beyond the servient tenement to other land.

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Implied easements Easements may also be impliedly granted under the rule that was established in Wheeldon v Burrows (1879) 12 Ch D 31.

A case to remember Wheeldon v Burrows (1879) 12 Ch D 31 Facts: Allen became the owner in fee simple of two tenements in 1856. The following year he built a workshop that was lighted by only skylights, although this was altered a few years later by raising the wall and including four windows. Part of the land was then sold to Wheeldon by auction in 1875, and the other lot, which included the workshop, was sold to Burrows in 1876. In 1878 Wheeldon’s widow erected boards near the edge of the land facing the workshop to assert her possession of the land. Burrows, however, knocked them down to assert his easement right of light to the windows, which he claimed by necessity or as expressly or impliedly reserved in the grant. Decision: A grant by the owner of a tenement of part of that tenement as it is then used and enjoyed will pass to the grantee all those continuous and apparent easements; that is, all easements necessary for the reasonable enjoyment of the property granted, which have been, and are at the time of the grant, used by owners for the benefit of the part granted. If the grantor intends to reserve any right over the tenement granted, it is their duty to reserve it expressly in the grant, one exception being ways of necessity. In this case, the vendor had not reserved the right of access of light to the windows and no such right passed to the purchaser of the workshop. The purchaser could build so as to obstruct the window of the workshop and therefore, under the circumstances, there was no implied reservation of any right over the piece of land first sold.

Thus the four elements that must be present for an implied grant of an easement are: 1 There must be a grant of part of the land; that is, a severance. 2 At the time of the severance, exercise of the easement must be continuous and apparent. 3 The easement must be necessary for the reasonable enjoyment of the land that has been granted. 4 At the time of the severance, the grantor must have used the easement for the benefit of the land that has been granted. Aldridge v Wright [1929] 2 KB 117 then extended the rule for Wheeldon v Burrows easements by requiring that there must be an imputed intention on the part of the subsequent purchasers to take the title subject to the burden of such an easement. The Aldridge v Wright extension of a Wheeldon v Burrows easement is therefore based on the common intention of parties.

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Care must be taken not to imply into a contract something that is not within the four corners of the contract. However, there are two exceptions: 1 necessity; that is, rights that must exist for land to be put to use 2 where land is sold on the understanding that there is an assumed easement. In Pryce v McGuinness [1966] Qd R 591, for instance, there was a subdivision where a block that was the third one back from the road had a right of way over the middle block next to it, but not over the block closest to the road. The third block had no access to the road except through the block closest to the road. It was held that a bona fide purchaser for value of the servient tenement, in this case the block closest to the road, held the land subject to the easement of the right of way by necessity for the third block. However, in Australian Hi-fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618 the implied easement had more limited enforceability. In this case, land had been registered under the Torrens system since about 1900 and had been divided into two subdivisions. A block of shops had been erected in 1928 on lot 1, and in 1966 an office block was erected on lot 2. In 1969 the land was divided into two lots, and in 1971 lot 1 was sold to Gehl, while lot 2 was sold to Australian Hi-fi in 1978. Australian Hi-fi sought to restrain Gehl from trespassing on lot 2. This trespass arose from Gehl’s attempt to exercise the easement right over the relevant portion of that lot, although no mention was made of an easement on the title deed. The matter was determined in Australian Hi-fi Publication’s favour, because it had an unencumbered interest and there had not been an omission of the easement right from the register. Thus, an easement by implication had limited enforceability under the in personam exception to indefeasibility of title, being only enforceable against those owners involved in the transaction that created the easement. Once transferred, therefore, it could no longer be enforced against the new registered owner of the servient tenement. This is also illustrated in McGrath v Campbell [2006] NSWCA 180, where two adjoining lots, Lot 6 and Lot 12, were owned by a single registered proprietor, Edna Chiplin. Lot 6 was on a main road and Lot 12 was on Brighton St. A registered easement over both Lot 6 and Lot 12 existed in favour of a third adjoining property, Lot 20, and allowed access to that property from Brighton St by means of a 3.6 metre right of way. These lots were commercial buildings and employees, customers and suppliers used the driveway over Lot 12 to access Lot 6. Lot 6 was later transferred to Leonard and Margaret Campbell, and Lot 12 to Edward and Margaret McGrath. The Campbells argued that there was an implied easement over Lot 12 for the benefit of Lot 6 on the basis that the transfers had given rise to an equity or right in personam enforceable against the McGraths. The McGraths argued that the indefeasibility provisions of the Real Property Act 1900 (NSW) and

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the circumstances of the case prevented recognition of any implied easement. It was held that a Wheeldon v Burrows easement is no more than an equitable easement, and that under the Real Property Act 1900 (NSW) an equitable easement of this type would be enforceable against the vendor as a personal equity, but is not enforceable against successors in title of the servient tenement. There was no evidence that an intention to create an implied easement could be imputed to the McGraths, and it was also not unconscionable for them to seek reliance on the indefeasibility of their title.

Prescriptive easements Easements can arise by prescription, and like any rights obtained by prescription, they arise from long use. Like implied easements, prescriptive easements arise from the common intention of the parties, which are then presumed by the operation of the law. They can arise under common law, including by a lost modern grant, or by the operation of the Prescription Act 1832 (UK), which still applies in Western Australia. Under common law it had to be proven that the easement had been enjoyed from time immemorial, which was set as being 1189, when Richard I ascended the throne. Due to the difficulty in proving this, the doctrine of lost modern grant developed.

A case to remember Williams v State Transit Authority of NSW (2004) 60 NSWLR 286 Facts: A portion of Randwick Racecourse had been resumed for a tramway in 1911 and then later used for buses. When the State Transit Authority sought tenders to purchase the land, the Australian Jockey Club indicated it would not accept the conditions of sale, and claimed right of way and sewerage easements. These were lost modern grants claimed on the basis of uninterrupted usage for more than twenty years. Decision: It was noted that a lost modern grant can be created at common law by twenty years uninterrupted enjoyment of the right, with the court being required to presume the existence of an express grant that had been lost. It was held, however, that under s 178 of the Conveyancing Act 1919 (NSW) the lost modern grant doctrine could not be invoked to establish a right of way against the Crown.

In Golding v Tanner (1991) 56 SASR 482, the wording of s 88 of the Real Property Act 1886 (SA) was wide enough to include easements by prescription, and the doctrine of lost modern grant was not inconsistent with the Act unless the registered proprietor of the servient land had changed over the period of the adverse user.

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Thus, the acts from which the prescriptive easements may arise have to be those of the registered owner, and the easement needs to be registered. The common law doctrine of lost modern grant applies throughout the country, and can apply to grant easements in Victoria and Western Australia, while in NSW and South Australia they are considered not to be inconsistent with the relevant statutes, provided there is no change in the registered proprietor on the servient land during the course of the adverse use. It should be noted that s 198A of the Property Law Act 1974 (Qld) states that right of way easements cannot be created by prescription. In Chick v Dockray (2010) 20 Tas R 167, meanwhile, Dockray was the owner of a dominant tenement and claimed the use of a roadway on the servient tenement owned by Chick in order to gain access to his. This had been the case between the two properties since 1948. It was held that Chick was restrained from obstructing the access because there was a right of way acquired pursuant to the doctrine of lost modern grant which authorised access. This was despite Part IXB Division 3 of the Land Titles Act 1980 (Tas), which stated lost modern grants can no longer be acquired, but Division 2 stated it did not act retrospectively in regard to easements created under that doctrine prior to the commencement of these provisions, and such easements remain unaffected.

Easements created under a statute An easement can also be created under a statute by allowing a land owner to apply to the court for a statutory right to use land owned by another person. This requires that the right be consistent with the public interest, be reasonably necessary, and that monetary compensation would be adequate for any loss or inconvenience that occurred to the owner of the servient land.

Relevant statutes Conveyancing Act 1919 (NSW) s 88K Property Law Act 1974 (Qld) s 180 Land Titles Act 1980 (Tas) s 110

Extinguishment of easements An easement can be extinguished by: • agreement or surrender • abandonment • other means under a relevant statute.

Chapter 11: Proprietary interests in land owned by another

Easements can be terminated by the same methods by which they were entered into, and there can therefore be an agreement to surrender an easement right. If an easement right is deemed to have been abandoned, then it will also be extinguished. This involves non-use of the easement, although merely not using an easement does not necessarily indicate the easement has been abandoned, as illustrated by Treweeke v 36 Wolseley Road Pty Ltd (1973) 128 CLR 274.

A case to remember Treweeke v 36 Wolseley Road Pty Ltd (1973) 128 CLR 274 Facts: In 1928 Dulcie Treweeke became the registered proprietor of 34 Wolseley Rd, which had originally been in common ownership with number 36. In 1927, number 34 had granted a right of way access to Double Bay to 36, which did not have a waterfront. This was by means of a metre-wide strip of land. The company became the registered proprietor of number 36 in 1959. Since 1928 the way had been blocked by a bamboo plantation, a swimming pool had been built in 1956 and two years later an iron fence was erected across the way. At no time did the owners or occupiers of 36 use the whole right of way. In 1971 Treweeke sought an order that the land was not subject to the easement right, or an order for extinguishment. Decision: The grant by which the right of way was created imposes no obligation on either the servient owner or the dominant owner to make the strip of land passable. A right will not be extinguished by non-use alone. The non-use of the total length of the way can reasonably be put down to its precipitous condition in places. There is ample evidence of utilisation of passable parts of the right of way and there is clear proof of the intention of the respondent to retain the right of way. An inference of abandonment therefore could not be drawn.

However, under ss 62, 73 and 73A of the Transfer of Land Act 1958 (Vic), if an easement has not been used for thirty years, this will be considered evidence that it has been abandoned. Courts also have a discretionary power to extinguish an easement right, and in Pieper v Edwards [1982] 1 NSWLR 336 it was stated that the factors a court will take into account are the history of the property, the conduct of the owners in both the servient and dominant tenements, the acts of a prior registered proprietor and the state of the register, with no one factor being regarded as decisive. It was then held that in this case an easement of carriageway had been extinguished due to the agreement of a predecessor in title. In Yip v Frolich it was held that the South Australian Registrar-General has the power to extinguish a registered easement, but it is very limited and cannot be exercised if the proprietor of the dominant tenement objects, unless their interest in the land will not be detrimentally affected by the extinguishment.

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In Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2012) 247 CLR 149 an easement right had been created in 1921 when a parcel of land had been subdivided and sold. In 2001 a new owner of the servient tenement asked the Registrar-General to remove the easement right from the register, and it was removed after the owner of the dominant tenement raised no objection. However, a new owner of this dominant tenement asked that it be restored, but the Registrar-General refused. The original judge refused to compel the Registrar-General to restore the easement, but the Court of Appeal overturned the decision on the basis that it amounted to an omission of the easement. The High Court, however, held the deliberate removal of an easement did not amount to an omission. Under the relevant statutes, easements can be deemed to be obsolete if the character of the neighbourhood has changed, or if the easement would impede reasonable use of the land that is subject to the easement right.

Relevant statutes Conveyancing Act 1919 (NSW) s 89 Property Law Act 1974 (Qld) s 181 Property Law Act 1958 (Vic) s 84 Transfer of Land Act 1893 (WA) s 129C

Covenants A covenant is an agreement or a promise and in regard to land law involves an obligation that directly relates to the land. For example, a landowner can enter into an agreement to regulate development by not blocking out views. This can then turn into a covenant; that is, an obligation binding a landowner, although usually it will not be binding on future purchasers because of the privity of contract. One way around the privity of contract is to have a succession of individual covenants. For example, if there is a covenant between two neighbours not to block out views and one of the owners sells, then a new covenant can be made between the other owner and the purchaser. A covenant may be positive; that is, it requires an act to be done; or it can be negative; that is, it requires an act not be done. In some circumstances the common law allows the benefit of a covenant to run with the land, but: 1 the covenant must touch and concern the land and must benefit the land itself 2 there must be an intention that the benefit should run with the land. In Austerberry v Corporation of Oldham (1885) 29 Ch D 750, for instance, the landowners decided to build a shorter, more direct road and formed a company to buy the necessary land. It was open to the general public, who paid a toll to use the road. A landowner who was not a member of the company sold his land to

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Austerberry, who was not able to enforce the covenant to repair the road against the corporation because it was a personal covenant that did not pass onto the land.

Restrictive covenants A restrictive covenant involves the use of a formal agreement that limits the use of a particular piece of land. It developed as a right recognised by equity that allowed the burden of the covenant to run with the land. Like easements, restrictive covenants impose restrictions on the use of land, and if the requirements are met, then the burden of the covenant can be made to run with the land. This is illustrated in Tulk v Moxhay (1848) 41 ER 1143.

A case to remember Tulk v Moxhay (1848) 41 ER 1143 Facts: Tulk held the fee simple in vacant land and a garden area in Leicester Square, London, which he conveyed to a purchaser with a covenant that these areas be maintained as a garden and pleasure area in an open state. The vacant land and garden were later acquired by Moxhay, who knew about the original covenant. Moxhay wanted to build on the land, but Tulk, who had retained ownership of houses in the square, sought an injunction. Decision: The question was not whether the covenant runs with the land, but whether it should be used inconsistently with the contract. The price paid was affected by the covenant, and nothing could be more inequitable than the purchaser disregarding the covenant and selling that property the next day for a greater price. If an equity is attached to the property by the owner, no one purchasing the property with notice of that equity can stand in a different situation from the party from whom they purchased.

Thus the four conditions of a restrictive covenant developed in Tulk v Moxhay are: 1 The covenant must be negative, because equity does not allow the burden of positive covenants to run with the land. 2 The covenant must benefit the covenantee. 3 The burden for the covenant must run with the land of the covenantor and so bind successors. 4 It is a burden that runs only in equity, not at law. The covenantee is the person entitled to the benefit of the covenant, while the covenantor is the person who is subject to the burden of the covenant. If, for example, Alice purchases land from Barry and covenants Barry not to build on the land that he has purchased, then Alice is the covenantee and Barry is the covenantor. The effect of this transaction is that Alice acquires an equitable interest to the extent

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that she can get an injunction to prevent the agreement being breached. A recent High Court case that examined restrictive covenants and the principles outlined in Tulk v Moxhay was Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998) 193 CLR 154.

A case to remember Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998) 193 CLR 154 Facts: Perpetual Trustees purchased land from National Mutual on which there was a shopping centre. There were another 3.9 hectares still owned by National Mutual, on which there was a restrictive covenant. This covenant was intended to prevent the use of the burdened land for any retail sales, showroom or market uses. Forestview Nominees subsequently acquired the burdened land and then sold it to Silkchime Pty Ltd, which wanted to develop a retail shopping complex on the burdened land. Perpetual then claimed that such a development would contravene the restrictive covenant. Decision: Under common law, tenants of the benefited land would be unable to enforce the covenant because they would lack the privity of estate with Perpetual. In equity, however, the authority to enforce the covenant is derived from the intention of the parties to the covenant, as evinced by its terms. In this case the clear intention of the parties, as evinced by the terms of the covenant, was to deny its benefit to parties lacking privity of estate with the covenantee. Such an intention was not repugnant to the principles supporting the doctrine in Tulk v Moxhay.

Where restrictive covenants are often used is in developments on new subdivisions, as illustrated in the case of Elliston v Reacher [1908] 2 Ch D 374.

A case to remember Elliston v Reacher [1908] 2 Ch D 374 Facts: This case involved an action to restrain Reacher from using a building in Felixstowe as a hotel, because this was contrary to certain covenants affecting the property. The property was on land that that once formed part of Felixstowe Estate, a small estate of ten acres close to the sea, which was acquired by Conservative Benefit Building Society. In the contract of sale it was stated that the land was conveyed as part of a larger estate called Felixstowe Estate, and that the property was conveyed subject to the contained covenants. This included agreements as to the mode of building on and the occupation of the land conveyed, specifically that no hotel, tavern, public house or beer house would be built without the vendor’s consent, which in this case had not been obtained.

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Decision: For a plaintiff to enforce these restrictive covenants it must be proved that: 1 both the plaintiffs and the defendants derive title under a common vendor 2 previously to selling the lands to which the plaintiffs and the defendants are respectively entitled, the vendor laid out their estate, or a defined portion thereof, for sale in lots subject to restrictions intended to be imposed on all lots, and which, although varying in details as to particular lots, are consistent with some general scheme of development 3 these restrictions were intended by the common vendor to be and were for the benefit of all the lots intended to be sold 4 both the defendant and the plaintiff purchased their lots from the common vendor on the footing that the restrictions were made for the benefit of other lots included in the general scheme.

If these four points are established, the plaintiff would, in equity, be entitled to enforce the restrictive covenants entered into by the defendants. In this case it had been sufficiently established that Elliston and Reacher had notice of the intention of the common vendor that the restrictions were for the benefit of all lots offered for sale and that they made their respective purchases on that footing. The defence that the character of the neighbourhood had completely changed therefore failed because its character has been preserved, at least in part, by the existence of the restrictions. Elliston was therefore entitled to an injunction to prevent the building from being used as a hotel.

Where all the four conditions outlined in Elliston v Reacher are satisfied, a scheme of development is held to exist, and any subsequent buyer will be bound by the restriction. In Netherby Properties Pty Ltd v Tower Trust (1999) 76 SASR 9 all the original purchasers in a building scheme entered into restrictive covenants, including one that prevented further subdivision of the allotments. The memorandum of encumbrance, however, did not refer to any land intended to benefit from the covenants, and therefore it was held that Netherby was entitled to subdivide into the two allotments as approved by the local council, because the restrictive covenant was unenforceable against it. Restrictive covenants can cause problems under the Torrens system because the sale and transfer will need to be registered; but there may be nothing about the restrictive covenant, because equitable interests do not have to be registered. The relevant statutes also provide the courts with the power to modify or extinguish a restrictive covenant. Most of the relevant statutes state that the covenantor’s intention on entering into the covenant is to bind all future parties who obtain title from the original covenantor. The relevant statutes also allow for the presence of a restrictive covenant to be notified on the certificate of title for the burdened land.

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Relevant statutes Intention was to bind future parties: Conveyancing Act 1919 (NSW) s 70A Property Law Act 1974 (Qld) s 53 Conveyancing and Law of Property Act 1884 (Tas) s 71A Property Law Act 1958 (Vic) s 79 Property Law Act 1969 (WA) s 48 Presence of the restrictive covenant can be included on the certificate of title: Conveyancing Act 1919 (NSW) s 88 Land Titles Act 1980 (Tas) ss 102–4 Transfer of Land Act 1893 (WA) ss 48, 48A

Practical example Haberfield, a suburb in Sydney’s inner west, has no pub. This is because it was originally land owned by the church and when the land was subdivided and sold off a restrictive covenant was placed on the land that stated no licensed public house could be built on the land.

Profits Profit, also known as a profit à prendre, is the right to enter another person’s land and take away part of the soil or the produce of the soil, such as crops, timber and minerals. If the right is to take natural produce then it is referred to as furstus naturalis; while if it is to take the produce of cultivation it is called fructus industriales. It is an interest in the land, but it may be unconnected with a dominant tenement. It is usually for a limited time only, and will be extinguished if the subject matter becomes exhausted.

Think about it 1 Do you think that it is appropriate for a person to be allowed to walk over another person’s land because at some time in the past this right was given to the owners of that property? Is this in conflict with the concept of private ownership, which involves the right to exclude the whole world? 2 Do you think it is appropriate for a housing development to have restrictive covenants in order to create a common appearance within that development? Do you know of any such developments, and if so, what would appear to be some of the restrictions that have been imposed? What are the benefits, if any, of such restrictions?

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Glossary Abstract of title

Class gift

Under old system title there was a requirement that all documents show the chain of title. The document that set out all the details of the relevant documents, such as deeds and wills, was called the abstract of title.

A gift to a particular group of people rather than specified persons. For example, ‘to my nieces and nephews’ rather than ‘to Jane and James’.

Accelerated payment

A term in the mortgage that can allow the mortgagee to demand that all the money owing on the mortgage, including the principal, be paid immediately if there is a default on the repayments. Accretion

Slow and imperceptible build-up of sediments by natural events resulting in an increased area of land. The owner of the land is entitled to the benefit of the increased area. Allodial

Absolute ownership of land where there is no residual interest to the Crown. Assignment

The transfer of rights. In regard to leases, the transfer of the remaining term of the lease so that there is no reversion of any residual term of the lease to the original lessee.

Clog

A term of a mortgage imposed by the mortgagee that impedes the ability of the mortgagor to redeem the property. Co-owned property

Property owned by two or more people, either as joint tenants or as tenants in common. Code

A statute that purports to be a complete statement of the law in a particular area. Copyright

An intangible property right giving the copyright owner exclusive rights in relation to that property. A copyright owner can therefore allow certain things to be done with that property or prohibit things being done with that property. In Australia it is covered by the Copyright Act 1968 (Cth). Covenant

An equitable right to use and enjoy property.

An agreement or promise incorporated into mortgages and lease documents. In regard to leases, a covenant is a term in a lease that the parties agree to.

Bona vacantia

Covenantee

Land that has no owner and is therefore claimed by the Crown.

The party entitled to a promise made in a covenant.

Caveat

Covenantor

A notice on the folio for a particular lot that protects an unregistered or unregistrable interest in that lot.

The party who assumes the obligations made in a covenant.

Charge

A document that creates or a acknowledges a debt owed by a company.

Beneficial interest

The security for a loan that attaches to property.

Debenture

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Glossary

Default

Fixture

A failure to carry out a legal or contractual duty such as the promise to make the agreed repayments under a mortgage.

A chattel or goods which were intended to become attached to land and are then considered by the law to be part of that land.

Easement

A right in regard to land owned by another person, such as the right to access across the other person’s land.

Grantor

Equitable interest

Indefeasibility

An interest in property recognised by equity but not the law when, although all the requirements for a legal interest have not yet been fulfilled, it would be unconscionable for the legal interest holder to retain the benefit of the property.

The basic underlining principle of the Torrens system whereby, on registration, the interest of the registered proprietor is protected against all other interests, unless they fall under one of the exceptions to indefeasibility.

Equitable right to redeem

A right of action against a particular person.

A right under equity for the mortgagor to recover property used as the security for a mortgage after the contractual date for repayment has passed. Equity

The body of law developed in the Court of Chancery, which now supplements the common law. Equity of redemption

The right a mortgagor has under equity to the property once the mortgage has been repaid. It is an equitable interest that arises immediately once the mortgage is discharged, and it can be assigned or otherwise disposed of. Estate

All the property under a will that will vest with the executor of that will, then become the property of those entitled to inherit under the will. Exclusive possession

The lessee’s right to exclude all others, even the owner, from leased property, except for inspections of the property with notice. The fundamental requirement for a lease. Executory interest

An interest that arises at a future time and requires further action to bring the interest into existence.

A person who bestows interests or estates in land on another person, the grantee.

In personam In rem

A right of action against the actual property. Intangible

Not able to be physically touched. Intellectual property law

Involves rights that provide protection to creative and intellectual works, and includes laws relating to copyright, designs and trade marks. Inter vivos

Between living beings; refers to an instrument made between people who are alive at the time. Joint tenancy

A type of co-ownership where the four unities––possession, interest, time and title––must be present. Its main feature is the right of survivorship, whereby the property remains with the surviving joint tenant or tenants on the death of one joint tenant. Land rights

Statutory rights to Crown land for Indigenous people. Landlord

The person with an interest in a property who then grants the right to occupy that property to another party. This term is interchangeable with ‘lessor’.

Glossary

Lease

Mortgagor

The grant of exclusive possession for a certain period of time, by a party with an interest in that land to another party. Also used to refer to the actual document that creates this grant.

The borrower of money under a mortgage.

Legal interest

An interest recognised by the law because all of the requirements for a legal interest have been fulfilled. Legal right to redeem

The contractual right the mortgagor has under the mortgage to have the property returned once the mortgage has been repaid. Lessee

The person to whom a lease interest is granted or assigned. Essentially interchangeable with the term ‘tenant’. Lessor

The person who grants a leasehold interest. Interchangeable with the term ‘landlord’. Licence

The granting of permission by a person to another to be on the first person’s land. It does not create an interest in that land and is revocable at any time. Lost modern grant

At common law, a lost modern grant for an easement right can be created by twenty years uninterrupted enjoyment of the rights, with the court being required to presume the existence of an express grant that has been lost. Mesne profits

The damages owed to a lessor when a lessee has committed trespass by remaining on the property after a lease has terminated. Mortgage

The lending of money for the purchase of property where the property itself is used as security for the loan. Mortgagee

The lender of money under a mortgage.

Native title

Rights to Crown land for Indigenous people recognised by the common law, with these rights now being determined in accordance with the Native Title Act 1993 (Cth). Nemo dat rule

Nemo dat quod non habet— a person cannot give better title than they themselves have. Old system title

The system of land title prior to the Torrens system, whereby good title was established through proof of an unbroken chain of previous transactions that went back over an acceptable period of time. Ouster

A co-owner being forced to leave a co-owned property in a way that denies them their right to the property, for example, because of domestic violence. Part performance

An equitable doctrine whereby an oral contract can be enforced when acts relating to a contract or agreement between the two parties have been done. Partition

The division of co-owned property into appropriate parts so that each of the co-owners becomes the sole owner of what has been allocated to them. Pastoral lease

A statute-based lease, usually for extensive periods such as seventy-five years, that allows the leaseholder to use that land for pastoral purposes but not to the exclusion of others who have rights in relation to the land. Privity of contract

A principle of contract law that stipulates that only the parties to a contract are bound by the terms of the contract. Privity of estate

The relationship that exists between a landlord and tenant, which will also be

155

156

Glossary

passed on to any person who succeeds either the landlord or the tenant.

that tenant’s interest is extinguished and cannot be inherited by that tenant’s heirs.

Profit (also profit à prendre)

Tenancy

The right to take produce, either natural or cultivated, from another person’s land.

Another term for a lease.

Remainder person

Co-ownership of property by two or more people who hold the property in undivided but distinct shares. Its main differences from a joint tenancy are that a tenancy in common does not furnish the right to survivorship and that only the unity of possession is required.

A person entitled to a future interest in the form of a remainder. Restrictive covenant

An equitable agreement to limit how a piece of land can be used. Riparian rights

Rights under common law that enable owners of land fronting rivers or streams to enjoy and use the water that naturally flows in the waterway, though in Australia these rights have been modified by statute. Seisin

In early Feudal times seisin indicated possession of the land, but over time it came to mean the freehold ownership of the land.

Tenancy in common

Tenant

The party who holds an interest in land from a landlord under a tenancy agreement. The term is interchangeable with ‘lessee’. Testator

A person who makes a will. Title

Ownership rights to property recognised by the law.

Severance

Torrens system

The conversion of a joint tenancy into a tenancy in common by a joint tenant during their lifetime, which defeats the right of survivorship.

The system of land title designed by Robert Torrens whereby the title arises from the registration of the land, that is, it involves title by registration.

Strata title

Trust

A statute-based system of title that allows for ownership of parts of buildings such as home units.

Involves one person, the trustee, holding property for the benefit of another person or class of person, known as the beneficiary or beneficiaries.

Sublease

The granting of a lease by a lessee for a term less than the original lease so that the original lessee has a reversion for the remaining term of the lease. Survivorship

An essential feature of a joint tenancy, whereby on the death of one joint tenant,

Vendor’s lien

A security recognised by equity that occurs when the vendor has not been paid the full purchase price but the property has been transferred to the buyer.

157

Table of Cases Bold entries indicate ‘Cases to Remember’ Abela v Public Trustee [1983] 1 NSWLR 308  60, 61 Abigail v Lapin [1934] AC 491  78, 99 Advisory Opinion on Western Sahara [1975] 1 CJR 39  42 AF Textile Printers Pty Ltd v Thalut Nominees Pty Ltd (2007) 17 VR 334  126 AG Securities v Vaughan [1988] 3 All ER 1058  52, 53 Aldin v Latimer Clarke, Muirhead and Co [1894] 2 Ch 437  125, 126 Aldridge v Wright [1929] 2 KB 117  143 Allen v Roughley (1955) 94 CLR 98 90–1 Andrews v Parker [1973] Qd R 93  35 ANZ Bank v Bangadilly Pastoral Co (1978) 52 ALJR 529 110 ANZ v Widen (1990) 102 ALR 289 71–2 Armour v Penrith Projects [1979] 1 NSWLR 98  102 Assetts Co v Mere Roihi [1905] AC 176  86 Attorney-General (Southern Nigeria) v John Holt Co Ltd [1915] AC 599  23, 24 Attorney-General v Brown (1847) 2 SCR App 30  30 Austerberry v Corporation of Oldham (1885) 29 Ch D 750  148 Australian Hi-fi Publications Pty Ltd v Gehl [1979] 2 NSWLR 618  144 Australian Provincial Assurance v Coroneo (1938) 38 (SR) NSW 700  18 Bahr v Nicolay (No 2) 164 CLR 604  87 Baigent v Random House Group Ltd (2007) 72 IPR 195  14 Barrow v Issacs [1891] 1 QB 417  129 Barry v Heider (1914) 19 CLR 197 77–8 Bath and Wells Diocesan Board of Finance v Jenkinson [2002] 4 All ER 245  33 Beames v Leader [2001] 1 Qd R 347  24 Beaudesert Shire Council v Smith (1966) 160 CLR 145 23 Belgrave Nominees v Barlin- Scott Air-conditioning (1984) VR 947  19 Bell v Custom Credit Corporation [1976] Qd R 57  96 Bennell v Western Australia (2006) 230 CLR 603  50 Bennell v Western Australia [2006] FC 1243  48 Beresford v Booth [1999] SASC 166  57–8 Bernstein v Skyways General Ltd [1978] QB 479 17 Bickel v Duke of Westminister [1977] QB 517  130 Biviano v Natoli (1998) 43 NSWLR 695  58 Black v Garnock (2007) 230 CLR 438  98 Bogdanovic v Kofeff (1988) 12 NSWLR 472  100–1 Boyapati v Rockefeller Management Corporation (2008) 77 IPR 251  14 Brand v Chris Building Co Pty Ltd [1957] VR 626 20–1 Breskvar v Wall (1971) 126 CLR 376  79, 83, 85

158

Table of Cases

Brunker v Perpetual Trustees Co Ltd (1937) 50 CLR 555 100 Bursill Enterprises v Berger Bros Co Pty Ltd (1971) 124 CLR 73  140, 141 Butler v Fairclough (1917) 23 CLR 78  72, 93, 96–7 Calma v Sesar (1992) 106 FLR 446  12 Cartwright, Re (1889) 41 Ch D 532  32 Castle Constructions Pty Ltd v Sahab Holdings Pty Ltd (2012) 247 CLR 149  148 CBS Records Australia Ltd v Gross (1989) 15 IPR 385  13 Ceedive Pty Ltd v May [2005] NSWSC 222  19 Chick v Dockray (2010) 20 Tas R 167  146 Clos Farming Estates Pty Ltd v Easton [2001] NSWSC 525  139 Coe v Commonwealth (1978) 53 ALJR 403 42 Colavito v New York Organ Donor Network Inc (2006) 8 NY3d 43  11 Collings v Lee [2001] 2 All ER 232  75 Commonwealth Bank of Australia v MacDonald (2000) 10 BPR 18  62 Commonwealth v NSW (1923) 33 CLR 1  17 Conlan v Registers of Titles (2001) 24 WAR 299  87 Conlan v Registers of Titles [2001] WASC 201  101 Cooper v Stuart (1889) 14 AC 291  41–2 Corin v Patton (1990) 92 ALR 1 60 Cottage Holiday Associates [1983] QB 737  121 Cowell v Rosehill Racecourse Co Ltd (1936) 56 CLR 605  117 Creer v P & O Lines of Australia [1971] 125 CLR 84  130 Cruise v Mont [1933] 1 Ch 278 126 Cuckmore Brick Co Ltd v Mutual Finance [1971] 2 All ER 637  110 Dayeian v Davidson (2010) 76 NSWLR 512  121 Delehunt v Carmody (1986) 68 ALR 253 55 Dennis v Dennis (1971) 45 ALJR 605  56 Dennis v McDonald [1982] 2 WLR 275  57 Dickens v Hawksley [1935] 1 Ch 267  13 Doherty v Allman (1878) 3 App Cas 709  32 Doodeward v Spence (1908) 6 CLR 406 11 Duke of Norfolk’s Case (1681) 22 ER 391  37–8 Elite Promotions & Management Pty Ltd v 5A Investments Pty Ltd (2011) 80 NSWLR 686 133 Ellenborough Park, Re [1956] Ch D 131  139, 140 Elliston v Reacher [1908] 2 Ch D 374  150–1, 151 Ex parte Van Achterberg [1984] 1 Qd R 160  22 Ex parte Whelan [1986] 1 Qd R 500  132 Farley v Hawkins (1997) 2 Qd R 361 19–20 Fejo v Northern Territory (1998) 195 CLR 96  45, 48

Table of Cases

Fordham Laboratories Pty Ltd v SOR (2011) 81 NSWLR 383  136 Forestview Nominees Pty Ltd v Perpetual Trustees WA Ltd (1998) 193 CLR 154 150 Forgeard v Shanahan (1994) 35 NSWLR 206  57 Fortson Pty Ltd v Commonwealth Bank of Australia (2008) 100 SASR 162  111 Frazer v Walker [1967] AC 569  85, 88 Freed v Tafeel [1984] 2 NSWLR 322  60 Friedman v Barrett [1962] Qd R 498  87, 130 Fyfe v Smith [1975] 2 NSWLR 408 113–14 Gibbs, Re [1925] 1 Ch 575  129 Gibbs v Messer [1891] AC 248  85, 86 Golding v Tanner (1991) 56 SASR 482  145 Gonzales v Clariades (2003) 58 NSWLR 211  54 Graham v KD Morris & Sons Pty Ltd [1974] Qd R 1  17 Green v Commissioner of Internal Revenue 74 TC 1229 (1980)  10 Greita Sebea v Territory of Papua (1941) 67 CLR 544  19 Grgic v ANZ (1994) 33 NSWLR 202  87 HA Warner Pty Ltd v Williams (1945) 73 CLR 429  119 Hall v Busst (1960) 104 CLR 206  34 Hare v Van Brugge (2013) 84 NSWLR 41 142 Harris v King (1936) 56 CLR 45  39, 39, 40 Haynes Case (1614) Co Rep 113  11 Heid v Connell Investment Pty Ltd (1989) 16 NSWLR 629  102 Heid v Reliance Finance Pty Ltd (1983) 154 CLR 326 78–9 Henderson v Eason (1851) 117 ER 1451 58 Holland v Hodgson (1872) LR 7  18 IAC (Finance) Pty Ltd v Courtenay (1968) 110 CLR 550  97 International Drilling Fluids v Louisville Investments [1986] Ch 513  129 Isaac v Hotel de Paris [1960] 1 All ER 348  117–18 J & H Just Holdings Pty Ltd v Bank of NSW (1971) 125 CLR 546  97–8, 98 JA Pye (Oxford) v Graham [2003] 3 All ER 238  92 Jared v Clements [1902] 2 Ch 399  74–5, 75 Jessica Holdings v Anglican Property Trust (1992) 27 NSWLR 140 95 Jones v Bartlett (2000) 205 CLR 166  127 Jones v Dodd [1999] SASC 125  12 Jovanovic v Commonwealth Bank of Australia (2004) 87 SASR 570  111 Kennard v AGC (Advances) Pty (1987) V ConvR 54–210  114 Knightsbridge Estates v Byrne [1938] 2 All ER 444 106 Knockhold Pty Ltd v Graff [1975] Qd R 88  133 Kreglinger v New Patagonia Meat and Cold Storage Company [1914] AC 25 106, 107

159

160

Table of Cases

Lace v Chantler [1944] KB 368  120 Lam Kee Ying Sdn. Bhd. v Lam Shes Tong [1975] AC 247  128 Latec Investments v Hotel Terrigal (1965) 113 CLR 265  76–7, 110 Lavender v Betts [1942] 2 All E R 72  125 Lee v Ferno Holdings Pty Ltd (1993) 33 NSWLR 404  122 Leigh v Dickeson (1884) 15 QBD 60  58 Ley v Scarff (1981) 33 ALR 653  108 Loke Yew v Port Swettenham Rubber [1913] AC 491  87 Lovett v Victoria [2007] FCA 474  48, 49, 50 Luke v Luke (1936) 36 SR (NSW) 310  56–7 Lysaught v Edwards (1876) 2 Ch D 499  71 Mabo v Queensland (No 1) (1988) 166 CLR 186  43 Mabo v Queensland (No 2) (1992) 175 CLR 1  30, 41, 43–4, 48 McGrath v Campbell [2006] NSWCA 180  144 McMahon v Ambrose [1987] VR 817 134 McMahon v Public Curator of Qld [1952] St R Qd 197  59 Maddison v Alderson (1906) 8 AC 467 70 Malzy v Eichholz [1916] 2 KB 808 124 Manchester Brewing v Coombs [1901] 2 Ch 608  67–8 Manktelow v Public Trustees [2001] WASC 290  12 Mercantile Credits v Shell Australia (1975) 136 CLR 326  130, 131, 134 Mercantile Mutual Life v Gosper (1991) 25 NSWLR 32 88–9 Milirrpum v Nabalco Pty Ltd (1971) 17 FLR 141  8, 9, 42, 43 Milmo v Carreras [1946] 1 KB 306 128 Mitchell v Arblaster [1964] NSWLR 119  56 Moore v Dimond (1929) 43 CLR 105  121 Moore v Regents of the University of California (1990) 793 P 2d 479 10 Mulcahy v Curramore Pty Ltd [1974] 2 NSWLR 464  90 Netherby Properties Pty Ltd v Tower Trust (1999) 76 SASR 9  151 Noakes v Rice [1902] AC 25  107 Northern Counties of England Fire Insurance Company v Whipp (1884) 26 Ch 482  73 Osmanski v Rose [1974] VR 523  99 Palumberi v Palumberi (1986) NSW ConR 55–287  19 Petkov v Lucerne Nominees (1992) 7 WAR 163  91 Phipps v Pears [1965] 1 QB 76  140 Pieper v Edwards [1982] 1 NSWLR 336  147 Pirie v Saunders (1961) 104 CLR 149  119 Proudfoot v Hart (1890) 25 QBD 42  127–8

Table of Cases

Prudential Assurance v London Residuary [1992] 3 All E R 504  120 Pryce v McGuinness [1966] Qd R 591  144 Public Trustee v Evans (1985) 2 NSWLR 188  54 Queens Club Gardens v Bignell [1924] 1 KB 117  132 R v Parker [1989] WAR 233  24 Radiach v Smith (1959) 101 CLR 209 118 Reeve v Lisle [1902] AC 396  106 Regent v Millett (1976) 133 CLR 679 70–1 Rice v Rice (1853) 61 ER 646 76 Robertson, Re (1943) 44 SR (NSW) 103  54 Rogers v Resi-Statewide Corporation (1991) 101 ALR 377  85–6 Rugby Joint Water Board v Walters [1967] Ch 397  22 Rugby School (Governors) v Tannohil [1935] 1 KB 87  133 Salia Property Pty Ltd v Commissioner of Highways (2012) 112 SASR 384  86 Samuel v Jarrah Timbers [1904] AC 323  105 Saunders, Re [1993] 2 Qd R 335  63–4 Shell Company of Australia v Zanelli [1973] 1 NSWLR 216  132 Sifton v Sifton [1938] AC 656  34 Singtel Optus v National Rugby League Investments Pty Ltd (No2) [2012] FCA 34 14–15 Smallwood v Shepherds [1895] 2 QB 627  121 Smith v Tamworth City Council (1997) 41 NSWLR 680  11–12, 67 South Coast Oils Pty Ltd v Look Enterprises Pty Ltd [1988] 1 Qd R 680  119–20 Southern Centre of Theosophy Inc v South Australia [1982] AC 706  24 Southwell v Roberts (1940) 63 CLR 581  113 Spencer v Commonwealth (1906) 5 CLR 418  110 Squire v Rogers (1979) 39 FLR 106  58, 59 Statewide Developments Pty Ltd (in liq) v Azure Property Group (Holdings) Pty Ltd (2012) 84 NSWLR 133  94 Stone, Re (1989) Qd R 351  54 Street v Montford [1985] AC 809 119 Summers v Salford Corporation [1943] AC 283  126 Taleb v National Australia Bank (2011) 82 NSWLR 489  80 Telex (Australasia) v Thomas Cook [1970] 2 NSWLR 257  125 Tessman v Costello [1987] 1 Qd R 283  104 Thrift v Thrift (1975) 10 ALR 331  59 Thurgood, Re (1987) Q ConvR 54–239  57 Treweeke v 36 Wolseley Road Pty Ltd (1973) 128 CLR 274 147

161

162

Table of Cases

Trustees of Church Property of the Diocese of Newcastle v Ebbeck (1960) 104 CLR 394 34–5 Tulk v Moxhay (1848) 41 ER 1143  149–50, 149 Turner v York Motors (1951) 88 CLR 55  122 Uniting Church v Immer (1991) 24 NSWLR 510  17 Vane v Lord Barnard (1716) 27 ER  32–3 Venables v Owners of Cambridge Court Strata Plan 4879 (2012) 78 SR (WA) 190  63 Victoria Valoutin Pty Ltd v Furst (1998)  100 W v D (2012) 115 SASR 61  57 Walker v Linom [1907] 2 Ch D 104  74 Walsh v Lonsdale [1882] Ch D 9  67–8, 69, 123 Ward v Western Australia (2002) 213 CLR 1  45, 48 Watson v Delaney (1991) 22 NSWLR 358  70 Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 239 ALR 75  142 Whaley, Re [1908] 1 Ch 615  18 Wheeldon v Burrows (1879) 12 Ch D 31  143, 145 Wik v Queensland (1996) 187 CLR 1  44–5, 45, 46–7, 48, 50 Williams v State Transit Authority of NSW (2004) 60 NSWLR 286 145 Wood, Re (1894) 2 Ch 310  39–40 Wright v Gibbons (1949) 78 CLR 313  53–4, 60 Yallingup Beach Caravan Park v Valuer-General (1994) 11 SR (WA) 355  19 Yanner v Eaton (1999) 201 CLR 351  9, 50 Yip v Frolich (2003) 86 SASR 162; (2004) 89 SASR 467  141, 147 Yorta Yorta v Victoria (2002) 214 CLR 422 49 Zapletal v Wright [1957] Tas R 211 35

163

Table of Statutes Commonwealth

New South Wales

Aboriginal Land Rights (Northern Territory) Act 1976  2, 42

Agricultural Tenancies Act 1990  2 ss 6–10  21

Australian Securities and Investment Commission Act 2001  108

Contracts Review Act 1980 s 7  108

Bankruptcy Act 1966  72

Conveyancing Act 1919  2, 72 s 23C  120, 122 s 23D  120 s 26  1, 55–6 s 54A  120, 122 s 66G  61 s 70A  152 s 85  127 s 88  152 s 88K  146 s 129  133 s 178  145 s 181  148

Coastal Waters (State Powers) Act 1980 25 Coastal Waters (State Title) Act 1980  25 Competition and Consumer Act 2010  113 Copyright Act 1905  13 Copyright Act 1968  6, 12 s 8  13 s 111  15 Corporations Act 2001 s 420A  111 Designs Act 2003  12 National Consumer Credit Protection Act 2009 108 Native Title Act 1993  2, 46, 47, 48 Pt 2, Div 2  46 Pt 2, Div 2A  47 Pt 2, Div 3  47 s 3  46 s 4  46 s 87  48 s 107  47–8 s 169  47 s 223  49 s 223(1)  47, 49 s 226(1)  46 s 226(2)  46 s 233  47 s 238  46 s 238(2)  46 s 238(3)  46 Patents Act 1990  12 Racial Discrimination Act 1975  43, 46 Seas and Submerged Land Act 1974  25 Trade Marks Act 1995  12 Trade Practices Act 1977 s 52  113 Water Act 2007  2, 23

Conveyancing (Strata Title) Act 1961  62 Crown Lands Unauthorized Occupation Act 1839 44 Encroachment of Buildings Act 1922 s 3  22 Industrial Relations Act 1996 s 106  108 Landlord and Tenant Act 1954  118 Mining Act 1992  2 Perpetuities Act 1984  2 s 7  38 s 8  40 s 9  40 Real Property Act 1900  2, 144–5 Pt 6A  91 s 3(1)  86 s 31B  84 s 36  84 s 41  105 s 42  87, 89, 90, 92 s 43  87 s 43A  72 s 57  105, 109 s 58  109 s 60  113, 133–4 s 61  112

164

Table of Statutes

s 62  112 s 63  133–4 s 74F  93 s 74J  94 s 74M  94 s 74MA  94 s 74P  95 ss 105–105D  99 s 126  102 ss 126–129  101 s 129  101 Residential Tenancies Act 2010  2 Retail Shop Leases Act 1994 s 64  136 Water Act 1912  2 Water Management Act 2000  2

Queensland Fauna Conservation Act 1974  9, 50 Land Act 1910  44 s 199(1)  45 s 205  45 Land Act 1962  44, 45 s 10  24 Land Title Act 1994  2 Pt 6, Div 5  91 s 27  84 s 28  84 s 64  122 s 74  105 s 78  113 ss 86–87  139–40 s 127  94 s 130  95 s 178  84 s 180  101 s 181  105 s 181  122 s 184  87 s 185  89, 90, 92 s 185(2)(b)  130 s 188  101 s 188A  101 s 189  101 s 211  101 Mineral Resources Act 1989  2 s 8  25

Property Law Act 1974  2 s 11  120, 122 s 12  120, 122 s 35  1, 55 s 38  61 s 43  58 s 53  152 s 83  109 s 84  109 s 85  109, 110, 111 s 99  112 s 107  127 s 124  133 ss 155–167  21 s 180  146 s 181  148 s 185  22 s 196  22 s 198A  146 s 209  38 s 210  40 s 213  40 Real Property Act 1877 s 11  130 Residential Tenancies and Rooming Accommodation Act 2008  2 Retail Shop Leases Act 1994  2 Water Act 1926  23 Water Act 2005  2

South Australia Conveyancers Act 1994  2 Encroachment Act 1944 s 4  22 Landlord and Tenant Act 1936  2 Law of Property Act 1936  2 s 29  120, 122 s 30  120, 122 s 31  122 s 69  61 Mining Act 1971  2 s 16  25 Real Property Act 1886  2 s 6  109 s 17  86 s 47  109

Table of Statutes

s 48  84 s 51B  84 s 56  84 s 67  105 s 69  86, 87, 89, 90, 92 s 80A–80I  91 s 88  145 s 119  90 s 125  127 s 132  105 s 133  109 s 137  113 s 141  112 s 142  112 s 191  94, 95 s 203  101 s 205  101 s 208  101 s 251  91 Residential Tenancies Act 1995  2 Water Resources Act 1997  2

Tasmania Conveyancing and Law of Property Act 1884 2 s 71A  152 Land Act 1958  3 Land Titles Act 1980  2 Pt IXB, Div 2  146 Pt IXB, Div 3  146 s 21  109 s 33  84 s 40  87, 89, 90, 92 s 48  84 s 49  105, 120, 122 s 67  127 s 73  105 s 78  109 s 82  113 s 85  112 s 86  112 s 91  109 ss 102–104  152 s 110  146 s 135  94 s 138  95 s 151  101 ss 152–153  101

Landlord and Tenant Act 1935  2 s 26  21 Partition Act 1989  61 Perpetuities and Accumulations Act 1992 2 s 6  38 s 9  40 s 11  40 Residential Tenancy Act 1997  2 Transfer of Land Act 1958  3 Water Management Act 1999  2 Tenures Abolition Act 1660  29–30

Victoria Instruments Act 1958 s 126  120, 122 Irrigation Act 1886  22 Mineral Resources (Sustainable Development) Act 1990  3, 26 s 9  25 Perpetuities and Accumulations Act 1968 3 s 5  38 s 9  40 Property Law Act 1958  3 s 79  152 s 84  148 s 101  109 s 102  109 s 103–106  109 s 146  133 s 159A  21 s 223  61 Residential Tenancies Act 1997  3 Transfer of Land Act 1958 s 27  84 s 27A  84 s 42  87, 89, 90, 92, 100 s 43  87, 100 s 44  87 ss 60–62  91 s 62  147 s 67  127 s 73  147 s 73A  147 s 74  105

165

166

Table of Statutes

s 77  109, 110, 111 s 78  113 s 79  112 s 87  112 s 89A  94 s 90  94 s 91  112 s 109  101 s 110  101 s 118  95 Transfer of Land Act 1958 s 34  84 s 40  120, 122, 195 Water Act 1905  23 Water Act 1989  3 Water and Conservation Act 1880  22

Western Australia Mining Act 1978  3 s 9  25 Property Law Act 1969  3 s 34  120, 122 s 53  112 s 57  109 s 58  109 ss 59–62  109 s 48  152 s 81  133 s 101  38 s 103  40 s 105  40 ss 122–123  22 s 126  61

Residential Tenancies Act 1987  3 Strata Titles Act 1985  63 Transfer of Land Act 1893  3 s 48  84, 92 s 48  152 s 48A  152 s 53  84, 112 s 57  113 s 58  105, 120, 122 s 68  87, 89, 90, 92 s 93  127 s 106  105 s 129C  148 s 134  87 s 138  94 s 140  95 s 141A  94 s 196  101 s 201  101 s 205  101 ss 222–223A  91

UK Intestacy Act 1877  52 Judicature Act 1873  67, 68 Married Women’s Property Act 1844  52 Prescription Act 1832  145 Quia Emptores 1290  29 School Sites Act 1841  33 Statute of Frauds 1640  68, 70, 71, 121

167

Index abstract of title 74 accelerated payments 108 accretion 23–4 adverse possession 90–2 agricultural holdings, fixtures 21 allodial land 30 ameliorating waste 32 assignments, and subleases 128–30 bodies corporate 63 bona fide purchaser without notice 69 bona vacantia 33 caveats failure to lodge 96–9 lodging without reasonable cause 95 nature and effect of 70, 93–5 protection of equitable interests 93–9 certificates of title, prevailing interests 92 charges over property 75 chattels personal 3 chattels real 3 clogs 105, 107 co-owned property, sale or partition 61 co-owner rights and obligations compensation for repairs and maintenance 57–8 duty to account for profits 58 equal enjoyment of property 56–7 liability for trespass and waste 59 co-ownership joint tenancy 52–4 of land 52–6 property other than land 56, 61 tenancy in common 54–6 termination 59–61 types under common law 52 co-parcenary 52 codes 13 commercial law, and property law 4 common law fusion with equity 67–8 origins of property law 1 priority of interests 72–80 common law maxims cuius est solum eius est usque ad coelum et ad inferos 16–17 nemo dat non quod habet 73 quicquid plantatur solo, solo credit 17–22

Commonwealth of Australia, statutes covering property 1–2 community title see strata title company title 62 conditional estates 34–5 constitutional law, and property law 4 contingent interests 36–7 copyright 3, 12, 13–15 corporeal hereditaments 3 Court of Chancery 67 covenantees 149 covenantors 149 covenants landlord’s covenants 124–7 in leases 123–30 in mortgage deeds 103 nature of 148–9 restrictive covenants 149–52 tenant’s covenants 127–8 Crown land 30, 42, 44, 48 cuius est solum eius est usque ad coelum et ad inferos 16–17 debentures 105 determinable estates 33–4 easements abandonment 147 characteristics 139–42 created under statute 146 distinguished from licences 140–1 extent of right 141–2 extinguishment 146–8 granting of 139 implied easements 143–5 and indefeasibility 90 and intangible real property rights 3 negative easements 139 positive easements 139 prescriptive easements 145–6 surrender of right 148 economic theory, concept of property 8 environment law, and property law 4 equitable interests disputes between 76–80 distinguished from legal interests 68–9 and future interests 36 nature of 68–9 and prior legal interests 73–4

168

Index

equitable interests cont. protection by caveat system 93–9 and subsequent legal interests 74–5 equitable leases 123 equitable mortgages 104 equitable right to redeem 104 equitable waste 32–3 equity concept of 67 development of 66–8 fusion with common law 67–8 rights protecting mortgagors 105–7 and tenancy in common 55 equity of redemption 104 estates 13 conditional estates 34–5 determinable estates 33–4 doctrine of 30–2 future interests 36–40 types 30 estoppel modification of doctrine of fixtures 20–1 tenancy by estoppel 122 and unconscionability 20–1 exclusive possession 62 executory interests 37 fee simple 30–1 fee tail 30, 31 feudalism 28–9 fitness for human habitation covenant 126 fixed-term leases 121 fixtures 17–22 foreclosure 112 fraud, and indefeasibility 87 freehold 30–1 fructus industriales 152 furstus naturalis 152 future interests as equitable interests 36 initial certainty rule 39, 40 rule against perpetuities 37–40 types 36–7 wait-and-see rule 39, 40 grantors 31, 33, 34 human body, as property 9–12 implied easements 143–5 in personam rights and indefeasibility 86–9, 144 nature of 68

in rem rights 68 incidents of tenure 29, 30 incorporeal hereditaments 3 indefeasibility and adverse possession 90–2 and claim under prior certificate 92 and easements 3, 90 and fraud 84 and in personam rights 86–9, 144 limits to 86–93 principle of 74, 84–6 and short-term leases 89 statutory exceptions 93 and wrong descriptions of land and boundaries 92 Indigenous land use agreements (ILUAs) 47, 48 initial certainty rule 39, 40 intangible property 3 intangible property rights 3, 13–15 intellectual property 12–15 joint tenancy definition and characteristics 52 survivorship 54 unity of possession 52–4, 56, 59 labour theory, concept of property 8 land allodial land 30 co-ownership 52–6 common law meaning 16–17 Crown land 30, 42, 44, 48 legal interests in 37 old system title 82–3 wrong descriptions of 92 see also native title; Torrens system; trespass to land land rights 42 landlord’s covenants 124–7 landlord’s powers 127 leasehold 30 leases assignments 128–30 covenants in 123–30 creation 122–3 definition 117–22 determination of 131–4 distinguished from licences 117–19 equitable leases 123 expiration 131 forfeiture 132–4

Index

landlord’s covenants 124–7 mergers 132 options to renew 130–1 privity of contract 134–5 privity of estate 135 residential tenancies 135–6 retail shop leases 136 statutory requirements 120 subleases 128–30 surrender of 132 tenant’s covenants 127–8 termination by notice 132 types 121–2 legal interests creation and recognition 68 distinguished from equitable interests 68–9 in land 37 and prior equitable interests 74–5 priorities in disputes 73 and subsequent equitable interests 73–4 legal philosophy, concepts of property 6, 8 legal right to redeem 103–4 legislation covering property Commonwealth 1–2 states 2–3 lessees 58 lessors 32 licences distinguished from easements 140–1 distinguished from leases 117–19 life estates 31–2 Locke, John 8, 9 lost modern grant 145–6 mesne profits 58 mining dispute resolution 26 mining law and mineral resources 17, 24–6 and property law 4 mortgagees appointment of receiver 109 foreclosure 112 power of sale 109–12 remedies 108–14 right to possession 113–14 suing on the contract 108–9 mortgages 73 common law mortgages 103–4 equitable mortgages 104 Torrens system mortgages 104, 113

mortgagors common law rights 103 equitable rights 105–7 statutory rights 108 National Native Title Register 48–50 National Native Title Tribunal (NNTT) 47–8 native title as bundle of rights 50 common law rights and interests 41–5 and differing concepts of property 8–9 Mabo decision 43–4 nature of 41 and pastoral leases 44–5 pre-Mabo cases 41–3 statutory rights and interests 45–8 native title legislation application of 1993 Act to past, ­intermediate and future acts 46–7 definition of native title 47 extinguishment of title 44–5, 48 Indigenous land use agreements (ILUAs) 47, 48 objectives 46 requirement of connection with the land 49 negative easements 139 nemo dat rule 73 New South Wales, legislation covering property law 2 no derogation from grant covenant 125–6 old system title 82–3 ousters 57–8 part performance 69–71 partition 58, 61 periodic tenancies 121 permissive waste 32 perpetuities, rule against 37–40 personal property, nature of 3–4 positive easements 139 power of sale, mortgagees 109–12 prescriptive easements 145–6 privity of contract 134–5 privity of estate 135 profit à prendre 152 profits 152 property as bundle of rights 8 classification 3–4

169

170

Index

property cont. concept of 6–9 definition 6 property law common law origins 1, 6–7 legislation 1–3 relationship to other areas of law 4–5 property rights cultural differences 8–9 key rights 8 proprietary interests in land owned by another 152 Queensland, statutes covering property 2 quicquid plantatur solo, solo credit 17 quiet enjoyment of property covenant 124 real property, nature of 3–4 receivers, appointment by mortgagee 109 Register of Native Title Claims 48 remainder persons 32 remainders (future interest) 36 remedies for mortgagees 108–14 under Torrens system 101–2 residential tenancies 135–6 restrictive covenants 149–52 retail shop leases 136 retirement villages 64 reversions (future interest) 36 right to possession, mortgagees 113–14 rights in personam 68, 87–9 rights in rem 68 riparian rights 22 seisin 30, 36, 52 severalty 59 severance, termination of co-ownership 59 short-term leases 89 South Australia, statutes covering property 2 specific performance 71–2 strata plans 63 strata title 62–4 subinfeudation 29 subleases, and assignments 128–30 survivorship, joint tenancy 54, 59 tangible real property 3 Tasmania, statutes covering property 2 tenancy, types 121–2 tenancy at sufferance 122

tenancy at will 121–2 tenancy by entireties 52 tenancy by estoppel 122 tenancy in common 1, 54–6, 62 tenant’s covenants 127–8 tenure 29–30 terra nullius 41, 42, 43 testators 31, 34 time-share schemes 64 Torrens, Robert 83 Torrens system caveat system 93–9 development and introduction 83–4 features 84 indefeasibility principle 74, 84–6 legislation 2–3, 84 limits to indefeasibility 86–93 mortgages 104 priority of interests 72 remedies 101–2 volunteers 100–1 trespass to land and airspace 17 by tenants 122 Crown land 30 easements 22, 144 fixtures 21, 22 liability of co-owners 56, 58, 59 requirement for claim 4 trusts, and property law 5 unconscionability and equity 67 and estoppel 20–1 unity of possession 52–4, 56, 59 vendor’s lien 102 Victoria, statutes covering property 3 voluntary assignment of property 100 voluntary waste 32–3 volunteers, and Torrens system transactions 100–1 wait-and-see rule 39, 40 waste doctrine of 32–3 types 32 water rights 4, 22–4 Western Australia, statutes covering property 3

Your guide to the essentials of property law. Learn how to link the key concepts from your lectures, textbooks and tutorials to get the most from your study, improve your knowledge of law and develop legal problem-solving skills. This guidebook will help you navigate through the fundamental points of property law using: • clear and concise explanations of what you need to know • guidelines for answering questions • relevant statutes and cases to remember • practical examples of the principles of property law in action • ‘think about it’ questions • assessment preparation sections • diagrams of difficult concepts • a glossary of property law terms • up-to-date cases and legislation. Chris Davies is Associate Professor in the College of Business, Law and Governance, James Cook University.

ISBN 978-0-19-559403-4

9 780195 594034